President Trump proposed ending an existing policy that protects state medical marijuana programs from Justice Department interference as part of his fiscal year 2021 budget plan released on Monday.
The rider, which has been renewed in appropriations legislation every year since 2014, stipulates the the Justice Department can’t use its funds to prevent states or territories “from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical marijuana.”
This isn’t the first time that an administration has requested that the rider be stricken. Trump’s last two budgets omitted the medical cannabis protections language, and President Obama similarly asked for the policy to be removed. In all cases, Congress has ignored those requests and renewed the protections in spending bills.
During last year’s appropriations season, the House approved an even more expansive amendment that would have provided protections for all state and territory marijuana programs, rather than just medical cannabis systems. But the Senate did not follow suit and the provision was not included in final fiscal year 2020 legislation sent to Trump’s desk.
When Trump signed that large-scale spending legislation in December, he attached a statement that said he is empowered to ignore the congressionally approved medical cannabis rider, stating that the administration “will treat this provision consistent with the President’s constitutional responsibility to faithfully execute the laws of the United States.”
Cannabis is also mentioned in several other places in Trump’s new budget proposal for next year. For example, it contains another long-standing rider that blocks Washington, D.C. from using local tax dollars to legalize marijuana sales.
Separately, the plan requests that funds be set aside to help the Food and Drug Administration (FDA) invest “in priority activities,” including the “regulation of cannabis and cannabis derivatives.” FDA is actively developing regulations for CBD since hemp and its derivatives were federally legalized under the 2018 Farm Bill.
“FDA recognizes the potential opportunities that cannabis or cannabis-derived compounds may offer, and acknowledges the significant interest in these possibilities,” the agency said in a summary. “FDA is aware that companies market products containing cannabis and cannabis-derived compounds in ways that violate the law and may put consumer health and safety at risk.”
“Questions remain regarding the safety of these compounds,” it continued. “FDA is committed to protecting the public health and improving regulatory pathways for the lawful marketing of cannabis and cannabis-derived products within the agency’s jurisdiction.”
FDA said it was important to fund these regulatory efforts because it’s an example of an issue with “rising public health needs as growing
markets outpace increases to Agency resources.”
The agency requested $5 million to “continue enforcing the law to protect patients and the public while also providing potential regulatory pathways, to the extent permitted by law, for products containing cannabis and cannabis-derived compounds.”
“FDA is seeing a significant increase in activity relating to the marketing of unlawful cannabis-derived products, especially those containing cannabidiol (CBD), since the Farm Bill passed. In many cases, product developers make unproven claims to treat serious or life-threatening diseases, and patients may be misled to forgo otherwise effective, available therapy and opt instead for a product that has no proven value or may cause them serious harm.”
It also outlined how it intends to use the funds across four different branches within FDA.
About $4 million will be allocated to an initiative designed to “better regulate the usage of cannabis-derived substances, such as cannabidiol (CBD), in FDA-regulated products such as dietary supplements and when used as unapproved food additives.”
It will also “support regulatory activities, including developing policies and continue to perform its existing regulatory responsibilities including review of product applications, inspections, enforcement, and targeted research.”
Half a million dollars will go toward FDA’s Animal Drugs and Feeds Program in order to “strengthen its capacity to evaluate scientific data related to the safe use of cannabis and cannabis derivatives in animal products.”
FDA’s Office of Regulatory Affairs would receive $2 million to help “regulate and inspect establishments manufacturing FDA regulated products containing cannabis and cannabis-derived compounds.”
“The initiative will support regulatory activities, including developing policies and continue to perform its existing regulatory responsibilities including review of product applications, inspections, enforcement, and targeted research,” the agency said. “FDA must support oversight of increasing numbers of marketed FDA-regulated products containing cannabis-derived substances that may put the public at risk.”
Another “priority component” of the budget is to fund cleanup efforts for illicit marijuana grows on federal public lands.
The Office of National Drug Control Policy (ONDCP) would also take a serious budget hit under the president’s proposal. If enacted, ONDCP’s funding would go from the $425 million it was allotted for 2020 to just $29 million for 2021—an approximately 90 percent cut. Trump included a similar request in prior budgets, but Congress rejected the cuts
Some of those dollars for ONCDP would be transferred to the Drug Enforcement Administration (DEA) to “improve coordination of drug enforcement efforts among Federal, State, and local law enforcement agencies in the U.S.” through the High Intensity Drug Trafficking Area program, the document states. Other dollars for grants to local anti-drug groups would be moved to the Department of Health and Human Services.
ONDCP, which is an office within the White House, applauded Trump’s request for $35.7 billion to fund “counter-drug efforts” in a press release. Jim Carroll, the offices’s director, said “President Trump has brought a relentless, whole-of-government approach to combating the crisis of addiction in our country.”
“The FY 2021 budget request sends a strong message that, although we’ve seen signs of real progress, the Trump Administration will not let up in our efforts to save American lives,” he said. “Whether it is going after drug traffickers, getting people struggling with addiction the help they need, or stopping drug misuse before it starts, this budget request ensures our partners will have the resources needed to create safer and healthier communities across the Nation.”
