\u00a0<\/b>In a closely watched tax case that\u2019s been raging for two and a half years, cannabis company Harborside was dealt a major blow in late November when a judge ruled against them in favor of the IRS, upholding the 280E tax code that prevents cannabis businesses from writing off business expenses as tax-deductible.<\/p>\n
After he called\u00a0Harborside<\/a>\u00a0\u201ca giant drug trafficker,\u201d Judge Mark Holmes, a George W. Bush appointee who was recently reappointed by\u00a0Donald Trump<\/a>, broke with precedent and held that Harborside and other cannabis businesses can no longer deduct\u00a0cost of goods sold<\/a>, thus sticking them with a much higher tax rates.<\/p>\n But while this ruling is unfortunate, it isn\u2019t as bad as it sounds: Harborside\u00a0will be appealing<\/a>\u00a0the decision and hopes to win that appeal. And in a victorious (if convoluted) twist, the same court ruled Wednesday that\u00a0Harborside will not have to pay any penalties<\/a>\u00a0related to 280E errors in previously filed taxes. This latest ruling will save the company, and other cannabis businesses caught in similar legal quagmires, millions of dollars.<\/p>\n While it may seem silly, a major issue raised throughout the legal battle by Harborside\u2019s attorney, Henry Wykowski, was a semantic argument. Wykowski argued that the IRS is improperly defining the phrase \u201cconsists of\u201d in their application of Section 280E to Harborside and other legal cannabis businesses. For a quick refresher, here is what\u00a0IRS code 280E<\/a>\u00a0actually says:<\/p>\n \u201c<\/i>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)\u00a0consists of<\/i> 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.\u201d<\/p>\n Wykowski spoke at last year\u2019s\u00a0National Cannabis Industry Association<\/a>\u00a0(NCIA) conference in Oakland, California and discussed the case in as much detail as he could, as it was being adjudicated at the time, and told attendees about previous efforts to overturn 280E on semantic grounds. In\u00a0CHAMP vs Commissioner<\/a>, a previous 280E-related court case where Wykowski was on the legal team representing Californians Helping to Alleviate Medical Problems, the lawyer said they attacked the idea of \u201ctrafficking\u201d tied up in the language of 280E and argued that CHAMP provided services beyond the realm of cannabis. This led to victory \u2014 CHAMP was relieved of a proportionate amount of tax burden to its employees who were not involved in handling cannabis. But in the case of Harborside, Wykowski said he felt this time it would be more effective to attack from the \u2018consists of\u2019 angle.\u00a0<\/b><\/p>\n During his most recent, semantic battle with 280E, Wykowski had an example at the ready to help make sense of his argument. \u201cNew York City doesn\u2019t \u2018consist of\u2019 Manhattan and the Bronx, it includes them,\u201d Wykowski said. \u201cIt \u2018consists of\u2019 all five boroughs.\u201d<\/p>\n To really hammer home the parallel, Wykowski argued the following: While Harborside\u2019s business includes the sale of cannabis, \u201cit consists of the sale of cannabis along with non-controlled substances, as well as various wellness services.\u201d And beyond that, Wykowski said, \u201cit consists of the Harborside brand, which set the standards for the industry at its inception.\u201d<\/p>\n Unfortunately, Judge Holmes did not agree with these assertions, and his ruling shows he felt neither 280E\u2019s wording nor his own classification of Harborside as little more than criminals was incorrect.<\/p>\n Harborside\u2019s CEO, Andy Berman,\u00a0released a statement<\/a>\u00a0after the ruling calling it \u201ca setback for entire cannabis industry, which is simply seeking the same tax treatment by the IRS that every other industry is subjected to.\u201d Berman stressed that \u201csince its inception, Harborside has demonstrated an utmost commitment to maintaining compliance under California state law,\u201d a fact also recognized by the court and cited as part of the reason the company will not face 280E penalties for past tax filings. He added that the company intends to \u201cconsider all legal options as we proceed, including an appeal to the United States Court of Appeals for the Ninth Circuit.