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280E and Your Business: An Oregon Cannabis Lawyer’s Perspective

Support for the ongoing planning process that is managing a business is a big part of why a marijuana business can benefit from a good relationship with its CPA. If having an accountant is new to you, think of him or her as someone that can provide you with an extra set of eyes and ears for your business. The process of checking in with your accountant regularly should help you anticipate financial and tax problems before they threaten to disrupt your business or personal finances.

280E

Two potential threats to Oregon medical marijuana businesses came to mind when I saw this article published by USA Today: https://www.usatoday.com/story/news/nation/2014/11/03/irs-limits-profits-marijuana-businesses/18165033/

The first is the difficulty of managing reimbursements for a tax liability that may not be calculated until the following year. The second is the ongoing drag on a business that is struggling to pay off back taxes in its second year of operation.

Under The Oregon Medical Marijuana Act (“OMMA”), a medical marijuana business is generally permitted to accept reimbursement for its normal and customary costs of doing business. Presumably that includes taxes.

But, how is reimbursement of tax expense to occur if the taxes (1) are not paid on an ongoing basis and (2) are not even known in amount until the tax return is prepared the following year? It appears that to comply with OMMA, the tax compliance process may need to to be a year-round endeavor. An Oregon medical marijuana business should engage its accountant to help it juggle the sometimes conflicting requirements of the reimbursement model and the Internal Revenue Code.

The business owner mentioned in the USA Today article apparently operated his business at a financial loss in its first year and discovered he was deemed to be profitable under the Internal Revenue Code. As a result, he owed $20,000 of income tax for a business that lacked the cash to pay it. Given the amount owed, it is not surprising he is paying that tax over time (it appears he entered into an installment arrangement with the IRS). However, he would presumably rather use the money to pay his current year tax liability or, better yet, use it to help grow his business.

This article is a cautionary tale, for sure. An Oregon cannabis lawyer, specifically a tax attorney, can help guide you through this process. Knowing up front your tax liability and potential pitfalls can help your cannabis business in Oregon avoid outstanding liability and the ultimate failure of your cannabis business.

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Oregon Ballot Measure 91, better than Washington I-502?

 

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As we get closer to the November election and the potential (likely?) passage of Ballot Measure 91 in Oregon, the most common question we hear asked is, “what is recreational marijuana in Oregon going to look like?”. That question is almost always closely followed by people asking if the recreational licensing and implementation process is going to be like Washington’s I-502 process.

As one of two states with recreational cannabis use, Washington should be a leader in how to implement, and build, a legal cannabis market. But, it’s not. Here’s a pretty great article about some of the big issues. https://www.inlander.com/spokane/more-money-more-problems/Content?oid=2358747 

From problems with under-production to the creation of a new black market, Washington’s I-502 has been a marginally successful program. 

We recognize that every state will have it’s growing pains, but we are very hopeful that Oregon’s legal cannabis market will look and feel different. 

The Seattle Times, in this article https://seattletimes.com/html/localnews/2024709004_oregonmarijuanameasurexml.html lays out some of the fundamental differences between the two states.

Here are a few of our predictions how Oregon will be different, and better:

1. Medical dispensaries in Oregon will be allowed to continue to operate and, if they choose, also get licensed to be recreational dispensaries.

2. Our taxes will be lower. I mean WAY lower. This will prevent the black market from regaining a foothold in Oregon.

3. Oregon will have learned from Washington and license cannabis cultivation facilities before new retail facilities.

4. We will not start from scratch for cultivation. This means that, hopefully, Oregon will allow an opportunity for cannabis cultivation facilities supplying the existing legal dispensary market to apply for a recreational license. This would ensure no lapse in cultivation.

5. We are very hopeful that the OLCC will not limit the number of licenses. Without limits a true free market cannabis economy can develop.

There has always been a rivalry between Washington and Oregon, Portland and Seattle, and, if Ballot Measure 91 passes, we are going to guess that Oregon is poised to be the leader in a sensible recreational cannabis market.

 

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Before Oregon Ballot Measure 91: Judge rules bans ok

As we are getting closer to the election, we at Emerge are closely following Ballot Measure 91. Ballot Measure 91 would essentially legalize recreational marijuana in Oregon. As a firm representing people in the cannabis industry we, of course, are keeping our fingers crossed that Ballot Measure 91 passes. In addition to doing what we can to help ensure this happens we are also closely watching what local governments are doing to regulate medical marijuana dispensaries.