The budget also prioritizes funding for the implementation of a domestic hemp program since the crop was legalized. It calls for $17 million for 2021 for the program, which “provides a national regulatory framework for commercial production of industrial hemp production in the U.S. through regulations and guidance.”
“In addition to those regulated under USDA plans, USDA approves state and Tribal nation plans to provide licensing services, technical assistance, compliance, and program management support,” the budget states. “In 2021, USDA will administratively implement fees to cover the Government’s full cost for providing services to beneficiaries of this program.”
Another current rider that prohibits the Justice Department from contravening an industrial hemp research program was proposed to be removed. However, that provision is essentially redundant under the new agriculture law, which transferred jurisdiction of the crop from DEA to the U.S. Department of Agriculture.
This story has been updated to include additional information about cannabis-related funding for FDA.
Photo courtesy of Philip Steffan.
GOP Senator Presses Treasury Secretary On Tax Credits For Marijuana Businesses
A Republican senator recently pressed the head of the Treasury Department on whether marijuana businesses qualify for a federal tax benefit.
During a Senate Finance Committee hearing on Wednesday, Treasury Secretary Steven Mnuchin was asked about the “opportunity zone” tax credit, which is meant to encourage investments in “distressed,” low-income communities through benefits such as deferrals on capital gains taxes.
Sen. James Lankford (R-OK), whose state’s voters approved a medical marijuana ballot measure in 2018, told Mnuchin that businesses that derive more than five percent of their profits from things like alcohol sales are ineligible for the tax credit, but there’s “not a definition dealing with cannabis businesses.”
“Are they within that five percent amount or are they not at all because there’s a federal prohibition on cannabis sales?” the senator asked.
“I’m going to have to get back to you on the specifics,” Mnuchin replied.
“That’d be helpful to get clarity because there are cannabis businesses across the country that, if they fall in opportunity zones, they’ll need clarification on that,” Lankford said. “When you and I have spoken about it before—it’s difficult to give a federal tax benefit to something that’s against federal law.”
Lankford, who opposes legalization and appeared in a TV ad against his state’s medical cannabis ballot measure, has raised this issue with the Treasury secretary during at least two prior hearings. When he questioned whether cannabis businesses qualify for the program last year, he clarified that he personally does not believe they should.
While Mnuchin’s department has yet to issue guidance on the issue, he said in response to the earlier questioning that his understanding is that “it is not the intent of the opportunity zones that if there is this conflict [between state and federal marijuana laws] that has not been cleared that, for now, we should not have those businesses in the opportunity zones.”
Mnuchin has also been vocal about the need for Congress to address the lack of financial resources available to state-legal marijuana businesses. Because so many of these companies are forced to operate on a largely cash-only basis, he said the Internal Revenue Service has had to build “cash rooms” to store their tax deposits.
“There is not a Treasury solution to this. There is not a regulator solution to this,” he said during one hearing. “If this is something that Congress wants to look at on a bipartisan basis, I’d encourage you to do this. This is something where there is a conflict between federal and state law that we and the regulators have no way of dealing with.”
Last week’s Finance Committee hearing was centered around President Trump’s Fiscal Year 2021 budget request, which separately includes a provision calling for the elimination of an appropriations rider that prohibits the Justice Department from using its fund to interfere in the implementation of medical cannabis laws as well as a continued block on Washington, D.C. spending its own local tax dollars to legalize marijuana sales.
Photo courtesy of C-SPAN.
American Bar Association Wants Protections For Marijuana Banking And Lawyers Working With Cannabis Clients
The American Bar Association (ABA) approved two marijuana-related resolutions during its midyear meeting on Monday.
The group’s House of Delegates voted in favor of proposals endorsing pending federal legislation to protect banks that service cannabis businesses and calling for a clarification of rules to ensure that lawyers will not be penalized for representing clients in cases concerning state-legal marijuana activity.
Under the banking resolution, ABA “urges Congress to enact legislation to clarify and ensure that it shall not constitute a federal crime for banking and financial institutions to provide services to businesses and individuals, including attorneys, who receive compensation from the sale of state-legalized cannabis or who provide services to cannabis-related legitimate business acting in accordance with state, territorial, and tribal laws.”
HOD Res 103D: Adopted. Urges enactment of laws to ensure that it shall not constitute a federal crime for banks and financial institutions to provide cannabis-related services. #ABAMidyear
— American Bar Association (@ABAesq) February 17, 2020
ABA added that “such legislation should clarify that the proceeds from a transaction involving activities of a legitimate cannabis-related business or service provider shall not be considered proceeds from an unlawful activity solely because the transaction involves proceeds from a legitimate cannabis-related business or service provider, or because the transaction involves proceeds from legitimate cannabis-related activities.”
