DEA Cannabis Rescheduling - Calyx CPA

“IS THE DEA’S RESPONSE TO RESCHEDULING CANNABIS OVERLY HYPED?” CALYX RESPONDS……

 

Cannabis Rescheduling and the IRS’s Response to Business Deductions

The recent decision by the Drug Enforcement Administration (DEA) to consider rescheduling marijuana under the Controlled Substances Act (CSA) marks a watershed moment in the history of American drug policy. Initially classified as a Schedule I drug, marijuana was deemed to have no medical value and a high potential for abuse, placing it alongside substances like heroin and LSD. This strict classification has governed its legal status, restricting not only its use but also research into its potential benefits.

The push for rescheduling comes on the heels of a comprehensive review by the U.S. Department of Health and Human Services (HHS), which highlighted marijuana’s accepted medical use and lower abuse potential relative to other Schedule I drugs. The proposal to shift marijuana to Schedule III, which includes drugs like ketamine and some anabolic steroids, suggests a significant change in federal perspective, recognizing both medical value and a lower risk of dependency.

For businesses in the cannabis industry, this reclassification could open up several financial opportunities, particularly regarding taxation. Currently, under IRS code 280E, cannabis businesses are unable to deduct ordinary business expenses because marijuana is classified as a Schedule I substance. The move to Schedule III would alleviate this issue, allowing these businesses to claim deductions that were previously disallowed. This could significantly reduce their tax burden, making operations potentially more profitable and sustainable.

The process of rescheduling marijuana from Schedule I to Schedule III may take longer than the media portrays. Initially, the proposal must pass through the scrutiny of the White House Office of Management and Budget (OMB), a step that ensures all legal and policy implications are thoroughly evaluated. This review can vary in length but is critical in shaping the framework under which marijuana would be regulated going forward.

Following the OMB review, the proposal enters a public comment period, where stakeholders from various sectors—medical, legal, business, and the general public—can provide feedback. This stage is vital for incorporating community and expert opinions and typically lasts several months, further extending the timeline.

Once the public comment period concludes, the DEA reviews the feedback and makes any necessary adjustments to the proposal. This step can also be time-consuming, as it may require additional rounds of revision and approval to address complex issues raised during the public comments.

The final rule is then published in the Federal Register, formalizing the rescheduling of marijuana. This publication is the trigger for the IRS to begin adjusting its policies, including the re-evaluation of tax codes such as 280E, which currently prevents cannabis businesses from deducting typical business expenses.

The IRS will likely respond by issuing new guidelines and possibly updating forms and instructions to accommodate the changes in marijuana’s scheduling. However, these adjustments won’t be instantaneous and will require time to implement. The IRS must ensure that their systems, procedures, and publications reflect these changes accurately, a process that could extend over several months post-rescheduling.

Throughout this period, businesses must stay informed and prepared for changes in compliance requirements, both from a scheduling and taxation perspective. It’s important to note that while the IRS adjustments will provide future relief, they will not apply retroactively to previous tax years before the reclassification is officially in effect. 

It is vital that you act now. As cannabis businesses anticipate the shift from Schedule I to Schedule III, it goes without saying that good advice is essential to effectively navigate the new regulatory landscape, while poor advice can result in permanent harm to your business.

Recognizing that the IRS will not allow retroactive application of tax deductions, minimally businesses should consider filing protective claims for refund to preserve the right to amend past returns based on the outcome of future legal changes. Additionally, firms like Calyx CPA are confident that the CSA’s application to states with cannabis programs will eventually be overturned. Following the example of companies like Trulieve, which received $113 million in refunds from amending their tax returns, they encourage cannabis businesses to maintain meticulous records and consider filing amended returns where feasible. They advocate for a proactive approach in managing audits and potential disputes with the IRS, emphasizing the necessity of sound legal arguments and rigorous compliance with emerging regulations.

 

 

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Cannabis Tax Refunds

INSIGHTS ON AMENDING RETURNS & NAVIGATING LEGAL CHANGES

Insights on Amending Returns and Navigating Legal Changes

Join Justin Botillier and Jamie Jorgenstone as they delve into the complexities of amending tax returns in the cannabis industry. This timely webinar comes as cannabis businesses look to amend their returns for refunds impacted by the infamous Section 280E of the tax code. The session shines a light on the potential rescheduling of cannabis and explores the constitutionality of the Controlled Substances Act in state-regulated markets.

