MRR ( Marijuana Retail Report) Since the start of 2018, there have been several changes at the federal level that are disturbing to those in the cannabis industry. One that is currently receiving increased focus is the change in approach to cannabis nonprofits regarding their tax-exempt status.
Beginning in January, the Internal Revenue Service has been denying tax-exempt status to nonprofits in the cannabis industry, focusing on 501(c)6 organizations. These groups include industry and political advocacy groups that lobby and write policy regarding medical and recreational marijuana laws. Thus far, the IRS has only targeted new groups that are seeking to gain tax-exempt status; nonprofits that already have tax-exempt status have yet to see a change.
This change comes from an Internal Revenue Service bulletin that was issued on January 2 of this year. In it, the IRS announced that it had amended its rules for issuing tax-exempt status. As stated in the bulletin:
“The Service will not issue a determination letter when the request concerns an organization whose purpose is directed to the improvement of business conditions of one or more lines of business relating to an activity involving controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act), which are prohibited by Federal law—regardless of its legality under the law of the state in which such activity is conducted.”
While this does not specifically call out the cannabis industry, there are no other industries the language can be applied to outside of the black market.
