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Troubling Taxation

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Colorado Alternative Health Care in Palisade is taking the United States’ Internal Revenue Service (IRS) to court under a claim that the business’ income was taxed twice. The troublesome tax issue stems from Section 280E of Internal Revenue Code, which does not allow cannabis businesses to claim certain credits and deductions on income earned from selling cannabis. The clause originally was intended to prevent drug dealers and those in the black market from claiming income deductions on illegal drug sales. Since earning income from cannabis is completely legal on the state level in Colorado, many feel that Section 280E is now unfair.

“What is happening here is that the federal government is actually providing a subsidy to the black market purveyors in Colorado so they are able to keep their cost of cannabis lower than those who are in the regulated industry and face this increased tax burden.”

“What is happening here is that the federal government is actually providing a subsidy to the black market purveyors in Colorado so they are able to keep their cost of cannabis lower than those who are in the regulated industry and face this increased tax burden,” Rachel Gillette of Greenspoon Marder, the lawyer handling this case, told CULTURE. “It’s unfortunate that the federal government during all this is going through a policy of backdoor enforcement and punishing these businesses via tax policies. They are also really serving to support the black market, because it incentivizes people to stay there and sell illegally.”

In making her case, Gillette pointed out that the company is officially registered as an S Corp., meaning that income and tax liability should flow through the shareholders, which in this case is the owners of the business, Jesse and Desa Loughman. She also stated that they properly listed their wage income the way the IRS requires. However, the IRS still decided to disallow a deduction based on the fact that they considered the income “trafficking,” which caused their income to be taxed twice, once as wages and secondly as S Corp. earnings.

Gillette believes that if she is able to help the Loughmans with their case, it could have wider implications for the industry as a whole. “If we win, we fix a problem that is a result of Section 280E, but it could have real world results in saving businesses money in that the IRS would now allow cannabis businesses to report their business expenses,” she explained. “It could have the effect of saving cannabis businesses some tax dollars.”

While this would be a positive step forward, she still admits that there is much more to be done before cannabis is taxed and treated fairly. “However, it really is a toe in the door,” she added. “We’ve got so much more work to do pertaining to this issue, and the real solution is to have congress take congressional action and change things so that Section 280E is no longer applicable in legal states.”

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Strain of the Week: Midnite

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Whoever first said that “nothing good happens after midnight” clearly was not enjoying life. Maybe it was said to perpetuate safety, specifically toward rambunctious youth who went gallivanting around in the forest at night. Or maybe it was more geared toward superstitious beliefs about witches or paranormal entities who roam around when the sun goes down. Either way, whoever said it definitely hadn’t seen a Gremlins movie, which contrary to the plot which warns against feeding a Gremlin at night, is one of the weirdest and best 1980s movies ever (change our mind). Ultimately though, cannabis after midnight can be a treat, especially when it’s a strain like Midnite.

Midnite is a cross between Bubba Kush and Chem #4. Bubba Kush is well-known for its earthiness, deep pine aroma and ability to induce sleep (not to mention that, as reviewers put it, it’s so widely loved that consuming it is often like “greeting an old friend at the airport”). Chem #4, which is also short for Chemdog/Chemdawg, is a zesty hybrid, complete with scents and flavors of lemon, that delivers full body effects of relaxation and euphoria. Between these two powerhouse strains create a unique strain child that’s full of potential.

Described as light green and denser than a dogwood tree, Midnite strain samples were absolutely covered in frosty trichomes—so much that it almost seemed like it was covered in freshly fallen snow, or even might glow when placed in a dark place. Surprisingly, the bud didn’t have much of a scent until it was ground up, revealing a potent chemmy aroma that made our seasoned reviewers salivate. Upon inhalation, the flower was robust but not harsh, leading to full body relaxation that didn’t feel lethargic. It won’t stop anyone from getting a full night’s sleep when ready to crash, however, and the rest of its qualities were deep and relaxing.

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Virginia to Focus on Legal Cannabis in 2021 Legislative Session

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Some legislators in Virginia are planning on pushing for support to consider recreational cannabis this year.

The 2021 legislative session in Virginia, which began on January 13, will be conducted remotely as the pandemic continues to be a major concern. The state’s House of Delegates will be meeting entirely remotely, and the Vermont Senate will meet at a conference center instead of at the state capitol building.

To start off this year’s legislative session, there are multiple topics on the table for discussion, including COVID-19 relief and the death penalty repeal. But perhaps the most contentious issue of all is the discussion of recreational cannabis legalization.

During this legislative push, Governor Ralph Northam is once again making it known that he would like to see recreational cannabis legalized. If Virginia legislators make a move, they will be the first Southern state to fully legalize cannabis. Currently, the state only allows medical cannabis, which went into effect on July 1, 2020.

Northam, who has been speaking out in favor of recreational legalization since November 2020, would like to see a legal approach that makes sure youth safety is high priority and also prioritizes the struggle of marginalized people disproportionately affected by the War on Drugs.

The success of this push for legalization will hinge on whether or not there are enough votes in the legislature in favor of legal cannabis for it to pass. However, even Republicans are coming around to cannabis issues in many states, and Virginia has successfully decriminalized cannabis and legalized a medical program.

Despite the fact that the state has already laid the groundwork for full, recreational legalization, it remains to be seen whether Virginia will follow through and successfully legalize cannabis this year.

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WSU Study Finds Cannabis May Diminish Stress Response

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A new study from Washington State University (WSU) has found that cannabis may diminish a user’s physiological response to stress.

Researchers found female rats that self-administered daily puffs of cannabis vapor for a month had lower blood levels of a hormone that causes stress when presented with a stressful situation than they did at the beginning of the experiment and compared to a control group. The rats were trained to trigger an infrared sensor that would activate a puff of cannabis vapor anytime they felt the urge. Previous studies have shown cannabis could have an effect on stress response.

After 30 days, only female rats that had access to the cannabis had a significantly muted response to stress. The rats that were given access to cannabis also tended to respond more for the substance and had higher concentrations in their blood after the experiment. Male rats did not experience the same results, but they also self-administered a lot less.  

“We don’t know if this is a good thing or a bad thing and there’s reason to argue for either of them at this point—a blunted stress response might actually predispose some people to certain mental health conditions is our concern,” said co-author of the study and WSU assistant professor of psychology, Carrie Cuttler. “So yeah, it sounds great on the surface that maybe they’re less prone to stress…but the stress response is an important system that exists for a reason—any alterations in that or perturbations in that system may or may not be a good thing.”

WSU assistant professor and another co-author of the study, Ryan McClain, mentioned there are ethical and legal concerns with testing stress responses on humans, as well as administering cannabis to some of the human participants, so these kinds of studies are limited to animal models.

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