IRS Rules could Result in Capone-like Prosecution for L.A. Marijuana Dispensaries

Forbes reports that the feds could use the Al Capone treatment to target those dealing in medical marijuana in states where it is legal, including California.

Our Los Angeles medical marijuana dispensary attorneys reported recently on our Marijuana Lawyer Blog about the recent IRS audit of an Oakland dispensary.

In 1931, mobster Al Capone was finally put behind bars for tax evasion. Forbes reports the IRS is now notifying many California dispensaries of audits, which could result in medical marijuana businesses being cited for millions in back taxes. At issue is IRS Code 280E, which “precludes deductions for any business trafficking in controlled substances.”

Because marijuana is legal under federal law, the IRS is arguing that many normal business expenses cannot be deducted from dispensary income. A Fairfax, California dispensary was the first to be hit with this ruling earlier this month. The owner told the media that the IRS disallowed all of her business expenses, like renting office space and hiring employees. The agency then hit her with a tax bill totaling several million dollars.

By some accounts, at least a dozen California dispensaries have been notified of pending IRS audits.

The CANNABIS LAW GROUP is a law firm dedicated to the rights of medical marijuana patients, collectives and growers and has built a reputation for high-powered, aggressive legal representation of the medical marijuana industry in Southern California. Call 949-375-4734 for a confidential consultation to discuss your rights.