CLEAR THE AIR ON U.S. POT POLICY

The federal government is sending mixed messages about
state-sanctioned medical marijuana with its IRS audits.

The Internal Revenue Service's audits of medical marijuana businesses
in Colorado and elsewhere around the country seem to be within the
agency's legal authority, but prompt a larger question for the Obama
administration.

What is the federal government's over-arching policy on
state-approved medical marijuana activity?

The Justice Department issued a directive in 2009 saying federal drug
enforcement resources wouldn't be used to prosecute medical marijuana
interests clearly acting within the frameworks established by states.
That directive, partly, caused the industry to boom in Colorado.

Yet the IRS reportedly has begun auditing dozens of medical marijuana
businesses, pursuing a clause in the federal tax code prohibiting
businesses trafficking in Schedule I or II drugs from taking business
tax deductions.

We've had our issues with the medical marijuana industry, but those
involved deserve a consistent answer as to how the federal government
views them.

The medical marijuana business is a risky one, since marijuana use
and distribution remain illegal at the federal level. There is always
the possibility the Justice Department could change its views - and
with the recent letter from Colorado's U.S. Attorney John Walsh, it
appears they are at least refining their views of what's acceptable -
or that a new president would backtrack on the directive Attorney
General Eric Holder issued. It advised U.S. attorneys that the
Justice Department should not go after people with cancer using
medical marijuana as part of a recommended treatment regimen that
complies with state law.

"As a general matter, pursuit of these priorities should not focus
federal resources in your States on individuals whose actions are in
clear and unambiguous compliance with existing state laws providing
for the medical use of marijuana," it said.

However, Justice would continue to prosecute "significant
traffickers" of illegal drugs, including marijuana. Commercial
enterprises that unlawfully marketed and sold marijuana for profit
would remain an enforcement priority.

The IRS should issue similar guidance, giving medical marijuana
businesses a clear heads-up as to how the agency views their tax obligations.

Would medical marijuana businesses be better off not taking business
tax deductions?

That surely seems to be the case, given the agency's tack in
California. A tax attorney told The Denver Post that the IRS has
undertaken some 30 dispensary audits there.

We have had a fundamental problem with Colorado's medical marijuana
"industry" for some time now, especially since voters never signed
off on a full-blown dispensary system when they approved a
constitutional change allowing for medical pot.

However, if the Obama administration is changing its position on how
it views dispensaries - especially after the state has created a
regulatory framework that allows them to exist - the federal
government needs to clearly articulate that position so everyone
knows the rules.