Industry Insider || Cannabis Attorney Henry Wykowski

You might say
attorney Henry Wykowski has had cannabis on retainer since his youth.

That’s when he
discovered the joys of cannabis, against the backdrop of cannabis smoke, music,
protest and free love that was the late ‘60s. No permanent dropout, Wykowski
went on to law school and eventually became a prosecutor for the Justice
Department.

His career has come
full circle in recent years, as Wykowski has become perhaps the most prominent
attorney in California, if not the nation, to represent medical cannabis
dispensaries in their battles with a federal government that treats them like
drug dealers. He said his firm has represented some 100 of them in multiple
states.

The veteran San
Francisco lawyer is proud to carry on the good fight in the name of the plant
he still loves today.

“What’s most
unfortunate is, with the amount of empirical evidence out there with respect to
the benefits of allowing adult use of cannabis, both medically and otherwise,
it’s most unfortunate the federal government has not dealt with this issue
appropriately,” said Wykowski.

Prosecutor
for the government

It was, perhaps, a
strange place for a committed cannabis smoker to find himself, prosecuting
cases for the government.

After graduating
from law school in 1976, he joined the presidential campaign of Jimmy Carter.
When Carter won, Wykowski was offered a job as a prosecutor, handling
high-profile tax cases. He later became a prosecutor for the U.S. Attorney’s Office
in Northern California.

Carter was the
first, and so far the only, president to voice support for an end to cannabis
prohibition, one of the progressive views that drew Wykowski to work for him.
But the pendulum lurched in the opposite direction with the election of
conservative Ronald Reagan in 1980, and seeing the writing on the wall,
Wykowski went into private practice in 1982, defending the accused tax cheats
he once prosecuted.

He might have
drifted into retirement had the federal government not decided to go after
Californians Helping to Alleviate Medical Problems (CHAMP), a landmark case
that would launch Wykowski into prominence and offer hope to other medical cannabis
dispensaries fighting the IRS.

A
taxing problem

In 2007, the IRS
demanded that CHAMP, a dispensary and wellness center, pay $489,000 in taxes,
based on a clause in the tax code that denies standard business deductions for
those trafficking in Schedule I (which includes cannabis) or Schedule II drugs.
Section 280E was enacted in 1982, when legal cannabis sales weren’t even a
stoner’s wildest dream.

“It didn’t take
into account that cannabis could be anything other than drug dealing,” said
Wykowski. “And now it unfairly penalizes cannabis dispensaries that are
attempting to comply with the law by imposing a tax nobody else has to pay,
which is substantial.”

Though legal under
state law, the Justice Department had been fighting California dispensaries by
sending closure orders or threatening letters to their landlords, but this was
a new federal offensive.

Hired by CHAMP,
Wykowski went to court when the IRS wouldn’t budge. He successfully argued that
the dispensary should be able to claim deductions for all activities not
directly related to cannabis sales, including yoga and other treatments. In the
end CHAMP paid $4,900–just one percent of what the government had sought.

After Colorado and
Washington voters legalized recreational cannabis in 2012, the Justice
Department decided it would not target cannabis activities in states where it
had been legalized, provided there is sufficient state regulation.

Other
federal threats

Exactly how many
dispensaries have been audited by the IRS is unclear, but Wykowski estimates
half of the 100 he has represented have been targeted. It’s not just
California, but dispensaries in Colorado, Maine, Vermont and Michigan that have
enlisted his help with the IRS.

In most audits,
representation by an accountant is sufficient, but he highly recommends cannabis
businesses hire an attorney to deal with the IRS. In most cases, he said, the
IRS has taken “a more reasonable position” through negotiations.

The agency
continues to use other tactics, such as fining dispensaries for paying taxes in
cash instead of electronically, despite the fact that pressure from the federal
government has caused most banks to refuse to do business with them.

Another threat in
the Bay Area has come from U.S. Attorney Melinda Haag, whose office has shut
down eight dispensaries there since 2011. The owners of San Francisco’s
Shambhala Healing Center , however, did not go gently into that good night.
Threatened with seizure of the building by the federal government, the
dispensary’s landlords, with Wykowski representing them, got the seizure order
thrown out and settled for $150,000.

When the U.S.
Attorney’s Office in 2013 tried to shut down Oakland’s Harborside Health
Center, which may be the largest in California or even the world, the owners
called Wykowski. That case is ongoing, and the city of Oakland and three
California members of Congress have voiced support for the dispensary, the
latter saying the Justice Department has “overstepped its bounds.”

Even legalization
in California–widely expected on the 2016 ballot–won’t change the threat the
industry faces from the federal government. While a rewrite of the tax code
could help the deductions problem, the only true fix would be to remove cannabis’s
federal designation as a scheduled controlled substance.

“At some point the
federal government is going to have to deal with it politically. I don’t think
it’s a matter of the courts. It’s basically going to take somebody with the
integrity to stand up and admit the federal government has made a mistake with
respect to its classification of cannabis as a controlled substance and correct
that error,” he said.

In the meantime,
Wykowski will keep up the fight.

“I really enjoy
what I’m doing. I think it’s having a positive impact on the industry and I am
happy that I am able to contribute to the success of cannabis,” he said.

Asked about a
cannabis-smoking former federal prosecutor not exactly conforming to the image
of cannabis users, Wykowski laughed.

“What can I tell
you? We like to break the rules and defy the images.”

 

Facebook Comments

Related Articles

SUBSCRIBE TO OUR NEWSLETTER
To stay updated on cannabis news, subscribe to CULTURE’s daily newsletter!
Cool Stuff
Entertainment Reviews