A bill that would accomplish this goal was approved by the House of Representatives last year, but it’s currently stalled in the Senate, where it awaits action in the Banking Committee. That panel’s chair, Sen. Mike Crapo (R-ID) is under pressure from industry stakeholders to advance the legislation, but he’s also heard from anti-legalization lawmakers who’ve thanked him for delaying the bill.
“Passage of the [Secure and Fair Enforcement] Banking Act or similar legislation will provide security for lawyers and firms acting to advise companies in the industry against having their accounts closed or deposits seized,” a report attached to the ABA resolution states. “This will also foster the rule of law by ensuring that those working in the state-legalized legitimate cannabis industry can seek counsel and help prevent money laundering and other crimes associated with off-the-books cash transactions.”
“Currently, the threat of criminal prosecution prevents most depository institutions from banking clients, including lawyers, who are in the stream of commerce of state-legalized marijuana. This Resolution is necessary to clarify that such provision of legal and other services in compliance with state law should not constitute unlawful activity pursuant to federal law.”
The second marijuana-related resolution ABA adopted on Monday asks Congress to allow attorneys to serve clients in cannabis cases without facing federal punishment.
Text of the measure states that the association “urges Congress to enact legislation to clarify and explicitly ensure that it does not constitute a violation of federal law for lawyers, acting in accord with state, territorial, and tribal ethical rules on lawyers’ professional conduct, to provide legal advice and services to clients regarding matters involving marijuana-related activities that are in compliance with state, territorial, and tribal law.”
HOD Res 103B: Adopted as revised. Urges enactment of laws to ensure lawyers can provide legal advice and services for clients' legal marijuana-related activities. #ABAMidyear
— American Bar Association (@ABAesq) February 17, 2020
Such a change would provide needed clarity for lawyers as more states legalize cannabis for adult use. ABA’s own rules of conduct have been a source of conflict for attorneys, as it stipulates that they “shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent.” Federal law continues to regard marijuana as an illegal, strictly controlled substance.
An ABA report released last year made the case that there’s flexibility within that rule, however, as “it is unreasonable to prohibit a lawyer from providing advice and counsel to clients and to assist clients regarding activities permitted by relevant state or local law, including laws that allow the production, distribution, sale, and use of marijuana for medical or recreational purposes so long as the lawyer also advises the client that some such activities may violate existing federal law.”
A new report attached to the resolution states that “statutory guidance is needed that explicitly ensures that attorneys who adhere to their state ethics rules do not risk federal criminal prosecution simply for providing legal counsel to clients operating marijuana businesses in compliance with their state law.”
“This Resolution accomplishes this elegantly by harmonizing federal criminal liability with States’ ethical rules regarding the provision of advice and legal services relating to marijuana business. If a state has legalized some form of marijuana activity and explicitly permitted lawyers to provide advice and legal services relating to such state-authorized marijuana activity, such provision of advice and legal services shall not be unlawful under the Controlled Substances Act or any other federal law.”
Last year, ABA adopted another cannabis resolution—arguing that states should be allowed to set their own marijuana policies.
Border Patrol Union Head Admits Legalizing Marijuana Forces Cartels Out Of The Market
The head of the labor union that represents U.S. Border Patrol agents acknowledged on Friday that states that legalize marijuana are disrupting cartel activity.
While National Border Patrol Council President Brandon Judd was attempting to downplay the impact of legalization, he seemed to inadvertently make a case for the regulation all illicit drugs by arguing that cartels move away from smuggling cannabis and on to other substances when states legalize.
Judd made the remarks during an appearance on C-SPAN’s Washington Journal, where a caller said that “the states that have legalized marijuana have done more damage to the cartels than the [Drug Enforcement Administration] could ever think about doing.”
“As far as drugs go, all we do is we enforce the laws. We don’t determine what those laws are,” Judd, who is scheduled to meet with President Trump on Friday, replied. “If Congress determines that marijuana is going to be legal, then we’re not going to seize marijuana.”
“But what I will tell you is when he points out that certain states have legalized marijuana, all the cartels do is they just transition to another drug that creates more profit,” he said. “Even if you legalize marijuana, it doesn’t mean that drugs are going to stop. They’re just going to go and start smuggling the opioids, the fentanyl.”
One potential solution that Judd didn’t raise would be to legalize those other drugs to continue to remove the profit motive for cartels. Former presidential candidate Andrew Yang made a similar argument in December.
Federal data on Border Patrol drug seizures seems to substantiate the idea that cannabis legalization at the state level has reduced demand for the product from the illicit market. According to a 2018 report from the Cato Institute, these substantial declines are attributable to state-level cannabis reform efforts, which “has significantly undercut marijuana smuggling.”
Additionally, legalization seems to be helping to reduce federal marijuana trafficking prosecutions, with reports showing decreases of such cases year over year since states regulated markets have come online.
In his annual report last year, Supreme Court Chief Justice John Roberts also noted reduced federal marijuana prosecutions—another indication that the market for illegally sourced marijuana is drying up as more adults consumers are able to buy the product in legal stores.