Justice Clarence Thomas Sides with Cannabis Operators Against IRS

The Supreme Court declined to hear a Colorado medical cannabis dispensary’s challenge to Internal Revenue Code 280 E that awards no tax exemptions to businesses “trafficking in illegal substances.”

Due to the conflicting federal policies on cannabis, a ban on interstate use or cultivation may “no longer be necessary or proper to support the federal government’s piecemeal approach,” wrote Justice Clarence Thomas reaffirming his 2005 dissent in Gonzales v. Raich.

In Gonzales, Thomas argued that federal criminalization of cannabis should not be imposed if state-legal cannabis did not cross state lines.

Now, he says, federal policies of the past 16 years have significantly undermined Gonzales’ reasoning.

“The federal government’s current approach is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana.”

Justice Thomas refers to Attorney General Merrick Garland’s refusal to reclassify cannabis as a drug worthy of use.

Pot’s illicit federal status allows the IRS to take huge chunks of cannabis operators’ profits, while other industries are awarded tax exemptions under IRS Code 280E.

Not prosecuting states

Yet, the Department of Justice has a policy against prosecuting states where cannabis is legal, started by Barack Obama, rescinded by Donald Trump, and reinstated by Joe Biden.

The justices’ decision not to hear the Colorado case affirms a Court of Appeals for the 10^th Circuit ruling in April 2020, deciding that the IRS acted in good faith in seeking the dispensary’s records to determine if the owners had taken improper tax deductions.

In a five-page statement in Standing Akimbo v. United States, Justice Thomas noted the federal government’s “half-in, half-out regime” allows state-level medical cannabis use but refuses to allow dispensaries to deduct business expenses from their taxes.

“Owners of state-legal dispensaries, often awash in cash for lack of banking services, can run afoul of drug-trafficking laws if they hire armed guards,” Thomas wrote.

And a state-permitted marijuana user can “find himself a federal felon” for owning a gun.

“If the government is now content to allow states to act as laboratories and try novel social and economic experiments, …  then it might no longer have authority to intrude on ‘[t]he States’ core police powers … to define criminal law and to protect the health, safety, and welfare of their citizens,” Thomas concluded.

The Court’s decision not to hear this case was unsigned and without explanation, as usual, except for Thomas’ lone dissent.