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Comment by Drakim | Hacker News Reader

What is the legality of marijuana on the federal level in the US? I was under the impression that even if marijuana is legal on a state level you can still get in trouble for it.

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Federally, it's still illegal. However, there have been statements that they aren't prosecuting or pursuing legal action in states that have legalized it [0].

[0]: http://www.denverpost.com/2013/08/29/federal-government-wont...

Edit: For the record, it would still block you from getting a US Government security clearance, and you can still run drug tests on employees and decline them for failing.

IOW: at the federal level illegal by law, ignored for recreational amounts by executive order (and thus possibly changing when a new executive branch is elected).

Couldn't that policy be reversed by another president? For example, a President Cruz might not like the idea.

In a way, Microsoft getting involved raises the cost of changing the policy; do they want to prosecute or otherwise upset a major corporation?

Yes.

Federal enforcement is carried out by the DOJ, which is an agency of the Executive Branch. The DOJ serves at the pleasure of the President, so while Obama chooses not to enforce this law currently, he (or the next President) could change their minds at any moment.

In practice, Microsoft is betting on their lobbyists to ensure a stable regulatory climate.

It is indeed illegal on the federal level. Currently everyone is just an executive order away from crack down on all of it. The guidance that the Obama Administration has been using is not to enforce the law in states where it has been legalized (though they have been cracking down on cases where dispensaries open within 1000 ft of a school). That said, a new president could do whatever they wanted and a crackdown would likely result in an eventual supreme court case that the states would probably lose based on current precedent.

I think you overstate the ease with which you go about putting toothpaste back into the tube.

http://lifehacks.stackexchange.com/questions/2221/whats-the-...

Yes, it's still very much illegal federally. It's still a Schedule I controlled substance. The federal banking system / IRS refuses to interact with marijuana businesses, the postal service won't mail ads for it, the DEA continues to raid growers, etc, etc.

Edit: as others have pointed out, I was incorrect in lumping in the IRS with the rest of the federal banking system. The IRS does indeed accept money from marijuana businesses. There are other parts of the federal banking system that are not so "accepting", for instance: http://www.denverpost.com/2016/01/05/judge-tosses-denver-mar...

> IRS refuses to interact with marijuana businesses

What does that mean? Surely the IRS still wants their money? It would seem to put the IRS and marijuana businesses in an awkward position...

Pretty sure the IRS is more than willing to deal with MJ businesses - they have an entire setup to let you report "illegal" gains and even keep that secret long before the recent legalization efforts.

Banks, now that's a different story.

The IRS explicitly states that you need to declare bribes and income from illegal activities [1]

"Illegal activities. Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity."

[1] https://www.irs.gov/publications/p17/ch12.html

Also from stolen goods, unless you return them in the same year:

"If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner."

I wonder if one could deduct it if they return the item in the subsequent year instead :)

You can deduct business expenses for illegal activities, except for specific categories (for example, bribing public officials is not a valid deduction).

So you might actually be able to deduct that, if you could justify returning the property as a business expense.

I would have bet money that was a joke. But no.

"We don't care where your income comes from, we just want our cut of it."

That's just hilarious! Are you saying drug dealers actually report their income and pay taxes off it?

Of course not. This is just a clarification about another point of law that a typical drug dealer violates, which gives law enforcement yet another angle.

In some cases proving tax evasion is easier than proving other crimes. This is what got Al Capone -- because the crime was perpetrated through his organization and not by him directly, it would have been difficult to hold him directly responsible for the crimes. However, once his ledger was discovered it was straightforward to prove that he received significant income without making the required income tax payments.

Once drug dealers get caught, they have to pay back taxes (I saw that in a movie)

It depends on your definition of "drug dealer". Companies that operate in the open under state laws that legalized weed normally do report their income and pay federal taxes on it, despite the activity being illegal on federal level.

For some twilight-zone stuff, check out drug tax stamps (i.e. http://www.ksrevenue.org/perstaxtypesdrug.html)

You have to buy them and place them on your drugs so if you get raided, you can prove that you paid taxes on your supply. There are even folks who collect the stamps.

The IRS doesn't refuse to interact with anyone. They want their money no matter how you made the income, and if you're in the country legally or not.

Remember, what they ultimately got Al Capone on wasn't racketeering, bootlegging or murder, it was tax evasion.

The absurd thing is that while marijuana being a schedule I drug which in the DEA's own words:

>> Schedule I drugs are the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.[0]

Cocaine and methamphetamine are both schedule II.

Now I understand the difference is that Schedule II means there are some medical uses but to lump marijuana in with "the most dangerous" but not meth? That just seems ridiculous.

[0]https://www.dea.gov/druginfo/ds.shtml

Methamphetamine is routinely prescribed for ADHD under the brand name Desoxyn, it absolutely has medical use.

But it's manifold more dangerous than cannabis

Alcohol and tobacco are several orders of magnitude more dangerous than anything currently scheduled.

Fentanyl is scheduled, so that's really not true.

They kill more people simply because they're more popular. I don't think they're more dangerous per dose.

Think again!!! http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4311234/ Alcohol is incredibly bad for your body dose by dose compared to marijuana.

Sidenote (not from this study): Mushrooms are supposedly the least harmful to the human body... Who'da thought?

I wasn't talking about marijana or musrooms. I was talking about for example heroin, which is schedule 1.

Cocaine and its related metabolites have accepted medical use. Particularly by ENTs and such.

Schedule I drugs have no known medical use and high abuse potential, which marijuana currently falls under. Whether or not you agree with that classification is an entirely seperate issue.

I really can't stand when objective issues of science and medicine are framed as something to "agree" or "disagree" with.

The scheduling of cannabis is crap, and literally everybody knows it. The DEA has to embarrassingly dodge the question whenever it's brought up.

What is objective here? The only objective truth is biological determinism. The rest is political garbage that I have no interest in discussing.

IRS refuses to interact with marijuana businesses

That's not even remotely true, as even 30 years ago the IRS happily took my money, and did so without telling anyone else where the money came from. I mean, maybe it's changed since, but when it comes to "IRS won't take my money", ima gonna have to pull the "citation needed" card.

Are you saying that you made money selling drugs, told the IRS that the money was made illegally and nothing happened? I've heard that the IRS definitely focuses on collecting tax money and not how it was made, but I thought that people technically never admitted to anything when declaring illegal income sources. It looks like the applicable part on a 1040 would be line 21, which just asks for "other sources of income".

During the course of facilitating a tax audit of a startup I worked at some years ago, I was told by the IRS agent conducting the audit that they in fact have an entire group of agents focused on compliance and audit for prostitutes. It turns out that the IRS' job is to collect money, not to make sure that rules established by other parts of the government are followed ;)

> told the IRS that the money was made illegally and nothing happened

Is there a checkbox on US tax forms for "illegally earned money"? Or are you expected to put that in a free-text field?

Man, I didn't know this would get so many responses, and I wished I could remember better from 30 years ago. So I apologize for the lack of detail (and I'm not a tax accountant anyway, so do not be taking this as advice or anything but an anecdote). But as I fuzzily recall, just put it in the "other income" box, deduct cost of goods, sorted.

One should also note that (as far as I can tell) the IRS does little more than a cursory glance at most returns to make sure the numbers add up, especially back then. Point being is that it's entirely possible one could have put "income from trafficking under-aged children into white slavery", deducted the cost of acquiring said children, and never gotten flagged because the numbers add up and it doesn't hit the "trying to weasel out of paying what's owed" flag in the computer. Dunno, I'm just relaying an anecdote with a lot of details left out, you sure as hell don't want to take this as tax advice.

Not quite. What would happen is that people would get rung up on drug trafficking charges and then the IRS would pile on by taxing the undeclared illegal income. In the late 70s/early 80s, a case[1] made its way through the tax courts wherein a petitioner, a convicted drug dealer facing a jeopardy assessment from the IRS, filed a tax return for the prior year in which he declared income calculated net of COGS and other misc business expenses. The IRS disallowed these deductions, which if upheld meant that the petitioner would owe tax on his entire gross income. The petitioner sued and won, which established a precedent that didn't quite gibe with the political climate of the day. In response, the Senate Finance Committee promulgated a code amendment generally referred to as 280E[2], which prohibits those engaged in illegal activities from deducting ordinary and reasonable business expenses when reporting their net income to the IRS. Only COGS can be deducted, which for dispensaries and other non-manufacturing license holders, can result in an effective tax rate of 70% or more. In fact, it's quite easy to lose money and still owe taxes in the industry if you let G&A run away from you.

[1] https://scholar.google.com/scholar_case?case=702348433062253... [2] https://newrevenue.org/2013/03/13/marijuana-tax-code-section...

In the mid-80s, you reported income to the IRS as coming from a marijuana business?

Bold move.

Is there a statutory prohibition on the IRS sharing this info with other law enforcement agencies? Where is the line, i.e. would you expect confidentiality if you reported proceeds from your work as a hitman?

In the mid-80s, you reported income to the IRS as coming from a marijuana business? Bold move.

In the mid-80s I had income that would not ordinarily go on a W2 or a 1099. I had reason to take them at their word and file. All I'm saying is that the IRS doesn't care where the money comes from, as long as they get their cut, and I have experience to back this up.

All it takes is one story to the contrary to turn this into urban legend, and the IRS doesn't get as much money anymore. They're a debt collection agency, I had/have little reason to doubt that they just want their money.

Of a sort. Other agencies can get that data from IRS, but they need to initiate the process, and they need a court order for that. So if they have a reasonable suspicion that someone is committing the crime, they can check that person's tax records; but they can't just trawl the tax return database and see who reported illegal activity.

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