Another court rules against Colorado marijuana business’ IRS challenge

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The Colorado medical cannabis dispensary whose challenge of IRS rules led a U.S. Supreme Court justice to question federal marijuana prohibition saw its bid to keep tax records secret rejected in federal court.

The 10th Circuit of Appeals in Denver on Friday affirmed a district court’s ruling that the U.S. Constitution does not protect Standing Akimbo from IRS requests to see the company’s business records, Law 360 reported.

The Denver-based dispensary has spent several years fighting IRS investigators who suspected the business was improperly claiming business deductions on its taxes in violation of Section 280E of the federal tax code.

Passed by Congress in the mid-1980s, 280E bars marijuana businesses from taking standard business deductions.

In Standing Akimbo’s case, the dispensary tried to block the IRS from accessing Colorado Marijuana Enforcement Division records as part of an audit.

In arguments before the 10th Circuit, Standing Akimbo’s attorneys cited Supreme Court Justice Clarence Thomas’ opinion in a different, related case as support for its position.

In June 2021, Thomas turned heads when he critiqued federal marijuana policy, writing that the federal government’s “half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana” might not be “necessary or proper.”

“This contradictory and unstable state of affairs strains basic principles of federalism and conceals traps for the unwary,” Thomas wrote.

However, Senior Judge Bobby Baldock wrote in the 10th Circuit’s ruling against Standing Akimbo that Thomas’ position “forms no part of a decision” and can’t be used to block the IRS from acquiring the dispensary’s Colorado records.