CannaBusiness Advisory

  • The 2018 Farm Bill and CBDMarch 13, 2019

    The $867 billion 2018 Farm Bill was signed into law by the President on December 20th, 2018.
    The reconciled farm bill mainly just reauthorized many expenditures in the prior 2014 Farm Bill. However, it put an end to five decades of hemp prohibition. Hemp was afforded limited legal protections in 2014, when Congress passed a farm bill that authorized states to develop pilot programs for its research. The 2014 Farm Bill eventually gave rise to a patchwork of state regulations regarding hemp and hemp-derived CBD. While the bill did include legislation that impacts traditional U.S. farmers, the portion of the bill that stands to have the most impact is the part that focuses on hemp.

    The 2018 Farm Bill, among other things:

    • Removed hemp’s low amounts of THC from the Controlled Substances Act;
    • Allows the U.S. Department of Agriculture to regulate the crop like any other agricultural commodity;
    • Permits hemp products – like CBD – to be introduced into interstate commerce.
    • Allows hemp production in all 50 states for any use, including flower production and CBD or other cannabinoid extraction;
    • Allows interstate commerce for hemp and hemp-derived CBD

    However, this updated guidance was interpreted and misinterpreted throughout the hemp … Keep reading

  • Asset Forfeiture; a Commentary on the Legal Marijuana Industry’s Achilles HeelMarch 06, 2019

    Given the United States’ current political climate, bi-partisan unity has become a seemingly rare occurrence, especially in the country’s highest court. That’s what makes the Supreme Court’s recent decision in Timbs v. Indiana all the more special, especially in light of the civil rights subject matter in question. The February 20, 2019 unanimous ruling confirmed that the Eighth Amendment’s prohibition on excessive fines applied to the several states (by way of the Fourteenth Amendment), specifically with respect to state and local government asset forfeiture laws. However, despite this ruling, asset forfeiture laws still stand as uniquely effective enforcement tools that the county’s federal, state, and local law enforcement officials have at their disposal, posing a threat to the recreational cannabis market.

    Generally speaking, asset forfeiture is a process by which law enforcement officials take possession of certain assets that they have deemed to be involved in criminal activity and will only be obligated to return such assets to their former owner upon a court ruling to the contrary. The person or entity from which the property was seized need not be convicted, or even charged with, a criminal offense. As a civil case, the burden of proof in civil … Keep reading

  • Sections 199A and 280E: So Much In Common?February 27, 2019

    • Both Code sections[1] end with a capital letter.
    • Both are in Subchapter B.
    • Both have to do with deductions.
    • Both treat certain types of businesses differently than others for no good reason.
    • Both feature separate/multiple trades or businesses tests.

     

    It’s the last bullet that makes me wonder if or how §199A might influence the application of §280E in the future (assuming § 280E isn’t repealed and/or marijuana descheduled in the near term).

    A Very (Very) Brief Obligatory Overview of §199A

    The Tax Cuts and Jobs Act of 2017[2] reduced the corporate income tax rate from a maximum graduated rate of 35% to a flat 21%. In order to create some parity between the lower corporate rate and the rates applicable to pass-through forms of business, §199A was added. Section 199A provides an income tax benefit to investors in pass-through businesses (e.g., partnerships and S corporations). Non-corporate investors may (after navigating a minefield of thresholds and exclusions and re-inclusions and exceptions to exceptions) be eligible to claim a deduction of up to 20% of the “qualified business income” earned by such pass-through businesses (the “QBI Deduction”).

    Separate Trade or Business Considerations

    There are several interesting cases that … Keep reading

  • Medicinal Cannabis and the Need for DataFebruary 20, 2019

    Discoveries advance on a regular basis as to how cannabidiol and related therapeutics can heal or at least relieve the pain associated with health conditions. From cancer and opioid addiction to chronic pain and glaucoma, medicinal cannabis shows great promise. As with other efforts to address a patient’s condition, this field will morph toward a more personalized set of therapy regimes. The broader precision medicine field has a significant head start, though, because of the years of both longitudinal and historical data studies. The medicinal cannabis field must leap ahead in this direction.

    The proliferation of different, proprietary data sets is seen slowing the growth and penetration of more ‘traditional’ personalized medicine. Each pharmaceutical company, bio bank and research organization has already collected large amounts of data from clinical trials, patients, providers and other sources. But the data an organization owns might not contain the insights it needs to achieve a breakthrough in personalized medicine.

    As medicinal cannabis providers collect and combine data sets, the key will be ensuring that those sets are correctly linked and that the data itself provides enough depth to yield real insights. That points to the need to set consistent standards for collecting data … Keep reading

  • SAFE Banking Act of 2019February 13, 2019

    One of the biggest challenges facing the legal cannabis industry today (as we’ve covered extensively on this blog) is access to, or better yet lack of access to, banking services. Because the use and sale of marijuana remains illegal at the federal level, banks and credit unions have been hesitant to provide services to cannabis-related businesses, even in states that have legalized both medical and recreational cannabis. The concern from a banking perspective is that providing banking services to these companies could potentially lead to allegations of money laundering and aiding and abetting federally-illegal operations. While this has not completely prevented cannabis companies from operating in states where it is legal, it has forced a burgeoning industry to operate on a virtually all-cash basis, leading to many financial and safety concerns.

    As a potential solution, in May 2017 Senator Jeff Merkely (D-OR) and Ed Perlmutter (D-CO) introduced the “Secure and Fair Enforcement (SAFE) Banking Act”, which proposed certain protections for banks against criminal and civil liabilities for serving legitimate cannabis companies that operate in compliance with applicable state law. The Safe Banking Act was not only intended to legitimize an up-and-coming industry, but also aimed to establish banking … Keep reading

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