TIME Drugs

Christian Marijuana Dispensary Reconciles Dogma and Dope While Battling the IRS

Bryan Davies, owner of medical marijuana dispensary Canna Care, leads supporters in prayer before facing the Internal Revenue Service in tax court on Feb. 24, 2014.
Bryan Davies, owner of medical marijuana dispensary Canna Care, leads supporters in prayer before facing the Internal Revenue Service in tax court on Feb. 24, 2014. Katy Steinmetz—TIME

"I prayed to the Lord and God said ‘Open up a pot shop'"

Early in the morning on Feb. 24, a large man with a long white beard and big cowboy hat gathered with about a dozen other people to pray outside the San Francisco branch of the United States tax court. In a kettledrum voice, Bryan Davies led the group in the Lord’s Prayer before asking, “If there is any evil here, let it be sent to the lake of fire!” Then Davies strode into the federal building, where he and his wife, Lanette, took on the Internal Revenue Service in a case that could set an important precedent for the nation’s rapidly growing legal marijuana industry.

At issue is a nearly $875,000 tax bill that the Davies’ have refused to pay on the grounds that a 1982 law meant to prevent drug traffickers from deducting business expenses should not apply to Canna Care, their small “Christian-based” medical marijuana dispensary in Sacramento—or any other marijuana dispensary legal under state law. Even if the Davies’ don’t win that argument, there are legal precedents for the dispensary to get a big discount on that bill if owners can prove they’re involved in two trades. So for two days of testimony, the usually staid federal tax court was given over to a detailed examination of what, exactly, constitutes a Christian cannabis business that claims to spend as much time serving the community as it does selling weed-infused lollipops.

The idea for merging marijuana and ministry came through prayer, the couple said during testimony. They had been exposed to medical marijuana when a doctor recommended Lanette Davies’ daughter use it to alleviate symptoms from a bone disease and it “made her life livable,” she said. Bryan Davies became a convert after finding it helped ease an arthritic condition that affects his spine. Trying to live on Social Security benefits and short on cash, Davies says he asked God for guidance. “I got on my knees, and I prayed to the Lord,” he told the court. “And God said … ‘Open up a pot shop.’”

Davies Canna Care

Katy Steinmetz / TIME

The Davies’ set up that shop in 2005, in the back corner of a small industrial complex in a neighborhood of Sacramento called Del Paso Heights. The dispensary is marked only by an illustration of an aluminum can with the word care wrapped across the front. Inside, a security guard mans the door to a windowless lobby. A table offers pamphlets on using medical marijuana to treat chronic pain next to bibles that are given away for free. The walls are a crowded tapestry of American flags, cannabis leaves, eagles, crucifixes and the “Don’t Tread on Me” gear favored by Tea Partiers (though Lanette says she’s a staunch Democrat and Bryan calls himself a libertarian). In the back room, employees sell strains of weed like Hindu Kush, Green Candy and L.A. Confidential, starting at $3.95 per gram.

That work of selling dope, the couple said in response to questioning from IRS lawyers, is consistent with the dispensary’s broader mission to help and heal. A patron might arrive having been diagnosed with Lou Gehrig’s Disease or terminal cancer, Bryan said: “They’ve been told they have so much time to live … and they’re angry with God.” He and other Canna Care employees would often pray with those patients, they testified, in what he said was an attempt to bring them back from the “precipice.” Bryan also said during testimony that he could exorcise patients who “don’t realize they’re hosting a demon.”

Marijuana is an unlikely form of outreach to Christians. A new survey of Americans’ attitudes about marijuana released Wednesday by the Public Religion Research Institute found that the majority of the 3,390 Christians polled, 52%, said they are against legalization. Opposition is strongest among Hispanic Catholics (67%) and white evangelical Protestants (61%), while lowest among Jewish Americans (23%) and the unaffiliated (27%). Robert Jones, CEO of the firm that conducted the survey, partly attributes the opposition among Christians to their view of the body “as a temple” that shouldn’t be soiled with substances like illegal drugs or alcohol or cigarettes.

The Davies’ use the Bible to reconcile selling marijuana with their faith, believing that cannabis was among the “seed-bearing plants” the book of Genesis says God gave man on the sixth day. “You’ve got to remember who created it,” Bryan said recently, shortly after the dispensary employees finished their daily 6 p.m. prayer.

