Attorney General Sessions rescinded, effective January 4, 2018, previous enforcement priorities of the DOJ related to marijuana – including the Cole Memo. The Sessions Memo dictates that federal prosecutors should follow the “Principles of Federal Prosecution” originally set forth in 1980 and subsequently refined over time in chapter 9-27.000 of the U.S. Attorney’s Manual. Sessions goes on to state in his memo that “These principles require federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.” It is important to note that Sessions has not previously set any specific enforcement priorities with respect to marijuana, nor has this memo created any new enforcement priorities of the DOJ. Rather Sessions has removed the foundational guidance that states have relied on to regulate the production and distribution of marijuana pursuant to state law and the will of each states’ citizens. The Cole Memo actually set 8 enforcement priorities for the DOJ with respect to marijuana, which Sessions has now unilaterally rescinded.
Husch Blackwell is pleased to announce the opening of a new law office in Sacramento, California, on January 2, 2018.
The office, located about two blocks from the state Capitol. The new location will allow us to better serve the emerging cannabis industry in California and be a base to serve other firm clients with California needs.
Join Us at the Cannabis Caucus Husch Blackwell is a lead sponsor of the Northern California Quarterly Cannabis Caucuses. The four caucuses in 2018 will bring together industry professionals, policymakers, regulators and movement leaders to network and discuss the advance of the cannabis industry nationally.
The first-quarter caucus will be held January 9 from 6:30 – 9 p.m. at Dashe Cellars in Oakland. The caucus is free for NCIA members and $50 for non-members. If you would like to attend the caucus and are not a NCIA member, use our promo code HUSCH75 at registration to receive a 75 percent discount.
As you probably heard, Denver Police, along with several agencies including the Aurora Police Department, the Marijuana Enforcement Division and Denver Department of Excise and Licenses, closed 8 Denver-area marijuana centers and stores on December 14, 2017. The Department of Excise and Licenses suspended 26 licenses including retail stores, medical centers, cultivations and manufacturing (all under related ownership). 13 people were also arrested on criminal allegations related to the sale of marijuana in excess of allowable amounts.
PLEASE be aware that enforcement actions are occurring. This was a concerted effort among multiple agencies over a year-long investigation period.
Poor training and lack of supervision of staff can result in the immediate closing of facilities, suspension of licenses, and criminal charges. Now is a great time to review your internal policies and procedures and ensure each staff member is aware of and adhering to company policy and following all laws and regulations.
“Sen. Cory Gardner of Colorado wants to attach an amendment to the GOP-led tax reform bill that would allow state-legal marijuana growers, processors and sellers to deduct normal businesses expenses from their taxes.” Section 280E of the tax code, forbids businesses from deducting otherwise ordinary business expenses (advertising expenses, insurance, employee wages, etc.) from gross income associated with the “trafficking” of Schedule I or II substances. The IRS has subsequently applied Section 280E to state-legal cannabis businesses, since cannabis is still a Schedule I substance under the Controlled Substances Act. Gardner’s amendment will include a 280E fix so that the provision no longer applies to marijuana businesses that operate in accordance with state or local laws.
What does this mean?
A 280E fix would be monumental for the cannabis industry. The inability for state-legal cannabis businesses to take deductions for normal business expenses has the potential to cripple the industry if not addressed in the near future. While I believe that getting this amendment in on the tax bill is a moon shot, I hold out hope that it is still a possibility. At a minimum, the GOP is finally listening to the plights of our industry and is attempting to be part of the solution.
Check out my colleague’s blog post on OSHA’s injury reporting deadline at Safety Law Matters.
Husch Blackwell Partner Steve Levine is presenting today, September 19, at the Colorado Real Estate Journal 2017 Industrial Summit & Expo. Steve will be moderating a Cannabis Update panel that will include Chuck Smith, Chief Operating Office from Dixie Elixirs & Edibles and Paul Kluck, First Vice President at CBRE. See more info on the industrial market on the CREJ website here.
The deadline for compliance with new edible restrictions and labeling requirements is fast-approaching. Infused product manufacturers (medical and retail) may no longer produce, transfer, or donate any edible marijuana products in the shape of a human, animal, or fruit or shapes that bear the likeness or contain characteristics of a realistic or fictional human, animal, or fruit, including artistic, caricature, or cartoon renderings. Also beginning on October 1, 2017, no medical marijuana center or retail marijuana store may sell any non-compliant edible product. Any marijuana business with non-compliant edible products must follow waste disposal rules.
Also beginning on October 1, 2017, each container holding medical and retail marijuana product must be labeled with the potency of THC and CBD. The potency must be expressed in milligrams and either be:
- in a font size that is not less than 10 point font and at least two font sizes larger than the surrounding label text, and must be bold, and enclosed within an outlined shape such as a circle or square; or
- highlighted with a bright color such as yellow.
These new potency labeling regulations apply to medical and retail establishments. Operators have been aware of these rules for some time and should be in compliance ahead of the October 1 deadline. We suggest operators use the next few weeks to double check inventory for old stock of non-compliant product.
On June 27, 2017, a three-judge panel for the 10th U.S. Circuit Court of Appeals vacated a district court ruling that nixed Denver-based Fourth Corner Credit Union’s bid to receive a master account with the Federal Reserve Bank of Kansas City. Fourth Corner has been waiting since the end of 2015 for such ruling. The ruling effectively allows for the credit union to continue with its lawsuit against the Federal Reserve in an attempt to obtain its master account so it can function as a state-legal credit union in Colorado.
What does this mean?
The opinion relied on the fact that the case is not about Fourth Corner violating federal drug laws. U.S. Circuit Judge Robert E. Bacharach wrote: “The district court dismissed the amended complaint, reasoning that Fourth Corner would use the master account to violate federal drug laws. This ruling was erroneous,” Essentially, the district court relied on suspicions about what Fourth Corner might do and such standard is not sufficient to approve a motion to dismiss.
Fourth Corner still has a long road to haul until it can reach a resolution, but this ruling is a positive step towards normalization of state-legal marijuana in Colorado.
On May 24, 2017 Vermont Governor Phil Scott vetoed legislation that would have begun the process of Vermont becoming the 9th state to legalize recreational marijuana. However, the legislation is not dead. Governor Phil Scott, referencing his libertarian streak, reiterated in a letter to the Senate he is not “philosophically opposed to ending the prohibition on marijuana”. He continued he believes if the Governor and the legislature work together they can “move forward on this issue”. The Governor offered his recommendations on the legislation which included removing confusion around what penalties apply to the sale and dispensing of marijuana to minors; more aggressive penalties for consumption while driving and use in the presence of minors (smoking marijuana in the car with a child present is only a small civil fine); ensure public safety officials can continue to enforce remaining drug laws; and expand the key stakeholders on the Marijuana Regulatory Commission to include Departments of Public Safety, Health, and Taxes.
The Governor reiterated his concern for public health and safety and his desire to “get this right”. He wants the Commission to have at least one year to create recommendations. He wants to ensure Vermont knows how to measure and detect impairment on roadways (the Governor confirmed he reached out to the Coalition of Northeastern Governors to engage in a discussion about creating a regional highway safety standard), fund additional substance abuse prevention education, and keep children safe while penalizing those who don’t.
The Governor opened the opportunity to discuss and work with the Legislature during the summer session on these revisions to move this legislation forward.
Like much of the industry, we will have to stay tuned.