The Gold of Pot at the End of the Rainbow

I thought that my experience with budding cannabis entrepreneurs (Bad pun. I am thoroughly ashamed of myself.) might be of some interest.

For many years, there was an upscale Kosher catering hall in Baltimore named “Blue Crest North.” The building is at the end of the block where I live. After the original owners sold the facility, including both the real estate and the catering business, it began a long decline. The new owners, in an attempt to keep the ship afloat, rented the hall out as a venue for seminars given either by a multi-level marketing organization or some sort of “invest in real estate with no money down” scheme. While walking my dogs, I would pass the building. I saw the incoming attendees to these seminars–earnest, honest, but clearly clinging to the lower edge of middle-classdom. They would walk in with seminar material and clipboards in hand, certain to take copious notes. Somehow, I knew that their efforts would come to naught.

Now, a couple of months ago I was invited by some subgroup of the University of Maryland to give a presentation at a two-day seminar on starting and operating a cannabis business. My topic was, of course, the tax aspects of selling cannabis. I previously mentioned the seminar here with a link to my speaker’s outline. In the presentation, I particularly focused on 26 U.S.C. 280E. That Code section provides as follows:

No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

I made it clear that, in my opinion, Section 280E makes it virtually impossible to derive a significant profit operating a cannabis business. (I note that a colleague of mine claims to have clients who are making serious money in the business. I have my doubts. I think that any current profitability is due to the novelty of legal cannabis. For the reasons suggested by Mark’s analysis here, I think that any profitability is a short-term phenomenom.)

In any event, when I got to the venue I discovered that even though there was a UofMD sponsorship, the primary sponsor was a group that apparently puts on these seminars on a for-profit basis and then collects additional fees acting as a consultant to cannabis entrepreneurs. I looked at the audience. The attendees were the same people that I used to see walking into seminars given at the Blue Crest.

At the end of my presentation, one very unhappy attendee asked: “Are you saying that we cannot make money in the cannabis business?”

Well, yes.

From Time to Time

The U.S.D.C. for Alaska (per Gleason, J.) has overturned Trump’s executive order that attempted to reverse actions taken by President Obama. The Court framed the issue as follows:

This case concerns Section 12(a) of the [Outer Continental Shelf Lands Act], which provides as follows: “The President of the United States may, from time to time, withdraw from disposition any of the unleased lands of the outer Continental Shelf.” In 2015 and 2016, President Obama issued three memoranda and one executive order withdrawing certain areas of the Outer Continental Shelf from leasing. On April 28, 2017, President Trump issued Executive Order 13795, which purported to revoke the 2015 and 2016 withdrawals.

Slip op. at 3-4, emphasis added.

So, for at least some period, oil and gas exploration in these environmentally sensitive areas have been blocked.

Same Old Shot ‘Em Up

The U.S.D.C. for the Southern District of California (per Benitez, J.) has ruled that California’s statute outlawing guns that hold more than ten rounds is unconstitutional.

I have not read the entire 86 pages of the opinion, but it seems to be based upon outdated and questionable scholarship (see footnote 7 at slip op. 3) and, rather disgustingly, suggests that German Jews could have avoided their fate at the hands of the Nazis if only they had guns (see footnote 13 at slip op. 13-14).

The decision is, at its core, an extended ideological screed rather than a judicial opinion. Just look at the first paragraph of the three paragraph footnote 33 (of a total of 69 footnotes) that begins on slip op. 22 and runs on to slip op. 23:


Artificial limits will eventually lead to disarmament. It is an insidious plan to disarm the populace and it depends on for its success a subjective standard of “necessary” lethality. It does not take the imagination of Jules Verne to predict that if all magazines over 10 rounds are somehow eliminated from California, the next mass shooting will be accomplished with guns holding only 10 rounds. To reduce gun violence, the state will close the newly christened 10-round “loophole” and use it as a justification to outlaw magazines holding more than 7 rounds. The legislature will determine that no more than 7 rounds are “necessary.” Then the next mass shooting will be accomplished with guns holding 7 rounds. To reduce the new gun violence, the state will close the 7-round “loophole” and outlaw magazines holding more than 5 rounds determining that no more than 5 rounds is “necessary.” And so it goes, until the only lawful firearm law-abiding responsible citizens will be permitted to possess is a single-shot handgun. Or perhaps, one gun, but no ammunition. Or ammunition issued only to persons deemed trustworthy.

Emphasis added.

Climate Change: Attention Must Be Paid

In Wildearth Guardians v. Zinke decided today by the U.S. District Court for the District of Columbia (Contreras, J.), the court returned to the Bureau of Land Management (“BLM”) the BLM’s authorization of oil and gas leasing on Federal land in Wyoming, Utah, and Colorado. The court stated:

[T]he Court concludes that—withholding judgment on whether BLM’s leasing decisions were correct—BLM did not sufficiently consider climate change when making those decisions. BLM summarized the potential on-the-ground impacts of climate change in the state, the region, and across the country. It failed, however, to provide the information necessary for the public and agency decision makers to understand the degree to which the leasing decisions at issue would contribute to those impacts. In short, BLM did not adequately quantify the climate change impacts of oil and gas leasing.

Partnership Tax Reform

Terry Cuff is a lawyer whose practice is focused on partnership taxation. He has submitted a long and detailed letter to IRS Commissioner Charles Rettig. The letter suggests areas in which partnership tax returns and audits might be improved.

A good deal of Terry’s letter deals with areas that only partnership tax practitioners who are “made men” (or, of course, “made women”) can fully comprehend and appreciate. (As Terry explains on page 32 of his letter “Partnership Tax is Difficult.”) However, Terry offers comments that should be of interest to a more general audience such as:

  • Low Audit Rate Encourages Abuse;
  • Partnerships Are Playgrounds for Abuse;
  • Only 0.4% of Partnerships Are Audited;
  • If You Cheat on Your Taxes, Use a Partnership;
  • Examiners Need Better Pay and Better Support; and
  • The IRS Competes Unfavorably With Private Industry in Recruiting Examiners.

I note that Terry has given me permission to post his letter.

Connecticut S. Court’s Gun Lawsuit Opinions

I have posted the opinions, both the opinions of the Court and the dissent, in Soto v. Bushmaster Firearms International, LLC. The opinion holds that the plaintiffs’ claims under state law were not barred by the Protection of Lawful Commerce in Arms Act (PLCAA). Both opinions are placed together as a single file.

Global Climate Change Now

It astonishes me that even at this late date there are people, even reasonably well-educated people, who believe that climate change will not affect them.

A report from First Street Foundation and Columbia University tracking the loss in property values along the coasts of 15 East Coast states shows that economic losses are not only occurring now, but that the losses are being incurred by literally millions of people.

More Parties Speak Up About the Abortion Gag Rule

The states of Oregon, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia and Wisconsin and the District of Columbia have filed suit to block the Trump Administration’s attempt that would effectively strip millions of federal dollars from reproductive health providers that perform abortion services and referrals. A copy of the complaint is here. Here’s a link to the press release from the New York Attorney General.

In addition, the AMA, Planned Parenthood of America, and other related organizations and individuals have also filed a complaint to the same end. A copy of that complaint is here.

My understanding is that other lawsuits either have or will shortly be filed. I will attempt to track and post copies of the complaints.