DSC00747

Katy Steinmetz / TIME

Prevailing in tax court will require a different standard of proof. The provision at the heart of the case is an obscure bit of federal tax code known as 280E, which states that taxpayers who are involved in drug trafficking are not allowed to deduct any business expenses—like payroll or rent or health benefits—that would be standard for other legal businesses. The law, put on the books more than a decade before any state legalized medical marijuana, has become an expensive reality for dispensaries; while medical marijuana is now legal in 20 states, and recreational marijuana is legal in two, pot is still a Schedule I controlled substance in the eyes of the federal government. And that means that regardless of state law, all dispensaries are drug traffickers as far as the IRS is concerned.

Canna Care’s disputed tax bill comes from $2.6 million in business expenses that the IRS has disallowed under that code. Getting a ruling that 280E should be revisited and no longer applied to medical marijuana dispensaries, as the Davies’ lawyer argued, would be a landmark decision for the burgeoning marijuana industry. But by the time testimony ended Feb. 25th, that appeared unlikely.

Throughout the two day hearing, the Davies’ were rebuked for using the witness stand as a soap box and rambling rather than giving forthright answers. One of their witnesses was disallowed because the IRS had not been notified of her appearance in advance, and their lawyer could not immediately recall what “THC”—or tetrahydrocannabinol, the mind-altering ingredient in cannabis—stood for. Canna Care employees testified that they did not know how their salaries were determined or by whom. Meanwhile, other attorneys arguing related cases have expressed concerns that a ruling against Canna Care might be “very detrimental” to their efforts to see the code reformed.

A ruling from judge Diana Kroupa may not be forthcoming for at least six months. As testimony ended, Kroupa seemed to acknowledge the shift in popular opinion in favor of legal marijuana, but implied that it would have little bearing on the outcome of a case that hinges, at its core, on an interpretation of fine-grained tax law. “The court is aware that there is a trend,” Kroupa said as the hearing concluded, “but the law is the law.”

Exiting the courtroom, the Davies’ remained upbeat. “I know what we’re doing is the right thing,” Lanette said, “Whether it goes for us or against us, that’s in God’s hands.”

TIME Marijuana

Christian Pot Dispensary Takes on IRS

Some Congress members are advocating marijuana be removed from the federal government's list of hard drugs.
Nick Adams—Reuters

A business touting Christ and cannabis takes a stand over dispensaries' awkward tax status

At Lanette Davies’ shop in Sacramento, everyone stops what they’re doing at 6 p.m. Some patrons come especially for this moment in the day, while others just happen to be there. “We have prayer every night, for our community and our patients,” she says. And those patients are all taking at least one of the same prescriptions: medical marijuana. Her shop, Canna Care, is a “Christian-based dispensary,” where the owners believe in both the powers of Christ and cannabis.

The not-for-profit dispensary has a rare mix of messages, but it might also be on the verge of setting a new precedent for the marijuana industry. On Feb. 24, Davies and her husband Bryan will face the Internal Revenue Service in tax court over disputes about business deductions. A ruling in their favor could help pull dispensaries like hers out of a legal limbo—in which states view them as legitimate businesses but the IRS continues to view them as aiding in drug trafficking.

Federal law defines pot as a controlled substance, and that is the law that the IRS follows, even after 20 states and Washington, D.C., have legalized medical marijuana. “The tax law is grossly unfair,” says San Francisco-based tax attorney Robert Wood, who has written extensively about the issue. “Whether you think dispensaries are a good idea or not, if they’re lawful businesses under state law, they should be able to deduct their business expenses like anybody else.”

So far, courts have ruled that dispensaries can’t do that. Businesses like Canna Care aren’t eligible for what would normally be routine deductions like payroll expenses and rent, because of a section of the federal tax code known as 280E, which dates back to 1982—more than a decade before California became the first state to legalize medical marijuana in 1996. When Davies’ filed her taxes in 2006, 2007 and 2008, she listed $2.6 million in such deductions. The IRS, which has repeatedly pursued dispensaries using that section of the code, came knocking with an audit in 2011 and refused to accept those deductions, levying nearly $875,000 in additional taxes on Canna Care.

As it has with other dispensaries, the IRS offered to settled the case for about $100,000, Davies says, but she refused on principle. “I could have settled this and walked,” she says, “but it would have been morally and ethically wrong to do so.” Davies believes her company is being unfairly targeted while providing a valuable service for people with serious ailments, including her husband and daughter, she says. (Her husband’s chronic arthritis converted them on the subject of cannabis.)

The IRS declined to comment.

Courts have issued rulings that suggest dispensaries are eligible for some tax deductions. In 2007, a California judge ruled that if a medical marijuana dispensary also provides extensive care-giving services, the owner may treat those businesses as separate for tax purposes. In a 2012 case, another California judge affirmed that a dispensary could deduct the cost of goods sold—i.e. the cost of the marijuana. The tax code, the judge ruled, “disallows deductions only for an expense of a business,” like providing health care plans for employees or advertising or legal services, and that does not include product. In this case, the IRS allowed Canna Care to deduct the cost of its marijuana, too.

While Wood sides with the Davies’ in spirit and says “it’s an appealing argument” that dispensaries legal under state law should be taxed like any other business, he says Congress, not the courts, will likely have to make that clarification in the tax code. “What the tax court has done is make sympathetic noises but act as if their hands are tied,” he says.

Davies remains hopeful. “It’s in God’s hands now,” she says.

TIME Drug Policy

Lawmakers Push Obama to Soften Marijuana Rules

Some Congress members are advocating marijuana be removed from the federal government's list of hard drugs.
Nick Adams—Reuters

Obama's recent comments saying pot is less dangerous than alcohol look like an opportunity to advocates for relaxed marijuana laws

More than a dozen members of Congress called on President Barack Obama on Wednesday to remove marijuana from the federal government’s list of hard drugs, seizing upon his own comments in a recent interview that pot is no more dangerous than alcohol.

“We were encouraged by your recent comments,” the letter from 17 Democrats and one Republican said. “We request that you take action to help alleviate the harms to society caused by the federal Schedule I classification of marijuana. … You said that you don’t believe marijuana is any more dangerous than alcohol: a fully legalized substance. …. Marijuana, however, remains listed in the federal Controlled Substances Act at Schedule I, the strictest classification.

“This makes no sense,” the lawmakers added.

Obama recently told the New Yorker that marijuana isn’t more harmful than alcohol when it comes to “its impact on the individual consumer.” Legalization advocates quickly jumped on those remarks and started a petition on Change.org, saying Obama should put his money where his mouth is and remove pot from Schedule I list of drugs, where it currently resides alongside substances like heroin, LSD and ecstasy.

The lone Republican signing the letter is California Rep. Dana Rohrabacher, who told TIME last year that, “If it was a secret ballot, the majority of Republicans would have voted to legalize marijuana a long time ago.” Most lawmakers signing the letter are from the West, and nearly half are from California, one of the 20 states where medical marijuana is already allowed and where advocates believe a successful legalization referendum could tip the scales in many other states.

The lawmakers said law enforcement resources are “wasted” on enforcing “harsh, unrealistic, and unfair marijuana laws” and that such laws disproportionately affect minorities. Even if the drug is not decriminalized they asked that it “at the very least [be eliminated] from Schedule I or II.” Schedule I drugs are viewed by the federal government as having have “no currently accepted medical use in the United States,” while Schedule II are classified as having “a high potential for abuse which may lead to severe psychological or physical dependence.”

Among the signers of the letter is Oregon Democratic Rep. Earl Blumenauer, who has pushed for tax reform that would treat legal marijuana businesses like other businesses and for federal legislation that would clarify states’ rights to legalize medical marijuana.

In his recent interview, Obama acknowledged his use of marijuana as a young man and said “it’s a bad idea, a waste of time, not very healthy.” He said that the legalization experiments taking place in Colorado and Washington should “go forward” and that it’s a problem poor people are disproportionately affected by drug enforcement. “We should not be locking up kids or individual users for long stretches of jail time when some of the folks who are writing those laws have probably done the same thing,” Obama said.

But what might sound like music to legalization advocates’ ears is still a far cry from saying he will declassify the drug, much less support the federal legalization of marijuana. In a recent interview with TIME, Vice President Joe Biden emphasized that the administration does not back legalization, even if there is room for change when it comes to enforcement.

TIME

Vice President Joe Biden Not High on Marijuana Legalization

Vice President Joe Biden listens to remarks at a news conference, Feb. 6, 2014, at 30th Street Station in Philadelphia.
Vice President Joe Biden listens to remarks at a news conference, Feb. 6, 2014, at 30th Street Station in Philadelphia. Matt Rourke / AP

In an exclusive interview with TIME, the Vice President also defends his record on criminal-justice reform

The Obama Administration is not pushing marijuana legalization on the federal level, Vice President Joe Biden said Thursday in an exclusive interview with TIME.

Just weeks after President Barack Obama told the New Yorker that the drug is no more dangerous than alcohol, Biden said the Administration supports smarter enforcement, but not outright legalization. “I think the idea of focusing significant resources on interdicting or convicting people for smoking marijuana is a waste of our resources,” Biden told TIME in an interview aboard an Amtrak train on the way to an event in Philadelphia. “That’s different than [legalization]. Our policy for our Administration is still not legalization, and that is [and] continues to be our policy.”

The outspoken lawmaker, who came out in support of gay marriage before his boss, was reserved on the subject, taking caution not to get out ahead of Obama. Biden’s position is essentially unchanged from a 2010 interview with ABC News in which he called marijuana a “gateway drug.”

In the interview with David Remnick, Obama said “it’s important for” legalization to go forward in Colorado and Washington, because of racial and economic disparities in enforcement. Asked about Obama’s comments, Biden said, “Look, I support the President’s policy.” The President put the brakes on calls for executive action to legalize marijuana in an interview with CNN last week, saying it was a decision for Congress, not the White House.

In the Senate, Biden was on the forefront of the Democratic Party’s war on crime, authoring or co-sponsoring legislation that created the federal “drug czar” and mandatory minimum sentencing for marijuana and the sentencing disparity for crack and powder cocaine.

“I am not only the guy who did the crime bill and the drug czar, but I’m also the guy who spent years when I was chairman of the Judiciary Committee and chairman of [the Senate Foreign Relations Committee] trying to change drug policy relative to cocaine, for example, crack and powder,” Biden says.

More from the interview will be published in the coming days on TIME.com.

TIME Drug Policy

Legal Marijuana Raises Issues for Indian Tribes

Young men wait to take part in an annual pow wow and rodeo in Toppenish, Wash. The boys are members of the Coleville and Yakama tribes.
Young men wait to take part in an annual pow wow and rodeo in Toppenish, Wash. The boys are members of the Coleville and Yakama tribes. Gordon King—Yakima Herald-Republic/AP

Washington and Colorado each has their own set of pot problems

Washington’s Yakama tribe lives on a one million-acre reservation in the southern part of the state, a relatively small patch left after nearly 12 million acres was ceded to the U.S. government by the nation in 1855. As state officials are racing to build one of the world’s first legal marijuana markets, tribe officials are making it clear that their reservation wants no part of it—and they don’t want anyone else growing or selling cannabis on their ceded land either, to which they maintain certain rights. But it remains unclear whether they have the legal authority to make a demand that affects nearly a third of the land area in the state.

The laws that govern American Indian reservations have long been confusing. Many tribes are subject to only their own laws and federal law, while certain reservations are under state jurisdiction. Now adding to the confusion in Colorado and Washington is the uncertainty about how those states can legally regulate a substance still considered illegal by the federal government. And while many Yakama are anxious to keep the marijuana market far away—fueled by concern about substance abuse—other advocates for American Indians are mad that tribes can’t enjoy the new freedoms that other state residents have.

(MORE: Seattle vs. Denver: Which State Wins the Doobie Bowl?’)

People in Colorado and Washington who don’t live on reservations “are moving forward with this massive experiment,” says Troy Eid, chairman of the Indian Law and Order Commission, a national advisory body focused on criminal justice in Indian territory. “And, once again, these tribes are getting screwed.”

The Washington State Liquor Control Board is tasked with shaping the new market in that state. Right now, they’re sifting through more than 7,000 business license applications from residents who want to farm marijuana or run pot shops, and they plan to start issuing those licenses in March. This is where leaders from the Yakama tribe have addressed “several hundreds” of letters, each “pro-objecting,” as their attorney George Colby puts it, to individual applications made from areas the tribe occupies or once did. “Citizens of the state of Washington don’t get to vote on what happens” in those areas, he says. “The federal government wasn’t supposed to let alcohol come on the Yakama reservation, and thousands of people have died. We’re not going to let that happen again.”

There is little question about tribes in Washington being able to prohibit marijuana use among their own people on their own land (though there is some question about “tribes’ ability to regulate non-member conduct on the reservation,” the attorney general’s office says). The big unknown is how much authority they have over sprawling ceded lands, acres that were essentially handed up to the federal government more than 150 years ago with the promise that tribes would retain certain rights to those lands in perpetuity. In the Yakama’s case, members still have the exclusive right to hunt, fish and gather food on those 12 million acres.

(MORE: It’s High Times for High Times Magazine)

Eid, an expert in tribal law appointed to his position by the president and Congress, says that while it’s not “absolutely clear,” he believes the Yakama do have the ability to object to marijuana being grown or sold on ceded lands. Meanwhile, the Washington state liquor board says they’re still planning to issuing licenses to businesses in those areas. “Objections are made all the time to licenses,” says spokesman Brian Smith. “You want to make sure you’re operating within the law as you know it, and that’s what we’ll be doing here.”

Neither side knows for sure, and that is a recipe for the conflict to end up in court, which might in turn force the question of how the discrepancy between state and federal law is going to be remedied when it comes to marijuana. The Washington attorney general’s office tells TIME that they will defend the liquor board if they’re sued, but that “the Liquor Control Board is still in the process of issuing licenses so it would be premature to speculate on the issue of how a court might rule on the issue of licenses on ceded lands.” Colby says that they will request the federal government to intervene if their ongoing pre-objections are not heard.

Other tribes in the state have yet to weigh in but Eid says that they are likely to stand with the Yakama, if only to make sure their rights to their own ceded lands remain as robust as possible. He also says that it would be ideal if everyone sat down in a room together and hashed out the issue. “They can work out what the scope of marijuana use and cultivation and distribution and so on could be,” he says. “They ought to be able to come to a voluntary agreement that would enable them to avoid any issues involving litigation.”

(MORE: Muting Marijuana’s High: Pot Without the Impairment)

When Eid is not working on the commission, he acts as counsel for the Ute Mountain Ute tribe, one of two in Colorado. Unlike the Yakama reservation, where state law enforcement has some authority, reservations in the Rocky Mountain State are bound solely by federal and tribal law. That means that while reservation-dwellers in Colorado were allowed to vote in favor of Amendment 64, the proposal that legalized recreational marijuana, it remains illegal to grow, sell or smoke on their reservations as it ever was. (La Plata County, one of two with large American Indian populations, voted to approve the measure by 62% to 38%.)

Some of the American Indians in Colorado view their current situation as a missed business opportunity. “Capital is flowing in here from all over the world,” Eid says. “The tribes are going to be left behind, because there’s been no change in state law that applies to them … These are some of the poorest areas in the country. They could be involved in this business as well, but instead they’re being prohibited from being part of what’s happening.”

One way or another, the federal government may have to weigh in on the issue, whether it’s Congress eventually giving tribes the authority to decide whether they want to legalize marijuana or a federal judge ruling on the status of ceded lands. “This is one of so many of the issues that we are pushing through,” says Smith. “We’re sort of the pioneers here. But we continue onward, into some unknown territory.”

VIEWPOINT: The Search for the Real Numbers Behind Marijuana Use

TIME Drug Policy

Alaska Next In Line To Legalize Marijuana

The initiative would make possession of limited amounts of marijuana legal for adults ages 21 and older

+ READ ARTICLE

With the legalization of marijuana in Colorado and Washington, advocates in Alaska say they already have enough signatures to get legalization on the ballot for August.

TIME Drug Policy

Alaska Takes Step to Becoming Next State to Legalize Marijuana

Regulating medical marijuana
Anthony Souffle / Chicago Tribune / MCT / Getty Images

Legalization could be on the ballot in August

Advocates for legalizing marijuana say that Colorado and Washington were just the beginning, and it’s looking like Alaska may be next. On Wednesday, legalization supporters submitted 45,000 signatures to the state’s Lieutenant Governor, about 15,000 more than they need to get the measure on the August 2014 primary ballot.

“Voters around the country are fed up with our failed prohibition policies,” Mason Tvert of the pro-legalization Marijuana Policy Project said in a statement. “Alaska is poised to be the next state to regulate marijuana like alcohol, and it won’t be long before more states follow.”

The initiative would make possession of limited amounts of marijuana legal for adults ages 21 and older, much like the law that took effect in Colorado Jan. 1. The state has allowed medical marijuana since 1998. And advocates are using the same political angle that was successful in 2012: that marijuana is safer than alcohol, and it makes little sense to regulate one while driving the other into an underground market. Alaska’s Campaign to Regulate Marijuana is also making the case that law enforcement has better things to do than arrest people for possessing pot and that regulating the substance would bring new revenue into the state’s coffers.

Why is Alaska potentially the third state to clear the way for legal weed? The reasons and are practical and political. While activists like Tvert are waiting until 2016 to push initiatives in more populous states like Arizona and California, when higher turnout for a presidential election may boost their effort, Alaska requires that ballot initiatives be dealt with during primary elections, so there was little advantage to waiting. They’re are also hoping that the state’s rich libertarian tradition will help their cause.

“It’s safe to say that Alaska has traditionally had a significant amount of interest in maintaining privacy rights,” says Allen St. Pierre, executive director of the National Organization for the Reform of Marijuana Laws. “The libertarian streak certainly benefits the effort.”

The Division of Elections will now review the signatures, and if enough are deemed to qualify, voters up north could soon find themselves in the marijuana debate.

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser