Biden Appointee Supports IRS to Probe State-Licensed Cannabis Businesses for Section 280-E Breaches


Cannabis News Update May 25, 2021

Today in cannabis news: New statistics show that more U.S. employees are testing positive for cannabis in drug screenings now more than ever before; investigators reveal that a Florida doctor pressured a cannabis company looking to do business in the state to donate $10,000 to U.S. Rep Matt Gaetz’s reelection race; and a President Biden appointee expresses support of allowing the IRS to probe state-licensed cannabis businesses for alleged Section 280-E breaches.

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** First up: A survey from Quest Diagnostics, one of the nation’s biggest substance screening laboratories, reports that more U.S. employees test positive for cannabis in drug screenings now more than ever before.

The findings of over 7 million drug screenings were reported in Quest’s 2020 study and indicated that 2.7% were positive for cannabis. Tests were positive for cannabis in 2019 at 2.5% and positive in 2016 at 2%.

As additional states implement cannabis policy reform, the herb has been more often consumed for both recreational and therapeutic reasons. Because of this, certain companies bypass the cannabis screenings or look over a positive cannabis test result to obtain more applicants for employment.

“We haven’t really seen a change in the overall testing rate, but we’ve been seeing changes in the degree to which marijuana is included in the testing panels,” Dr. Barry Sample, Quest Diagnostics’ senior director for science and technology, told Wall Street Journal.

** Next up: Florida medical cannabis entrepreneur Jason Pirozzolo organized the leading executive at a cannabis firm with contact with U.S. Rep. Matt Gaetz (R) while also pushing them to give Gaetz a $10,000 reelection campaign donation.

In September 2017, Dr. Michael Murphy, CEO of the Alternate Health Corp., was invited to a fundraiser for Gaetz which Pirozzolo planned to hold in a hotel in Orlando during a conference held by the American Medical Marijuana Physicians Association, an organization on which Pirozzolo is a member of the board. Pirozzolo underlined Gaetz’s significance in the medical cannabis market, urged Dr. Murphy multiple times for a donation to Gaetz, and offered guidance on how to arrange the contributions to abide by federal campaign finance rules.

Now, Gaetz and Pirozzolo are under federal investigation for public corruption in medical cannabis policies. Authorities are looking into Gaetz’s ties to the sector to see if there are any possible “pay-to-play” agreements. Gaetz is also purportedly being investigated for allegedly paying underage girls for sex, including a 17-year-old.

Authorities are reported to also be looking into a vacation to the Bahamas that Gaetz and Pirozzolo had in September 2018 with a group of young girls who may have been compensated to accompany them. Also on the trip was Gaetz’s colleague and former Rep. Halsey Beshears (R), whose brother co-founded Florida’s largest medicinal cannabis firm.

** Last up: President Joe Biden’s appointee, Acting Solicitor General Elizabeth Prelogar, issued a brief with the United States Supreme Court this week in favor of lower court judgments allowing the Internal Revenue Service to probe state-licensed cannabis businesses for alleged Section 280E breaches.

In the brief, Prelogar said: “…The court of appeals merely explained, correctly, that the federal prohibition on trafficking marijuana is itself a sufficient basis for the IRS to investigate potential violations of Section 280E by petitioners, irrespective of state law. … The court of appeals was also plainly correct that the Controlled Substances Act would preempt Colorado law in the event of any conflict. Colorado may, of course, choose not to prohibit conduct that federal law prohibits. … Under the Supremacy Clause, however, Colorado may not authorize individuals or businesses to violate federal law.”

Even if the company is recognized by the state in which it functions, Section 280E of the federal tax code prohibits “any trade or business…that consists of trafficking controlled substances” from deducting typical business expenditures.

As per reporting from Colorado Politics, in another 280E case with the Supreme Court in February, Prelogar issued a similar brief outlining the same claims.


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