IRS Also Targeted Marijuana Establishments

Ariel Shearer of the Huffington Post highlighted Wednesday that for years, the IRS has been relying on a tax rule originally intended to target illegal drug traffickers in order to systematically target medical marijuana establishments, deemed legal in 18 states.


“The IRS has been functioning as an arm of justice, employing the U.S. tax code as a weapon in the federal government’s ongoing war against legal cannabis,” Shearer commented. The federal War on Drugs has seen heavey-handed crackdowns on medical marijuana establishments, sanctioned by state laws; a number of pot dispensary operators and landlords face decades in federal prison.

Shearer reported on how the IRS are aiding in this federal effort:

The majority of Americans favor legalization of marijuana, while 18 states and the District of Columbia have already legalized medical marijuana. But pot businesses in those states are vulnerable to the federal government’s strategic application of IRS Code Section 280E, a law enacted in 1982 after a drug dealer claimed his yacht and weapons purchases as legitimate business expenses — and long before medical marijuana was first legalized in California in 1996.

Now the IRS is applying a rule originally aimed at illegal (and often violent) drug trafficking to businesses that are entirely legal under their states’ laws. Medical marijuana dispensaries are facing audits and heavy tax bills that could force them out of business…

“Section 280E was passed by Congress to deprive drug dealers on corners from deducting their expenses,” said Henry Wykowski, a defense lawyer who represents dozens of dispensaries under audit in California. “The IRS is using this law in a way it was never intended to be used.”

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