After House Bill 3460 passed in 2013 creating legal marijuana facilities, municipalities stepped in and began imposing their own regulations. During the 2014 legislative session, Senate Bill 1531 allowed local jurisdictions to impose moratoriums on dispensaries with an expiration date in May 2015. What we saw was a huge number of cities and counties step in and impose those moratoriums. You can see the list here: https://www.oregon.gov/oha/mmj/Documents/SB1531%20Moratorium%20List.pdf

While 1531 has created a brief moratorium, some jurisdictions have gone into overdrive and created local rules banning dispensaries all together. In southern Oregon, the city of Cave Junction took a different position and instead filed a law suit against the Oregon Health Authority and the State of Oregon. This lawsuit specifically sought to address the conflict between state law and federal law. Noelle Crombie at the Oregonian discusses the case here: https://www.oregonlive.com/marijuana/index.ssf/2014/10/medical_marijuana_in_oregon_co.html#incart_river

Avoiding that conflict, Josephine County Circuit Court Judge this week ruled in favor of the city and found that, since there was no specific language in House Bill 3460 disallowing cities and counties from banned marijuana facilities in Oregon, local government could do as they pleased.

This is clearly a blow to the medical marijuana community in Oregon and, as we edge closer to the moratorium expiration, we wonder if more local jurisdictions will attempt to impose permanent bans. However, it is important to note that Ballot Measure 91 DOES contain specific language directing local governments how they can impose a ban – it must be voted on by the people in that jurisdiction and they give up tax revenue. This may leave local jurisdictions in the nonsensical position of banning medical dispensaries serving truly sick people while recreational dispensaries open instead.

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New Brand & Website

Emerge Law Group is pleased to announce the launch of our new brand & website! Throughout our site you will find information about Emerge and our services as well as information on various laws and business practices.

Please get in touch with us with any questions! We can help you with all of your cannabis legal needs!

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FRANCHISE LAW

Franchisors

Franchise law is a heavily regulated area of law.  We help clients expand their businesses through franchising and other distribution methods. We have experience in many industries including, restaurants, health, and beauty, alcohol, and cannabis among others. Our representative services include the following:

Franchisees

We also help potential franchisees interested in buying a franchise. We are able to assist with evaluation of franchise opportunities with respect to:

Alternative Structures

However, not all businesses are suited to franchise. We are also experienced with helping clients structure alternative distribution methods to prevent classification as a franchise.

MERGERS AND ACQUISITIONS

Our M&A attorneys are highly experienced in counseling clients who are considering acquisitions or exit strategies.  We have many years of experience handling deals of various types and sizes, ranging from sales of small closely-held business, private companies, and publicly-traded corporations.  We have represented business owners, private equity firms and investment banks in a wide range of industries. 

We have a deep business bench, and Emerge attorneys have handled transactions of all shapes and sizes.  Whether your deal is valued at $100,000 or $100,000,000, our experienced attorneys will guide you through the deal process.

We understand the intensity, technical skill and judgment needed to get deals done, and we provide our clients with timely, practical and cost-effective legal advice.  We are highly capable in all aspects of M&A, including the following:

CANNABIS INDUSTRY

Emerge Law Group is highly experienced in the cannabis industry.  We have helped many clients obtain state licenses and local permits to operate cannabis businesses throughout California, Oregon, and Washington.

Emerge attorneys were instrumental in the drafting and passage of Oregon Measure 91, legalizing marijuana in the State of Oregon, and have represented cannabis businesses well before many law firms were willing to enter the cannabis industry. As a firm that has provided legal services in the cannabis space for many years, we are familiar with the unique and complex issues businesses and individuals face in an emerging and highly regulated industry.

We regularly help clients with:

Cannabis laws and rules are also regularly changing.  Members of our team are dedicated to attending legislative hearings, state agency and local city and county meetings to stay up-to-date on any new changes and how to adjust to any new changes.

See our Cannabis Industry page for more information.

PSYCHEDELICS

There is tremendous excitement about the potential for psychedelic drugs to benefit a wide variety of populations, including terminally ill patients suffering with anxiety and depression. Until recently, psychedelic substances have been accessible only in the illicit market and are illegal under federal and state to manufacture, distribute, or possess. These substances have, since 1970, been treated as having no legitimate medical use, and no commercial application. As such, no one invested in this area or required legal services, outside of the criminal context.

Today, researchers in a multitude of clinical studies are proving the medical safety and efficacy of these medicines, with the objective of changing the treatment of these substances under the Controlled Substances Act. Companies are now actively raising money to develop intellectual property and seize market opportunities associated with psychedelic drugs.

