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The IRS Targets Drug Policy Reformers

A recently adopted IRS rule for tax-exempt organizations seems to violate the First Amendment by taking aim at groups that support drug policy reform.

The rule, described in an Internal Revenue Bulletin dated January 2, 2018, says the IRS will deny tax-exempt status to "an organization whose purpose is directed to the improvement of business conditions of one or more lines of business relating to an activity involving controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law regardless of its legality under the law of the state in which such activity is conducted."

As Washington, D.C., lawyers David Rivkin and Randal Meyer pointed out in The Wall Street Journal, that language arguably covers organizations that advocate legalization of marijuana (or any other prohibited substance) or favor looser restrictions on certain prescription medications, both of which would improve "business conditions" for companies that sell those drugs. The exclusion also seems to encompass advocacy of less ambitious reforms, such as allowing state-licensed marijuana merchants to deduct business expenses on their federal income tax returns or changing the laws and regulations that discourage banks from serving such businesses.

Nonprofit organizations that are exempt from taxes under sections 501(c)(3) and 501(c)(4) of the Internal Revenue Code (for "charitable" and "social welfare" organizations, respectively) are subject to restrictions on the amount of "lobbying" they can do. But this exclusion goes beyond those general rules by disfavoring certain viewpoints.

"The government may not discriminate against groups based on the viewpoint of their speech," UCLA law professor Eugene Volokh noted in a 2016 Volokh Conspiracy post about tax-exempt "hate groups." Volokh cited a 2015 D.C. Circuit case dealing with an anti-Zionist group that claimed its views had led the IRS to delay consideration of its application for 501(c)(3) status. "In administering the tax code," the appeals court noted, "the IRS may not discriminate on the basis of viewpoint."

Asked to clarify the aim, scope, and legal basis of the rule, an IRS spokesman promised a reply or a firm "no comment" but delivered neither. Mason Tvert, spokesman for the Marijuana Policy Project, says he believes the rule applies to new applicants for tax-exempt status but not organizations that have already been granted it. A new drug policy reform group could be rejected "if whoever is reviewing the application determines the applicant would be working to advance the cannabis industry," Tvert says. "It wasn't necessarily simple before. It seems like this new rule could make it even more difficult."

Photo Credit: IMOGI/iStock

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  • Longtobefree||

    "regardless of its legality under the law of the state in which such activity is conducted."

    Constitution, what constitution? We're the IRS.

  • Juice||

    The Supreme Court already said the IRS can penaltax you for not doing what it wants. How is this so different?

  • Sometimes a Great Notion||

    "an IRS spokesman promised a reply or a firm "no comment" but delivered neither."

    Sounds about right, wouldn't want the peasants to understand the tax code, they may revolt.

  • Mickey Rat||

    You have to make a "no comment" comment for it to be a real no comment.

  • Rockabilly||

    Fuck the IRS !!!

    And Fuck the democrat/progressive/socialist/communist party !!

    I await your death !!!

  • spork||

    Broaden your field of fire a smidge to the right and I am all-on-board there, buddy !!!

  • Libertymike||

    An administration which employs bureaucrats who conceive of such a rule, is an administration devoted to filling the swamp, not draining it.

  • Mickey Rat||

    I don't anti drug prohibition is one of Trump's issues, so I don't think he is looking to reclaim that part of the swamp.

  • C. S. P. Schofield||

    Gimme a break. That's like saying that if a newly elected POTUS can't fix everything in the first hundred days of his (or her) administration, that constitutes failure.

    I'm not saying Trump walks on water. I don't think anybody but Trump thinks Trump is the best of all possible Presidents. But I don't think any human President could even shake the hands of every bureaucratic Drone on the Federal Government in one term, much less review their decisions and fire the morons.

  • EscherEnigma||

    I don't think anybody but Trump thinks Trump is the best of all possible Presidents.


    Have you heard how LoveConstitution talks about him?

  • Deconstructed Potato||

    Off topic: ROOOOOOBBBBBBBYYYYYYYYYY!!!!!!

    Start digging into this, pronto.

  • Jerryskids||

    "Seems" to violate the First? I don't see how it's not explicitly violating the First - the plain language of the rule is the well-known chilling effect for anybody advocating changing the drug laws in the direction of making them more lenient rather than more onerous.

  • Cloudbuster||

    I don't see how it's not explicitly violating the First

    You must not be a lawyer, a class of criminal dedicated to the propositions that "Congress shall make no law" about a subject means Congress gets to make a boatload of laws about a subject and that "shall not be infringed" means infringements are justified at every turn.

    I understand it's difficult to think like that. First you have to dedicate your soul to absolute evil.

  • Longtobefree||

    Maybe if we got rid of the 'charitable' deduction, all of this nonsense and sham 501c3 or 4 corporations would go away. We could put the displaced IRS agents to work either patrolling the border (for republicans) or following Trump around to get him on something (for democrats).

    If citizens want to help others, it should not matter if it is deductible or not.

    Here's a crazy idea, get rid of all deductions and just tax everybody the same regardless of marital status.

  • Friendo||

    I applaud this. Nobody gave a shit when the tea party patriots (and other advocating for smaller government groups) were targeted. Suck it up fuckers. How does it feel.

  • Vladilyich||

    In any state where gambling is illegal, the IRS requires you to itemize your winnings, but will not allow you to deduct your losses. Same warped philosophy. I also look to see (soon) the requirement of any investor who owns pot stocks to be required to claim all gains, but they will disallow the deduction of any losses because, technically, owning stock in a marijuana company is tyechnically illegal and makes you a part to manufacture and distribution of a controlled substance.

  • SDN||

    Remember Operation Choke Point?

    Why bother having an election, if the Deep State #Resistance can continue previous policies?

  • LEAPGuyAZ||

    WOW so much for free speech in the Trump administration.. With marijuana legal in 33 states in one way or another this doesn't sound like the will of the people. What happened to "We the People"

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