A Denver medical marijuana dispensary is seeking immunity from federal drug-law prosecution as the Internal Revenue Service mounts an audit targeting tax compliance.
The IRS is investigating Standing Akimbo‘s 2014 and 2015 tax returns in an audit similar to others launched by the tax agency into Colorado dispensaries. Federal investigators contend Standing Akimbo’s four owners have refused to turn over documents needed to verify the company’s tax liabilities.
The federal agency issued administrative summonses to Colorado’s Marijuana Enforcement Division for data from its seed-to-sale inventory tracking system. California recently selected the same software system to record marijuana shipments and sales in its recreational and medical markets.
Standing Akimbo asked the U.S. District Court for the District of Colorado to block the summonses. On Wednesday, the dispensary’s owners submitted a letter to Colorado IRS agents seeking “absolute immunity” from federal criminal drug laws.
“The evidence you are demanding of the growing/selling of marijuana would be the same evidence that would ‘convict overwhelmingly’ under federal criminal drug laws should this information be shared with the Department of Justice and prosecution ensue,” Standing Akimbo’s attorney, James Thorburn of Colorado’s Thorburn Walker, wrote.
He continued: “If absolute immunity is not granted to the taxpayer, there will be a full claim of Fifth Amendment privilege.”
The case is not the first time immunity has been raised by dispensaries facing IRS investigations into whether they are improperly taking tax deductions for federally illegal drug transactions. Thorburn Walker clients have argued that the Department of Justice is using the tax agency to go after state-legal marijuana businesses—an accusation the IRS denies.
Standing Akimbo told the Colorado district court that the IRS investigations are compounded by U.S. Attorney General Jeff Sessions’ Jan. 4 rescission of Obama-era guidance shielding state-legal marijuana businesses—”an indication that criminal prosecutions of the marijuana industry may be imminent.”
In its motion to enforce the summonses, Charles Butler, a trial attorney in the DOJ’s tax division, said Standing Akimbo’s actions “is part of an ongoing campaign” by dispensaries to hinder the IRS from following federal tax laws governing marijuana operations.
Another Thorburn Walker dispensary client facing a tax audit, The Green Solution Retail Inc., petitioned the U.S. Supreme Court in October to consider whether the IRS has any role in determining whether a taxpayer has violated anti-drug laws. U.S. Solicitor General Noel Francisco recently asked the high court for an extension of the deadline to file a response to Feb. 2.