Cannabis: In Focus

  • Tenth Circuit Upholds Licensing Agency’s Discretion When Awarding Cannabis-Related Licenses
  • Delaware Becomes Latest State To Legalize Recreational Cannabis
  • Cannabis Legislative Updates
Continue Reading Cannabis Legal Report—Week of April 24, 2023

Rep. Earl Blumenauer (D-OR) introduced the Small Business Tax Equity Act (H.R. 2643) on April 17, 2023, a bill that will allow cannabis businesses to obtain tax write-offs for ordinary business expenses.

Currently, cannabis businesses are not able to deduct business expenses under a provision of the tax code known as Section 280E, which prohibits such deductions for Schedule I or Schedule II controlled substances. The bill would amend Section 280E to allow ordinary business expenses to be deducted when the company’s business consists of sales of cannabis conducted in compliance with state law.

The proposed bill has bipartisan cosponsors including Reps. David Joyce (R-OH), Brian Mast (R-FL), Nancy Mace (R-SC), Barbara Lee (D-CA), and Danny Davis (D-IL). The bill has been referred to the House Committee on Ways and Means for further consideration.

Of course, the congressman’s bill would be moot if the President Biden’s administrative rescheduling process moves cannabis to Schedule III, IV, or V. Rescheduling to Schedule III, IV, or V would solve the 280E tax issue without the need for an additional legislative fix. Congressman Blumenauer has asked for more transparency around the president’s process.

Cannabis: In Focus

  • US Sentencing Commission Seeks Amendment To Allow for More Lenient Treatment for People With Prior Cannabis Convictions
  • Second Circuit Narrows TRO Affecting New York State Cannabis Retail Licensing
Continue Reading Cannabis Legal Report—Week of April 17, 2023

As a consequence of cannabis’ federal illegality, cannabis companies are generally locked out of the nation’s federal bankruptcy courts. Perkins Coie’s Cannabis industry group’s Tommy Tobin recently sat down with Billy Organek, a program fellow at the Harvard Law School Bankruptcy Project, to discuss the effects of current bankruptcy laws on cannabis companies in the United States.

Cannabis companies can run out of money, but they are generally unable to declare bankruptcy. While company leaders and investors still have options, these opportunities remain largely untested. Harvard’s Organek discussed several options, including:

  • State-level receiverships running a distressed cannabis company while winding down its affairs.
  • Out-of-court restructuring negotiations between the debtor and its creditors to attempt to reach resolution regarding amounts owed.
  • Foreclosures to allow those with security interests in property to enforce their rights to that property.

As with so many aspects of cannabis law, there are countervailing pressures and untested solutions to novel problems. Of course, having smart, appropriate contracting on the front end is vital when working with cannabis companies, including provisions that will help mitigate risk in the absence of federal bankruptcy protections.

Listen to “Distressed Cannabis Companies: Considering Options Amid Bankruptcy Limitations – Episode 20” on Spreaker.

Note that all episodes are available on AppleGoogle, and Spotify.

Cannabis: In Focus

  • Two Bipartisan Bills Introduced to Regulate CBD
  • Congressional Letter Circulated Regarding Biden Administration’s Cannabis Scheduling Review
  • Alcohol Industry Group Issues Open Letter Supporting Cannabis Legalization
  • SEC Charges Cannabis Company With Securities Fraud
Continue Reading Cannabis Legal Report—Week of March 27, 2023

Cannabis: In Focus

  • Attorney General Garland Testifies Before Senate Judiciary Committee
  • Ninth Circuit Affirms Ruling that California County May Deny Licenses to Cultivate Cannabis
  • Oklahoma Recreational Cannabis Measure Fails
  • Medical Cannabis Patient Sues Arkansas Company for Inflating THC Levels
Continue Reading Cannabis Legal Report—Week of March 20, 2023

Our democracy is driven by both laws and fundamental freedoms. Americans expect governmental oversight that balances freedom of choice with protection of public health and safety. Sometimes these two imperatives that are emblematic of a free society do not align perfectly. In this op-ed published by Bloomberg Law, Perkins Coie Senior Counsel Andrew Kline and attorney Pamela Epstein of Terpene Belt call on Congress to modernize the 2023 Farm Bill to regulate all intoxicating cannabinoids and protect the safety of businesses and consumers.

To read the op-ed, please visit Bloomberg Law here.

Cannabis: In Focus

  • DEA Classifies Two Lab-Derived Cannabinoids as Schedule I
  • Washington Federal Judge Dismisses Suit Challenging Residency Requirements
Continue Reading Cannabis Legal Report—Week of March 1, 2023

Cannabis: In Focus

  • Seattle Federal Court Dismisses Dormant Commerce Clause Challenge
  • Manhattan DA Attempts To Curb Illegal Cannabis Sales by Targeting Landlords
  • Australia Legalizes Prescriptions of Psilocybin and MDMA
Continue Reading Cannabis Legal Report—Week of February 13, 2023

Tough economic conditions are leaving cannabis businesses with fewer financing and transaction options. Chapter 11 bankruptcy, a tool which many businesses have used to reorganize or liquidate, has historically been inaccessible to cannabis and cannabis-adjacent businesses because potential (or actual) breaches of the Controlled Substances Act (CSA) were viewed as per se cause for dismissal. But the Los Angeles bankruptcy court presiding over The Hacienda Company, LLC recently denied a motion to dismiss the case of a debtor in the business of wholesale manufacturing and packaging of cannabis products.1 The decision gives hope that bankruptcy could be a viable path to maximize value for creditors and purchasers through a sale structured as one of intellectual property (IP), rather than one of an operating cannabis business.

The decision in Hacienda builds on the other recent U.S. Court of Appeals for the Ninth Circuit decisions allowing narrow windows for cannabis-adjacent debtors to benefit from bankruptcy.

Continue Reading Distressed Cannabis: Growing Room for Bankruptcy in Ninth Circuit