THC is most certainly challenging our society: from commerce to ethics to health concerns or even health benefits. All we know is that the world of commerce is up to its neck in trying to keep up and no one can seem to keep pace with these forward-thinking and ambitiously brave entrepreneurs; no one. Anyone who says otherwise, in our book, is likely suffering from the Dunning-Kruger effect (see URL below). In other words, none of us have gained an appreciation for the vast complexities that face this developing industry. How can we? It’s a developing market!
Ethically, we see it not much more different than the Age of Prohibition nearing its life expectancy. Consider for instance that the regime for Qualified Opportunity Funds (a new and highly-favorable tax provision encouraging reinvestment) excludes certain “sin businesses” within their provisions but exclude THC-related businesses! A tax provision that encourages reinvestment in eligible communities that excludes massage parlors and liquor stores but not a THC business? Consider, several years ago, that the Service implemented relaxed penalties for companies conducting Federally illegal activities that could not make their tax deposits via Electronic Federal Tax Payments System (“EFTPS”).
As of now, the focus is way too much on “IRC 280E” and those designed machinations created to otherwise legitimize “illegal expenditures” through re-classification and complex tiered entity structuring coupled with the avoidance of entity attribution rules. Yes those are important tax strategies. But what happens when the contractor who thinks everything is a nail has his hammer taken away (e.g. when the THC industry is legalized)? What will the tax accountants talk about then?
We love the industry because it is one of a few that truly requires a multi-disciplinary approach. An industry that touches just about everything: Health Sciences, Manufacturing, Research & Design, Logistics & Transportation, Marketing & Branding, Real Estate, Retail and Politics. To serve only “cannabis” is to fail in seeing the bigger picture. Our clients, in this space, need advisors that see the inter-relationship between the wealth being accumulated and invested into separately owned and controlled businesses and to find an unlock the tax benefits in each unique area as transactions are planned and executed. While our expertise is in tax, we take a global approach in planning by seeing the “bigger picture” amidst keeping our eye on the “devil in the details” and, further, and sometimes even more importantly bringing strategic partners to the table to solve problems outside the realm of tax.
KELLY ALLEN, CPA, CVA, ABAR, CFF, MAFF, MST