Late last month, federal prosecutors sent letters of warning to “owners and lienholders of properties where illegal marijuana sales are taking place,” in California, telling them they must shut down the businesses within 45 days or face prosecution and property seizures.
One letter sent to a northern California property owner reads:
This office has been advised that there is a marijuana dispensary operating under the business name [redacted] San Francisco, California which property you own or have under your management control. The dispensary is operating in violation of federal law, and persons or entities who operate or facilitate the operation of such dispensaries are subject to criminal prosecution and civil enforcement actions…These penalties and remedies apply regardless of the purported purpose of the dispensaries or the uses for which the marijuana is purportedly sold.
In a press conference Friday, four US Attorneys in California announced they plan to step up prosecutions across the state.
“While California law permits collective cultivation of marijuana in limited circumstances, it does not allow commercial distribution through the store-front model we see across California,” U.S. Attorney in Los Angeles Andre Birotte said.
The feds plan to utilize civil forfeiture lawsuits against property owners, typically used in drug trafficking cases. In a civil forfeiture case, prosecutors actually sue the property itself, not the owner. The feds must only establish probable cause that the property was used in a criminal activity, leaving the owner as a third party claimant. Prosecutors don’t have to prove the property owner committed any crime. The owner must prove on a “preponderance of the evidence” that the property was not used in criminal activity. Local law enforcement agencies can get a cut of seized assets, making forfeiture a lucrative strategy for cash-strapped municipalities.
“Findings suggest asset forfeiture is a dysfunctional policy. Forfeiture programs, while serving to generate income, prompt drug enforcement to serve functions that are inherently contradictory and often at odds with the demands of justice,” Mitchell Miller and Lance H. Selva wrote in a scholarly paper on forfeiture published in Justice Quarterly.
Neill Franklin, the executive director of Law Enforcement Against Prohibition issued a statement pointing out that the crackdown breaks an Obama campaign promise and runs counter to public opinion, with 80 percent of Americans supporting medicinal marijuana programs. But he said that’s not the worst of it.
“This crackdown is going to endanger public safety. The fact is, people in California and the other states with medical marijuana laws are going to use their doctor-recommended marijuana whether the Department of Justice likes it or not,” he said. “The president should be focusing on creating more jobs, not threatening to close down businesses that are bringing commerce to their communities.”
The IRS also put the squeeze on medicinal marijuana businesses, announcing earlier this week a dispensary cannot deduct most standard businesses expenses for tax purposes.
The ruling could mean one of the largest medical marijuana businesses in the country will have to shut down. Under the ruling, Harborside Health Center owes $2.5 million in taxes from 2007 and 2008.
The IRS based its ruling on a section of the tax code passed in the early 1980s as part of the Reagan administration war on drugs. The law bans any tax deductions related to “trafficking in controlled substances” and was originally directed at drug dealers and cartels.
“Section 280E of the Code disallows deductions incurred in the trade or business of trafficking in controlled substances that federal law or the law of any state in which the taxpayer conducts the business prohibits. For this purpose, the term “controlled substances” has the meaning provided in the Controlled Substances Act. Marijuana falls within the Controlled Substances Act,” IRS deputy associate chief counsel wrote in a 2010 letter to members of Congress.
William Panzer, an Oakland tax attorney helped author California’s medical marijuana law.
“This law is not about protecting citizens from criminals. It is a concerted effort by the federal government to crack down on a legitimate business,” he told MSNBC.
Tenth Amendment Center communications director Mike Maharrey called federal drug laws blatantly unconstitutional, pointing out that as “an object which, in the ordinary course of affairs, concern the lives, liberties and properties of the people, and the internal order, improvement and prosperity of the State,” formulating and enforcing drug policy should remain a power left to state governments.
“People who insist the feds have any legitimate authority to prosecute this so-called war on drugs should consider the Eighteenth Amendment. If the federal government can just pass a bunch of laws against drugs, why in the world did Congress go to all of the hassle of getting an amendment ratified to allow them to pass a bunch of laws against alcohol?” he asked. “And while we’re on the subject, they might want to go back and read their history. Prohibition has to stand as one of the greatest crime generators in American history.”
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