The FBI didn’t get Al Capone. The IRS did. Capone was found not guilty of Prohibition violations. But he was convicted of tax evasion and sentenced 11 years in federal prison. Hoping to repeat history, the Obama Justice Department has decided that the IRS will be the lead agency in the fight against medical marijuana. The IRS led this week’s raid on Oaksterdam University in Oakland. It’s part of a nation-wide income tax offense against the medical marijuana industry. Why not use the DEA?
The medical marijuana movement has completely stymied the DEA. The nation’s dedicated drug enforcement police are all about undercover buys, body wires, and informers. When a cheerful, medical marijuana clinic employee greets a DEA agent with “Hi, how can I help you,” they lose it. Their undercover strategy looks silly when medical marijuana dispensaries operate out of storefronts with big signs.
Worse, if the DEA brought a medical marijuana case in Oakland, or a lot of other places, it might lose. Richard Lee, Oaksterdam University’s president, is widely popular. His businesses have helped revitalized Oakland, and he has been generous with civic contributions.
Enter the IRS. The IRS? Don’t these medical marijuana businesses pay taxes? Sure. But in a remarkable ruling, the IRS in October 2011 ruled that medical marijuana dispensaries can’t deduct ordinary business expenses, such as payroll, rent or utilities. The IRS says licensed medical marijuana clinics are criminal enterprises. Al Capone could not take deductions for his employees, and neither can marijuana businesses, according to IRS doctrine.
MSNBC is reporting that California’s Harborside Health Center, one of the nation’s largest medical marijuana dispensaries, has gotten a $2.5 million bill from the IRS – 2 million more than it owes.
Of course, the IRS position would be silly if it weren’t so serious for the people involved. Licensed medical marijuana dispensaries are businesses like any other. The pay rent, salaries, and taxes. They have the right to deduct these expenses just like any other licensed business.
The IRS is a relentless foe. The DEA or FBI come in, bust some people, and move on. The IRS is like cancer. It just grabs you and just wears you down. Don’t these IRS agents have anything better to do? Why not go after real tax evaders, instead of making up nonsense allegations against businesses which are perfectly legal under applicable state law.
In the end, of course, Al Capone won. Prohibition was repealed. Alcohol became legal and was treated as a public health issue. Time will tell for Richards Lee.