\u201d<\/p>\n Another\u00a0statement<\/a>\u00a0from Harborside co-founders Steve DeAngelo and\u00a0dress wedding<\/a>\u00a0points to the harms this ruling will have on patients. \u201cThis ruling artificially raises the cost of cannabis by disallowing standard business tax deductions,\u201d the statement said. \u201cStudies have showed that higher priced cannabis drives vulnerable patients to less expensive but more dangerous substances, including opiates, alcohol, and pharmaceuticals.\u201d<\/p>\n During the\u00a0Emerald Cup<\/a>, Cannabis Now had the chance to speak with Andrew DeAngelo, Steve\u2019s brother and Harborside\u2019s 3rd co-founder, about their tax court ruling, next steps, their Canadian IPO and efforts to reform 280E.<\/p>\n Andrew was pragmatic about the loss. \u201cHarborside always expects to win our cases,\u201d he said. \u201c[But] you have to embrace an attitude of defiance in these fights with the Feds or you won\u2019t be able to summon the energy and courage it takes to fight.\u201d Andrew reiterated that the people behind Harborside aren\u2019t traffickers: \u201cWe are cannabis tradespeople,\u201d he said.<\/p>\n Despite speculation that the ruling might negatively impact on their public offering on the CSX, Andrew said there would be none due to foresight from the company in factoring in 280E ahead of time. \u201cWe have been very transparent with investors about our case and the various possible outcomes of it,\u201d Andrew said. This ruling was just a bump in the road, and Andrew says potential investors should not be concerned.<\/p>\n Nearly seven years ago, Steve\u00a0referred to 280E<\/a>\u00a0as a \u201cdagger pointed at the heart of medical cannabis.\u201d Since then, the effort to reform 280E has shifted from a grassroots fringe issue to a major one, discussed in the halls of Congress by cannabis lobbyists working for publicly traded companies.<\/p>\n More recently, Andrew echoed what Berman said about appealing: \u201cThe fight is not over yet, we can and will appeal. And, naturally, we believe 100 percent that we will win the appeal at the Ninth Circuit and win big for the entire industry.\u201d<\/p>\n But failing that, Andrew said it was \u201ca good thing the reform movement for 280E moved from the grassroots to the grasstops.\u201d He went on the say the shift from protesting in the streets to groups like the NCIA\u00a0 lobbying Congress for bills, is something \u201cto be celebrated,\u201d because he is more hopeful that sweeping reform could come from Congress. \u201cCongress has the power and they need to exercise it to fix 280E once and for all,\u201d he said. \u201cCongress offers the most holistic and widespread reform we can hope for.\u201d<\/p>\n TELL US<\/b>, do you see Congress stepping in on behalf of cannabis businesses against the IRS?<\/p>\n The post Harborside Vows to Continue the Fight Against 280E<\/a> appeared first on Cannabis Now<\/a>.<\/p>\n
\u00a0In a closely watched tax case that\u2019s been raging for two and a half years, cannabis company Harborside was dealt a major blow in late November when a judge ruled against them in favor of the IRS, upholding the 280E tax code that prevents cannabis businesses from writing off businessContinue Reading<\/a><\/span><\/p>\n","protected":false},"author":114,"featured_media":0,"comment_status":"false","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[165,6907,148,50,170,2082,1419,1845],"tags":[],"_links":{"self":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/31742"}],"collection":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/users\/114"}],"replies":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/comments?post=31742"}],"version-history":[{"count":1,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/31742\/revisions"}],"predecessor-version":[{"id":31743,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/31742\/revisions\/31743"}],"wp:attachment":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/media?parent=31742"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/categories?post=31742"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/tags?post=31742"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}What the Case \u201cConsists Of\u201d<\/h4>\n
Harborside Does Not Admit Defeat<\/h4>\n
Andrew DeAngelo Sheds Some More Light<\/h4>\n
Taking 280E Reform \u201cFrom the Grassroots to the Grasstops\u201d<\/h4>\n
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\nRead More: Harborside Vows to Continue the Fight Against 280E<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"