Supreme Court denies Certiorari in cannabis case
On June 24, 2019, the U.S. Supreme Court denied a petition for certiorari to review the Tenth Circuit’s decision in Alpenglow Botanicals, LLC v. United States. In that case, a medical cannabis company commenced an action challenging the IRS’s determination that pursuant to Section 280 of the Internal Revenue Code, the company was not entitled to various business deductions because it trafficked in cannabis in violation of the Controlled Substances Act. The company argued that the IRS exceeded its statutory and constitutional authority by denying the deductions, because the company had never been charged with trafficking in cannabis or violating the Controlled Substances Act.
After the District Court dismissed the action, the Tenth Circuit affirmed and held that it was “within the IRS's statutory authority to determine, as a matter of civil tax law, whether taxpayers have trafficked in controlled substances.” The Court explained that the Plaintiff’s argument to the contrary turned on a faulty premise: “At the core of Alpenglow's argument is the assumption that a determination a person trafficked in controlled substances under tax law is essentially the same as a determination the person trafficked in controlled substances under criminal law.” Interestingly, while the Court stressed that the Department of Justice’s prosecution decisions were irrelevant to the issue at hand, it also noted, citing the Session’s memo, that the Department of Justice “has specifically rescinded its former policy of non-prosecution for marijuana dispensaries complying with state law, evidencing governmental intent to enforce this law. As such, § 280E would not constitute a Dead Letter Rule, even if such a rule existed.”
While the Tenth Circuit’s decision was in accordance with well-established precedent, the Supreme Court’s subsequent denial of certiorari indicates that the Court is in no hurry to insert itself into the present cannabis debate.
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