In addition, advocates at the state and local levels are not waiting for the rescheduling of these substances and are active in undertaking efforts to decriminalize these substances and/or make them affirmatively legal under state and/or municipal law. Decriminalization already has occurred in cities including Denver, Oakland, Santa Cruz, and Ann Arbor. Oregon is poised to be the first state to make psilocybin therapy affirmatively legal. Emerge Law Group is working with a wide array of clients pushing forward in this emerging area.

See our Psychedelics Practice Group page for more information.

TAXATION

CORPORATE AND PARTNERSHIP TAX

Businesses of all kinds benefit from a customized but systematic approach to structuring legal relationships. Emerge Law Group helps businesses and business owners with a variety of tax planning matters.

Representative client services include:

ESTATE PLANNING

Estate planning encompasses everything from a will and power of attorney to combined estate and business succession planning. In almost all cases, the purpose of the plan is to help the client protect those they care about most in the event they can no longer be there for them.

Emerge Law Group has experience with a wide range of tools used in estate planning, including wills, trusts, and family business entity planning.

TAX CONTROVERSIES

Emerge Law Group can assist with the resolution of difficult tax controversies. Our areas of emphasis and experience include:

REAL ESTATE TRANSACTIONS

Emerge Law Group assists clients with a wide range of real estate transactional matters.  We regularly help clients with:

LAND USE

Emerge Law Group also assists clients with all aspects of local government land use and development processes, ranging from preliminary property analyses and building permit issues to complex land use reviews and hearings. Our attorneys are experienced in obtaining land use entitlements and development permits for a wide range of uses.

We regularly help clients with:

Above all, we understand the value of working with cities and counties to enhance communities while developing the land to its potential. We strive to create solutions to land use issues that serve to better our clients and the communities in which they live and work.

LITIGATION AND ALTERNATIVE DISPUTE RESOLUTION

The attorneys in Emerge Law Group’s Litigation and Alternative Dispute Resolution practice group litigate commercial, intellectual property, and public interest matters in state and federal courts, as well as private mediation and arbitration proceedings.  Our lawyers have represented national and regional financial institutions, major media, entertainment and technology companies, and other Fortune 500 companies in a broad array of high-stakes disputes.  Our team of litigators has handled leading cases that have shaped the law in cutting-edge business, technology, free speech, and public interest impact lawsuits in trial and the courts of appeal.

We have particular expertise in handling civil litigation and regulatory enforcement matters in the cannabis and psychedelic industries.  While many firms claim expertise in the these industries, few have our depth of experience successfully litigating contract, trademark, partnership, shareholder, land use, and real estate disputes in court and arbitration.  Even fewer firms have our level of experience handling writ of mandate proceedings against the government regulators.

Our litigators practice in California, Oregon, and Washington, but have appeared in state and federal courts nationwide.  Our knowledge of our clients’ businesses, goals and concerns, and our experience litigating at the highest levels, give us unique insight into possible outcomes and pitfalls as we continuously confront issues of new impression.

No matter what the industry, we pride ourselves in achieving our clients’ objectives through efficient and creative solutions primarily designed to avoid disputes in the first place—which is always the best litigation strategy.  Many times, our clients obtain excellent outcomes before or at the earliest stages of litigation because our adversaries quickly recognize the challenges they will face in litigating against us.  When litigation is unavoidable, however, we work hard to provide our clients with both cost-efficient and “big firm” quality representation.

 

INTELLECTUAL PROPERTY

Your intellectual property (or “IP”) strategy can harness your most valuable information and intangible assets including your name, your brand, your designs, your content, your services, and your products — what makes your business stand apart in a competitive world.  We can help you evaluate and build your IP portfolio, then secure it, monetize it, and protect it.

IP encompasses multiple areas of law and different types of information or material.

Our Intellectual Property practice focuses on:

TRADEMARK

Trademarks include names, signs, logos, designs, phrases, slogans, expressions, and sometimes even colors, sounds, or smells that identify or distinguish one business compared to others.  Trademark protection is fundamental in securing your “brand.”

COPYRIGHT

Copyright covers original works of creative authorship fixed in a tangible medium of expression.  This includes literary, dramatic, musical, and artistic works, such as poetry, novels, designs, movies, songs, computer software, and architecture. Copyright does not protect facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed.  Depending upon the type of work, “moral rights” (such as the right of attribution) may be implicated as well.

TRADE SECRET

Trade secret laws can vary somewhat between states, but generally trade secrets cover information, including drawings, cost data, customer lists, formulas, recipes, patterns, compilations, programs, devices, methods, techniques or processes that derive economic value from not being generally known and are the subject of efforts that are “reasonable under the circumstances” to maintain secrecy.

PRIVACY

Depending upon where you live or operate, there is a special patchwork of laws and regulations that protect and regulate personal information.  If you are handling or giving out personal or potentially sensitive information, you may be implicating privacy laws.

PUBLICITY

Publicity rights address the commercial use of an individual’s face, name, image, or likeness.  These rights vary state-to-state.  Marilyn Monroe, for example, lived in multiple states which created complex questions about her publicity rights.

Our Intellectual Property services include:

FINANCIAL INSTITUTIONS

In states where new cannabis banking opportunities exist, Emerge Law Group has the proven expertise in creating canna-banking programs to efficiently capitalize on those opportunities. Our Banking Practice Group specializes in working with banks and credit unions to develop regulatory compliant programs and operational best practices. We also train banking staff to become experts in canna-banking so they can effective understand and manage the risk affiliated with canna-banking.

We regularly help clients with:

EMPLOYMENT LAW

At Emerge Law Group, we recognize that employees are the heart and soul of any successful business.  Our Employment Law Practice Group works with employers to help them effectively manage their workforce, navigate the complex web of federal, state and local employment laws and, if necessary, defend against claims before administrative agencies and in court.

We regularly help clients with:

CORPORATE FINANCE AND SECURITIES

Our corporate finance and securities lawyers are experienced attorneys who have practiced at large law firms, worked as in-house counsel for public companies and investment banks, and owned and operated start-up companies. We work with clients to help achieve their financing goals while safely navigating the highly technical securities law landscape. 

In addition to representing issuers, we also routinely represent institutional and individual investors, including in connection with fund formation and investments.

Our expertise includes:

We have a deep understanding of the financing options available to businesses, including simple unsecured loans, asset-backed financing, convertible debt, common and preferred equity, crowdfunding and various other structures.  We work closely with our clients to understand their business and financing needs, ensure they are prepared to approach investors and choose the right partners, structure and negotiate terms, navigate the due diligence process and successfully close the deal.

COMPLIANCE AND LICENSING

ALCOHOL AND BEVERAGE INDUSTRY

Emerge attorneys have represented businesses in the alcohol and beverage industry, including wineries, breweries, distilleries, restaurants, bars, movie theaters, golf courses, and gas stations.  We can help you vet new locations, acquire existing locations, and apply for the appropriate liquor license.  We also provide training to comply with applicable rules and regulations, prepare operating procedures, submit renewals, and keep clients protected in the event of any potential violations or administrative hearings.

CANNABIS INDUSTRY

Emerge Law Group is highly experienced in the cannabis industry.  We have helped many clients obtain state licenses and local permits to operate cannabis businesses throughout California, Oregon, and Washington.  We regularly help clients with:

Cannabis laws and rules are also regularly changing.  Members of our team are dedicated to attending legislative hearings, state agency and local city and county meetings to stay up-to-date on any new changes and how to adjust to any new changes.

See our Cannabis Industry page for more information.

PSYCHEDELICS INDUSTRY

Emerge Law Group is a leader in the psychedelics industry.  There is tremendous excitement about the potential for psychedelic drugs to benefit a wide variety of populations, including veterans struggling with PTSD and terminally ill patients suffering with anxiety and depression.  Until recently, psychedelic substances have been accessible only in the underground; they are illegal under state and federal law to manufacture, distribute, or possess.  These substances have, since 1970, been treated as having no legitimate medical use, and no commercial application.  As such, businesses have not invested in this area or required legal services, outside of the criminal context.

Today, psychedelics are proceeding toward legalization on multiple paths.  Researchers in a multitude of clinical studies are proving the medical safety and efficacy of these medicines, with the objective of changing the treatment of these substances under the federal Controlled Substances Act, opening legal access to them.  Private and public companies are now actively raising money to develop intellectual property and capitalize on the market opportunities associated with psychedelic drugs.  Opportunities to be early actors in this new arena are tremendous.

See our Psychedelics Practice Group page for more information.

BUSINESS AND CORPORATE

Our business transactions team is made up of highly experienced transactional attorneys who have practiced at large law and accounting firms, worked as in-house counsel for public companies and investment banks, and owned and operated start-up companies. We understand complex legal matters and provide high quality legal services in a cost-effective manner.  Our clients value our experience, knowledge and judgment.

ENTITY FORMATION

Our team routinely advises clients regarding:

CORPORATE GOVERNANCE

Emerge attorneys also advise on-going concerns with: