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
YOUR GUIDE TO THE LEGAL PRESENT AND FUTURE OF THE CANNABIS INDUSTRY
Cannabis: In Focus
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
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:
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.
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Cannabis: In Focus
Cannabis: In Focus
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
Cannabis: In Focus
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