How the Federal Raids Illuminate Marijuana Legalization Problems
The medical marijuana industry received a significant blow this week, as growers and dispensaries in Montana and California were raided by federal authorities. California and Montana have both passed legislation legalizing marijuana for medical use, yet are the subjects of multi-pronged federal investigations into drug trafficking and tax evasion. Montana's raid came the day after a bill to repeal the state's medical marijuana law died in the Senate, leading some to suggest the two were related.
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The raids raise questions about the legitimacy of state marijuana laws in the face of a federal government that considers any production and sale of the substance to be illegal. They also highlight two particular areas where the difference between federal and state marijuana laws collide.
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Drug trafficking: Possession was not the issue in Monday's Montana raids nor Tuesday's in California. Rather, agents targeted marijuana providers. These raids have elicited outrage from those who recall President Obama's promise that the Justice Department would be more "hands off" with regard to prosecuting marijuana users and distributors in states that have legalized the medical use of pot. Just last month, AOL News' Jacob Sullum analyzed the instructions U.S. attorney's received in November to apply said lenience only to "individuals whose actions are in clear and unambiguous compliance with existing state laws." He notes that states like California may allow patients or their "caregivers" to grow their pot collectively and sell it to other patients at dispensaries, but to U.S. attorneys or the DEA, dispensaries themselves "are completely illegal" regardless of the state's law, "because they exchange pot for money."
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Tax evasion: The raided growers and dispensaries is Montana and California are all being charged with tax evasion. In states that have legalized medical marijuana use, medical marijuana dispensaries should be considered legal businesses. But, according to the I.R.S., "no deductable 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...consists of trafficking in controlled substances...which is prohibited by Federal Law or the law of any State in which such trade or business is conducted." That would, of course, pose quite a problem for filing taxes.
