WeedWeek edition / August 02, 2020
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1 IS 471C A POT TAX FIX, OR A TRAP?

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A self-described "very aggressive" accountant recently wrote to me, "We don't want our clients paying any tax if possible. We know how to use 471c to navigate the unfair implications of 280e."

WeedWeek isn't affected by industry-hated tax rule 280E, but our business columnist Dan Mitchell, dug a little deeper into 471C, an obscure loophole some think can normalize the taxes paid by smaller cannabis businesses.

  • The rule, included in the 2018 tax cut, affects how companies reporting less than $25M in revenue can categorize their expenses.
  • Whether cannabis companies can take advantage of it to offset 280E has not been adjudicated in court.
  • Regulatory analyst Sean Hardwick recently wrote that claiming "471C could have 'dire consequences' to the marijuana operator."
    Mr. Cannabis Law
A note from the editor

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Tips, comments and complaints to Alex alex@weedweek.net.

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2 SELECT VAPES SUED FOR OVERSTATING POTENCY

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A $10M class action lawsuit claims that in Oregon, Cura's Select Elite vapes contained significantly less THC than labelled.
WeedWeek

  • MSO Curaleaf, which acquired Cura for $400M earlier this year, declined to comment on the lawsuit but said a similar case had been dismissed.
  • Investment firm Arcadian Capital sued for 3% of the acquisition price claiming it introduced Curaleaf's predecessor and Cura. Cura says the claim in invalid.
    MJBiz
  • Last week WeedWeek reported on an investor lawsuit against Curaleaf's latest acquisition, Grassroots.

More from Hilary Corrigan in WeedWeek:

3 KPMG CASHES IN AS ILLINOIS EQUITY APPLICANTS WAIT

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Global accounting giant KPMG received a nearly $7M no-bid contract from Illinois to assess license applicants. Those applicants are now on hold in part because of KPMG's COVID-related travel ban, the Chicago Sun-Times reports.

  • "Officials’ decision to go with an out-of-state firm was to prevent insiders from getting a leg up in the process," the paper reports. "The delays lengthened the head start already given to the existing clout-heavy pot firms, including some that are publicly traded and another that counts a high-powered lobbyist as an investor. That’s helped them profit even more from the robust weed sales during the pandemic."
  • The firm is still expected to rate more than 800 applicants at a rate of $2,500 each. The delays have fallen especially hard on equity applicants.
  • KPMG declined to respond to questions.

Quick Hit

  1. New Cannabis Ventures' American Cannabis Operator Index climbed 26.7% in July.

4 IS CANNABIS RECESSION PROOF? WE’RE ABOUT TO FIND OUT

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The federal government's $600/week lifeline for the unemployed, which began in April and supported a lot of people's cannabis purchases, has expired. Observers are now asking whether it will at least temporarily depress sales.

  • Industry execs say they're more concerned about the overall recovery than this specific benefit.
  • While the benefit may be extended as part of ongoing COVID relief, some Republicans have proposed slashing the benefit to $200/week.
  • Politico suggests the illegal market may have been hit harder by the pandemic-related economic downturn.
  • SF Weekly talks to Erich Pearson, CEO of Sparc dispensary, about their pandemic strategy. That story is by Zack Ruskin and WeedWeek is very excited to start crossposting his excellent newsletter Rolling Stoned.

Meanwhile, lots of cannabiz companies are 🔒staffing up. The most in-demand skills include sales, marketing and IT.
Business Insider

5 POWER PLAYERS: WANA BRANDS CEO NANCY WHITEMAN

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This week for Power Players we caught up with Nancy Whiteman, CEO of Colorado-based Wana Brands, which now sells its gummies in eight states. Among much else, we discussed budtenders, how to launch a product during a lockdown and the future of gummies.

Whiteman:

"Everybody likes gummies. They taste really good. But I think one of the other reasons why gummies have really taken off as a platform for THC specifically, is that we’ve grown accustomed to gummies as the way that we take our vitamins, et cetera.

"We don’t get up in the morning and open up our vitamins and say, “That vitamin C gummy was good. I think I’m going to have six or seven.” We’re used to eating one. And it feels satisfying and complete in and of itself in a way that I think other product forms don’t. People often ask, “Why are there not more savory edibles?” Well, because nobody wants to eat one cracker, right?"

Read the whole thing.

Quick Hit

  1. Some brands are having success marketing "joy and well-being."
    Green Entrepreneur
  2. Another Green Entrepreneur piece looks at Kikoko's approach to standing out on shelves.

6 DEMOCRATS’ PLATFORM REJECTS FEDERAL LEGALIZATION

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Scott Eisen / Getty Images

The draft version of the Democratic Party Platform supports decriminalizing REC and allowing states to determine their own laws, but stops short of endorsing full federal legalization.
HuffPost

  • Delegates voted 105-60 against legalization.
  • A delegate who introduced the amendment said the platform represents a step backwards from 2016 when the platform endorsed "providing a reasoned pathway for future legalization."
  • However, in a speech on racial justice, Democratic presidential nominee, Joe Biden, who does not support legalization, wants federal aid to support the expungement of past cannabis offenses from criminal records.
    Marijuana Moment

Also in D.C., the Democrat-controlled House of Representatives passed a bipartisan bill to protect all state-legal cannabis activity.
Marijuana Moment

7 CALIF. LEGISLATURE TO DEBATE BANKING BILL

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The California Senate Banking and Financial Institutions Committee plans to hold a hearing on bills that would give a "safe harbor" to banks serving cannabis businesses. 🌴WW California has more.
Bloomberg Law

  • One bill passed the state Assembly 68-1, but observers say the pandemic complicates whether it will become law.
  • Another proposed California bill would "limit appellations of origin, or specific geographic designations, on labeling where cannabis is grown to weed that’s “planted in the ground, in open air, with no artificial light during the flowering stage of cultivation until harvest.”

Separately, Canna Law Blog looks at the federal lawsuit trying to obtain licensing documents from California regulators.

Quick Hit

  1. Costa Mesa, Calif. in Orange County, "provides a recent example of how industry and a city council came together to create mutually beneficial tax policy."
    Forbes -- Ben Curren

8 LITTLE KNOWN HAZARDS OF WEED WORK

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Two interesting stories this week brought up safety hazards within the industry:

9 CBD MAY HELP WITH…CANNABIS USE DISORDER

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Among the many potential benefits of CBD, a study in The Lancet found a surprising one: CBD may help reduce problematic cannabis use.

  • The first randomized study found doses of CBD were well tolerated and more effective than a placebo at reducing cannabis use among the subjects.

Another study found that among "street-involved youth," cannabis use was "understood to ameliorate some of the harms of, or even facilitate transitions out of" homelessness.
PLOS One

Quick Hit

  1. The European Union might designate CBD-infused foods as "narcotics."
    Canna Law Blog

10 THE ART AND SCIENCE OF CANNABIS BLENDS

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Photo by Ngaio Bealum

WeedWeek culture columnist Ngaio Bealum discussed the joys of cannabis blends. They used to just happen when a bunch of folks brought their own product to a session, but now companies like Perfect and Lola Lola are getting in on the action.

Other happenings: