IRS Denies Nonprofit Status to Cannabis Trade Associations

cannabis industry association


Just two days before U.S. Attorney General Jeff Sessions revoked a wide range of Obama-era policies protecting cannabis businesses, including the Cole Memo, the IRS issued a policy update that contained a subtle, yet significant development: a ban on the creation of nonprofit cannabis industry associations.


The change was announced on Jan. 2nd, and it garnered little to no media attention at the time. While the policy shift didn’t rescind the status of existing 501(c)6 organizations in the cannabis industry, it did prohibit any new groups from operating as non-profits.

Upon discovering the change in regulations, cannabis industry leaders voiced their strongly-held opinions as to the importance of marijuana trade groups’ ability to operate as non-profits, as well as the destructiveness of Sessions’ decision. Here’s what they had to say:


“Industry associations are vital to a business community. They provide the ability to network with your peers, trade knowledge, explore possibilities and grow the entire industry with the thought that a rising tide lifts all boats. It would be nothing short of abuse of power to see our federal government use the terrible mis-classification of cannabis as a Schedule 1 as a tool to disrupt the thriving cannabis economy.” Jeremy Jacobs, Co-Founder of Eyechronic, a dispensary technology company that provides advertising and tools to the cannabis industry


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“The existence of the IRS’s red flags on medical marijuana-related applications was first revealed in documents obtained and released in 2013. Since then, there have been red flags on names referencing the term ‘Medical Marijuana.’ This was then confirmed by the Treasury Inspector General for Tax Administration on October 5th, 2017. Now the IRS is completely shutting off the issuance of determination letters to organizations whose purposes are directed to the improvement of business conditions of one or more lines of business relating to an activity involving controlled substances (Schedule I and II) and clearly states ‘regardless of its legality under the law of the state in which such activity is conducted.’ This situation further increases the gap between federal and state regulations in a time when cannabis is becoming more widely accepted and a lot of signs are pointing towards federal legalization. Taking a 30,000-foot view, I strongly believe that we’re losing the sense of the word ‘United’ States of America. This action is condemning a nascent industry in a land where we bolster the term ‘innocent until proven guilty.'” –Arnaud Dumas de Rauly, Chief Strategy Officer forThe Blinc Group, a distribution-centric vapor and cannabis incubator


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“By preventing cannabis-related businesses from forming 501(c)(6) organizations, the IRS is improperly taking a political stance that is at odds with close to 90% of American taxpayers who support medical cannabis legalization. This decision stifles job creation, harms thousands of small businesses, and is in direct in violation of U.S. federal law prohibiting political discrimination by the IRS.” –Isaac Dietrich, Chairman & CEO of MassRoots (OTCMKTS: MSRT), the largest and most active social network for cannabis enthusiasts on the web.


“It is unfortunate, yet not surprising, that the current administration continues to act in direct contradiction to what the majority of Americans want. Blocking non-profit cannabis industry associations who are working to advocate for responsible consumption of this powerful plant medicine makes absolutely no sense.”  –Krista Whitley, CEO of Altitude Products, a conglomerate of cannabis companies such as Social Media Unicorn, a canna-brand marketing & sales agency, Bella, a line of cannabis products designed by and tailored to women, and The Weekend Box, a monthly variety box of the top products in cannabis.


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“Even in a not-for-profit setting, it never ceases to amaze me what ways beneficial organizations can be roadblocked. This is yet another example of one of the many institutional problems we see that our and other technologies can solve for the cannabis industry and its major constituents. If these organizations were using 420 Blockchain technology, cannabis business would have full transparency and accountability, traceability and auditability in order to show where all transactions are coming from and going.”  –Mike Kramer, Co-Founder and CEO of 420 Blockchain, the first enterprise-level seed-to-sale Blockchain solution in the cannabis industry.


“I’m reading the new IRS policy and I’m thinking to myself, this is clearly political. They are blocking the formation of non-profit associations for the cannabis industry. We need these organizations in our community! The new policy of deregulation cuts both ways, in some cases, it helps, in others, it creates opportunities for corporate interests to place undue influence on the direction of the industry. Just as Obama used the IRS to chase his enemies, so too does the Trump administration, which is pursuing a return to a Reagan-era War on Drugs mentality.” – – Clarisa Strohmeyer, Founder of Ganjly, the nation’s leading Cannabis News Site dedicated to de-stigmatizing cannabis.


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Ethan Andersen is a drug law reform advocate and Publicist at NisonCo, a cannabis industry media relations firm. You can follow him on Twitter here.