Justin and Jamie provide expert analysis on how past court decisions and the current legal landscape could impact your business’s ability to reclaim lost deductions. They discuss the critical aspect of managing audits and leveraging legal precedents effectively. The webinar is an essential resource for cannabis business owners and legal professionals seeking to optimize their tax strategies and maximize potential refunds.

Don’t miss this opportunity to gain invaluable insights from experienced professionals on navigating the evolving tax rules affecting the cannabis industry. Whether you’re refining your approach to tax liabilities or exploring ways to challenge unjust fiscal policies, this session offers practical advice and strategic perspectives.

 

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Psychedelics Oregon

CALIFORNIA’S PIONEERING LEGISLATION FOR PSYCHEDELIC THERAPY

California’s Pioneering Legislation for Psychedelic Therapy

In an era where mental health innovation is more crucial than ever, California stands at the forefront of a transformative shift. The recent passage of Senate Bill 1012, introduced by Sen. Scott Wiener, marks a significant development in the use of psychedelics for therapeutic purposes. Here’s a deep dive into what this groundbreaking legislation entails and its potential ripple effects, particularly for states like Oregon.

A New Dawn for Psychedelic Therapy

Under SB 1012, California is set to establish regulated service centers where adults aged 21 and older can access substances such as psilocybin, MDMA, mescaline, and DMT in a professionally supervised setting. This initiative, aptly named the “Regulated Therapeutic Access to Psychedelics Act,” is not merely about accessibility but is structured to ensure safety and efficacy through stringent oversight (Marijuana Moment).

The Framework of Regulation

The proposed service centers will operate under the aegis of the newly formed Division of Regulated Psychedelic Substances Control within the California Department of Consumer Affairs. This division will oversee the training and licensing of facilitators who must hold medical licenses, thereby ensuring that participants are in capable hands. This regulatory mechanism aims to foster a safe environment for those exploring psychedelic therapies as avenues for profound healing (KQED).

Health Safeguards and Accessibility

Participants in the program will undergo thorough health and safety screenings to tailor their experiences safely. The bill interestingly does not limit access to individuals with predefined medical conditions, broadening the potential benefits to a wider audience. It also emphasizes the importance of follow-up care, which includes integration services to help individuals process their experiences meaningfully (The Marijuana Herald).

The Broader Implications

Proponents of the bill argue that psychedelics hold immense potential in treating conditions resistant to conventional treatments, such as severe depression and PTSD. This legislation comes in response to Governor Gavin Newsom’s earlier veto of a more extensive decriminalization bill, signaling a cautious but progressive approach towards psychedelic therapy. The governor’s guidance has shaped this legislation to focus more narrowly on therapeutic use, ensuring that it’s paired with appropriate safety protocols (Marijuana Moment).

What This Means for Oregon and Beyond

California’s legislative advancements serve as a potential blueprint for other states, including Oregon, which has shown interest in similar reforms. The Oregon community, particularly businesses and healthcare providers, should closely monitor California’s rollout and outcomes to adapt and prepare for possible legislative shifts in their state. This movement isn’t just about changing laws but is a part of a larger shift towards integrating more holistic and progressive treatments into mental health care (DoubleBlind Mag).

As this bill progresses through further legislative stages, it will be crucial to watch how it influences not only the landscape of mental health treatment in California but also sets a precedent for other states considering similar pathways. For professionals and businesses in the cannabis and psychedelic sectors in Oregon, staying informed and prepared is key to navigating the potential changes that might come with such legislative models.

In essence, California’s move towards regulated psychedelic therapy is a beacon of innovation in mental health care, providing a glimpse into a future where these powerful substances are harnessed safely and effectively to heal and transform lives.

SOFF

SOUTHERN OREGON FAMILY FARMS CO-OP

Justin Botillier, the CEO of Calyx CPA in Medford, Oregon, shares his insights and personal journey within the cannabis industry. His commitment to cannabis legalization began with his high school senior project, and has since evolved into a professional and passionate advocacy.

Calyx CPA, under Justin’s leadership, is dedicated to serving the cannabis industry, mirroring his commitment to justice and community support. He points to Southern Oregon as a historic hub for cannabis cultivation, with Southern Oregon Family Farms (SOFF) leading the charge. 

This region is celebrated for its deep-rooted knowledge, sustainable farming techniques, and the high efficacy of its cannabis products, making them some of the finest on the global stage. 

SOFF is particularly noted for its commitment to environmentally friendly outdoor cultivation, which utilizes natural resources like sunlight and soil. This method not only minimizes the environmental footprint but also highlights the unique advantages Southern Oregon offers over other regions.

Despite the flourishing industry, Justin underscores the significant challenges it faces, such as bureaucratic obstacles and widespread misinformation among consumers. These threats undermine the sustainability and growth of local cannabis farms.

Justin calls for robust community engagement and support for the industry’s mission. He emphasizes that backing this cause is more than just community investment; it’s an investment in the collective future. Such support is vital for the cannabis industry in Southern Oregon to thrive, ensuring it remains sustainable and prosperous for generations to come.

 

 

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INTERVIEWING BRITT ROLLINS, CEO OF THE NATIONAL PSYCHEDELICS ASSOCIATION

Navigating the Psychedelics Industry: How the National Psychedelics Association is Pioneering Change

The Psychedelics Industry, once a fringe sector, has rapidly evolved into a significant area of interest for both investors and healthcare professionals alike. At the forefront of this burgeoning industry is the National Psychedelics Association (NPA), a pioneering body dedicated to facilitating the growth and regulatory navigation of psychedelic-related businesses. The NPA plays a crucial role in addressing both the opportunities and challenges encountered by those within this space, particularly in relation to financial services, business solutions, and legislative advocacy. This article delves into the comprehensive efforts of the NPA to support the psychedelics community and foster an environment conducive to the sector’s sustainable development.

Introduction to the National Psychedelics Association

The National Psychedelics Association (NPA), established with the vision of supporting the evolving needs of the psychedelics industry, serves as a beacon for those navigating the complex landscape of psychedelic substances. With a focus on promoting safe, ethical, and legal access, the NPA provides invaluable resources, including regulatory guidance, business support, and educational services. As the industry burgeons, the association’s role in uniting businesses, researchers, and enthusiasts becomes increasingly vital, ensuring the psychedelic movement progresses with integrity and professionalism.

Challenges with Banking and Financial Services

One of the most pressing obstacles faced by businesses within the psychedelics industry is the limited access to banking and financial services. Given the legal ambiguities and evolving regulations surrounding psychedelics, many financial institutions are hesitant to engage with businesses in this sector. This hesitancy can stifle growth, limiting companies’ abilities to secure funding, process payments, and manage operations efficiently. Recognizing these challenges, the NPA actively works with stakeholders to bridge the gap, advocating for clearer regulations and fostering relationships with financial institutions open to supporting the industry.

Efforts to Provide Business Solutions

In response to the unique demands of the psychedelics market, the National Psychedelics Association has embarked on a mission to deliver targeted business solutions. These efforts include offering strategic advice, facilitating networking opportunities, and providing insights into best practices for navigating the market. Furthermore, the NPA is instrumental in advocating for changes that could alleviate some of the financial and operational burdens on businesses, aiming to cultivate a thriving and competitive industry landscape.

Support for Service Centers

Service centers, such as therapeutic clinics and research facilities, constitute a critical component of the psychedelics ecosystem. The NPA recognizes the challenges such establishments face, from regulatory hurdles to logistical complexities. To address these issues, the association offers tailored support encompassing regulatory compliance, staff education, and community-building initiatives. This comprehensive approach ensures that service centers can deliver their invaluable services effectively and within legal bounds.

Guidance for Industry Professionals

The evolving landscape of the psychedelics industry necessitates continuous learning and adaptation by its professionals. The National Psychedelics Association acknowledges this need by providing a plethora of educational resources, workshops, and seminars geared towards enhancing the knowledge and skills of industry participants. By equipping professionals with the latest information on legislation, research, and market trends, the NPA empowers individuals to navigate the industry with confidence and contribute positively to its development. In conclusion, the National Psychedelics Association stands at the vanguard of the psychedelics movement, tirelessly working to address the sector’s multifaceted challenges while promoting growth and innovation. Through its comprehensive support services and advocacy efforts, the NPA is pioneering change, laying the groundwork for a future where the psychedelics industry flourishes, benefiting individuals and society at large.

NAVIGATING THE COMPLEXITIES OF 280E, 471(C), CHAMP, & STRATEGIES FOR PSILOCYBIN SERVICE CENTERS.

Insights into Oregon’s Psilocybin Service Centers

Enlightening Insights into Oregon’s Psilocybin Service Centers

In this enlightening conversation, Justin Botillier, CEO of Calyx CPA in Medford, Oregon, alongside Michael Brooks, who is venturing into Oregon’s burgeoning psilocybin industry, delve deep into some of the most pressing questions faced by psilocybin service centers today.

Addressing IRS Code Section 280E and Its Implications

Addressing the intricacies of Section 280E of the IRS code, they explore its profound implications on the psilocybin industry, particularly service centers, drawing parallels and distinctions with the cannabis industry’s ongoing struggle.

Comprehensive Strategies to Mitigate 280E’s Impact

With a comprehensive analysis, Justin provides a thorough breakdown of the strategies to mitigate 280E’s impact, including the use of 471(c) and the CHAMP (Californians Helping to Alleviate Medical Problems) case as pivotal references for tax planning and business structuring.

Selecting the Appropriate Business Entity

Furthermore, the discussion covers the essential considerations for choosing the appropriate business entity, emphasizing the unique challenges and opportunities within the psilocybin sector.

Navigating Banking and Financial Operations

They also touch upon banking difficulties, offering practical advice for navigating financial operations amidst federal restrictions.

Understanding the Federal Climate and Potential Changes

Justin sheds light on the current federal climate surrounding 280E and the potential for significant legal and regulatory changes, highlighting the importance of strategic planning and robust record-keeping.

This video is a must-watch for anyone involved in or considering entering the psilocybin industry, offering valuable insights into tax strategies, business planning, and the evolving federal landscape. Whether you’re an established service center, a newcomer, or simply interested in the intersection of psychedelics and business, this discussion provides critical knowledge and guidance to navigate the complexities of operating within this unique and transformative space.

calyx cannabis

COULD RESCHEDULING CANNABIS POTENTIALLY SET BACK FEDERAL LEGALIZATION BY DECADES? 

calyx cannabis

It appears that cannabis is on track for rescheduling by the end of 2024. However, the primary benefit we anticipate for our clients is the elimination of the 280E tax burden. The author of ‘Congresswoman Says Marijuana Rescheduling Could Set Full Federal Legalization Back ‘Another 50 Years’,’ published by Marijuana Moment, raises a compelling argument.

Fortunately, by employing strategies such as the 471(c) inventory method over the past decade, Calyx CPA has managed to save our clients tens of millions in taxes. This has been achieved by substantially reducing the amount of phantom income reported due to 280E, bringing our clients’ tax liabilities closer to those of fully legal businesses. Therefore, should the industry continue to focus its efforts towards achieving full federal legalization instead of settling for the short-term reward of rescheduling? This decision is more than a mere strategy; it represents a critical juncture that could significantly influence the future of the industry.

The author suggests that if the industry shifts its focus away from fighting 280E but secures some other form of federal recognition, it might still confront financial challenges. However, any federal change could offer benefits such as improved access to banking and increased investor confidence, which could potentially outweigh the ongoing tax issues.

In contrast, the prospect of full federal legalization presents a comprehensive solution. It aims to address a wide range of issues, including the repeal of 280E, simplification of banking processes, normalization of tax treatments, and resolution of legal uncertainties. The potential benefits are substantial, ranging from increased investments to advancements in research. However, achieving this requires widespread congressional support and alignment with federal policies, presenting a challenging and potentially prolonged endeavor.

Faced with this dilemma, the cannabis industry must consider the immediate advantages of a partial legislative victory against the long-term benefits of full legalization. This decision hinges on an assessment of the political landscape, the immediacy of the industry’s needs, and its long-term objectives.

In conclusion, the direction chosen by the cannabis industry at this crossroads will profoundly impact its future. This decision necessitates not only a deep understanding of the legislative environment but also a clear vision for the industry’s future. As the cannabis sector continues to expand and mature, the path it takes now could define its role in the economy and society for many years to come.

 

https://www.marijuanamoment.net/congresswoman-says-marijuana-rescheduling-could-set-full-federal-legalization-back-another-50-years/?

marijuana_business_inventory

HOW DOES INVENTORY INCREASE NET INCOME?

I had a client inquire about why an increase in inventory increased their net income. I explained that for most businesses purchasing products for resale, as well as supplies and materials, typically categorize these items as ‘Cost of Goods Sold’ (COGS). COGS directly offsets gross income and subsequently reduces net income.

However, at the end of the financial year, often accountants request clients to report their ending inventory. Once this is reported, accountants reallocate funds from COGS to the inventory on the balance sheet. This adjustment lowers the COGS, thereby increasing net income. This adjustment can often surprise business owners, particularly in their first year of operation when inventory is being accumulated for the first time.

A significant point to note is that businesses often have substantial funds tied up in inventory. However, they cannot deduct the cost of this inventory until it is sold, which might be in the following year. This leads to a situation where they might have to pay taxes on income despite having low or negative cash flow. A practical tip is to minimize inventory accumulation towards the end of the year and consider replenishing it at the beginning of the next year.

Notably, as of this recording, most businesses are not required to report inventory if their gross revenue is under $29 million. If your business falls under this threshold and your accountant still asks for inventory reporting, it might be wise to get a second opinion as to whether it is necessary to report inventory.

An exception exists for certain industries, such as the cannabis industry, which are subject to specific regulations like Section 280E. In these cases, businesses are required to report inventory as they use particular methodologies that capitalize COGS to inventory, allowing them to deduct otherwise non-deductible expenses.

Businesses with revenues under $29 million can generally employ the cash method of accounting, which permits them to write off purchases for resale, supplies, and materials as COGS and benefit from these deductions in the year they occur.

Assete write off

WHAT KIND OF ASSET CAN I WRITE OFF?

As a tax planning strategy, particularly towards the end of the year, a common question from clients is: “What can I buy to decrease my tax liability?” Many consider purchasing vehicles or making down payments on properties or building facilities. However, it’s important to note that there are limits. For example, buying real estate, including land and building, doesn’t usually offer immediate tax deductions. In fact, down payments on property in and of itself don’t qualify for immediate deductions.

The main category of assets eligible for immediate depreciation (sometimes called ‘bonus depreciation’) includes equipment that can be described as losing value upon purchase and is also not permanently affixed to a building or property. This category encompasses a wide variety of assets, from computers to tractors, dehumidifiers, trimming machines, and even essential building equipment like appliances.

For vehicles, to qualify for bonus depreciation or 179 deductions, they must have a demonstrable and primary business use. Purchasing cars for tax write-offs is often risky if they are not used exclusively for business. For instance, vehicles must be used over 5% of the time for business purposes to be eligible. If this percentage drops, the IRS may require you to recapture formerly deducted depreciation. If business use is less than 50%, consider opting for taking a mileage deduction (currently at $0.65 per mile), which is safer. For business owners, reimbursing oneself for mileage from the business for the use of a personal vehicle is recommended. This reimbursement is non-taxable and counts as a business expense. Remember that these business miles must be meticulously recorded for the deduction to be substantiated.  

Land, on the other hand, is not depreciable. It generally appreciates in value, and the IRS doesn’t allow depreciation as it’s seen as a cash-for-property exchange without actual value loss. Residential rental properties can be depreciated over 27.5 years and commercial buildings over 39 years, but these are long-term deductions and don’t offer much immediate tax relief.

Remember, specific equipment, such as above-ground irrigation systems, that aren’t permanently attached to the property can also qualify for bonus depreciation. Investing in equipment can be a smart tax strategy, especially if these are items you plan to purchase regardless.

Mindfulness-Experience-Podcast-1-c29e19aa

THE MINDFULNESS EXPERIENCE PODCAST – IRS, 280E & PSYCHEDELICS Ideas

In this episode of The Mindfulness Experience Podcast, host Keith Fiveson interviews Botillier, CEO of Calyx CPA LLC, who has extensive experience working with small business owners and is a passionate advocate for the Cannabis and Psychedelic Industries. As a member of the psychedelic community, Justin is committed to assisting businesses in Oregon’s burgeoning psilocybin industry in navigating the financial implications of the 280E provision.