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Lobby Day For the Marijuana Industry

Weed wonks head to Capitol Hill, talking taxes and policy reform

Squint, and it looks like your typical networking confab in the nation’s capital: men and women in tailored suits and trendy dark-framed glasses gathered around a sideboard of coffee and carbs, their outsized name cards promoting wonkish-themed firms and start-ups.

Focus in, however, and a few inconsistent cues emerge: a touch of leather here, a man with handlebar mustache over there.

The blink-you-missed-it nonconformity is all you get, however. As marijuana industry leaders readied for lobbying Capitol Hill Tuesday, their freak flags weren’t flying. This is the next-gen legacy of a decades-old movement, a business association like any other, with their sights on tax reform and banking regulations, and they are all business. They just want to end the federal ban on pot, too.

“If you are in the business of selling cannabis or cannabis products in the cannabis space it is in your financial interest to change federal law,” exclaimed Aaron Smith, co-founder and executive director, of the National Cannabis Industry Association (NCIA), which started out with a dozen cannabusinesses in 2010 and now has over 850 members and a full-time lobbyist on the Hill.

Not just about profits, the assorted entrepreneurs, investors, advocates, lawyers and compliance experts gathered in Washington had specific goals for their “lobby day” with lawmakers on Wednesday. Those included a change to the tax code, specifically repealing “280E,” which restricts their ability to declare corporate deductions, forcing pot business to pay upwards of 70 percent of their income to Uncle Sam. They also want Congress to step in on their behalf with federal regulators who are scaring banks into turning away businesses in states where recreational marijuana and/or medical marijuana are fully legal, forcing them to be dangerous cash-only operations.

“We’ve come a long way since the beginning,” said Steve Fox, co-founder and deputy director, who heads up NCIA’s lobbying effort, recalling the first such confab in 2010 where, “I believe all we probably had was a homemade little poster board with our logo on it on the podium.” On Tuesday he spoke to a generous audience in the sleek “20 F Street” conference center on Capitol Hill, and two giant banners with NCIA’s sunrise logo (no leaf) graced the stage. D.C. Delegate Eleanor Holmes Norton stopped by and spoke for nearly 20 minutes about D.C.’s legalization law, which so far, has been thwarted by several Republicans in Congress.

Like any other industry, every level of the supply chain filled the room—cultivators, sellers, laboratories that test medical marijuana, manufacturers of equipment that extract the oils that make edibles and other cannabis products, capital investors, and experts who help cannabusinesses comply with the laws, which vary from state to state. Activists were in force, too, the backbone of a movement that has steered not only successful medical marijuana laws in 23 states plus D.C., but full legalization in Colorado, Washington, Oregon, Alaska and the District of Columbia—all in the last five years.

“This is all part of an ongoing social justice movement,” said Smith, “but we are also a movement for free enterprise, which I think has been the driving force behind a lot of social change.”

This juncture is exactly where free enterprise needs to keep channels open with the anti-prohibition effort and not let the two grow apart or worse, work against one another, said Rob Kampia, head of the Marijuana Policy Project, which has been responsible for drafting most of the state-level laws enacted since 2000, including the landmark referendum legalizing pot in Colorado in 2012.

On one hand, medical dispensaries used to a certain profit level in California were blamed in part for gumming up full legalization in 2010 because they saw profits going down. On the other, reformers have been prickly about “Big Pot” and the over-commercialization of the bud.

“The tension between industry players who care about making money and the rest of us who care about freedoms … . Both aren’t mutually exclusive,” pointed out Kampia. More than ever, he said, they have to work together.

Now that these laws are in place, the success of the movement will depend, in part, on whether the dispensaries act responsibly, standards are met, the taxes and other benefits that states are counting on transpire, and businesses not only profit, but have the ability to grow and flourish in a safe, legitimate space. Getting the federal government to take pot off of its Schedule I list of Controlled Substances, would be the cherry on top.

No one agrees more than the entrepreneurs who spoke with TAC at the event Tuesday. All three have livelihoods that depend on the success of cannabis, but expressed a personal investment in reforms based on the compassion for patients and the freedom of choice. All three were running to serve on the NCIA’s board of 22 directors.

“I’m conservative—very conservative,” and a longstanding Republican, offered Chet Billingsley, a refined older gentleman with a shock of white hair, impeccably dressed, and with a presence that belies his years on Wall Street and in the halls of America’s top schools, including West Point, Harvard, and MIT. The founder of California-based Mentor Capital, a publicly traded mergers & acquisitions and investment company since 1985, Billingsley has shifted the company’s focus from cancer research to medical cannabis. Mentor is now what is called a public incubator, taking solid cannabis companies, prepping them to go public, and then spinning them off, all the while letting them maintain operational control.

He told TAC that when he was first approached with investing in medical marijuana, “my response was, ‘are you kidding me?’ It was like asking a chicken to go surfing in the ocean.” It was a moral dilemma. Then “the scientist in me” did the research and found the answer. For cancer patients, Billingsley realized, “(cannabis) was a godsend,” stimulating appetite, suppressing nausea, and easing pain. He believes cannabis can ease the tremors brought on by Parkinson’s disease, and treat epilepsy, too.

In fact, families all over the country have been moving to medical marijuana states like Maine and Colorado to treat children with epilepsy because it is known to help reduce the severity of seizures.

For Billingsley, an end to federal prohibition would open the space to investment, which is hurting due to fears among banks and other financial institutions. Most banks won’t take accounts from cannabusiness, and even attempts to open community credit unions are encountering unusual speed bumps.  Everyone fears the unknown when a new president takes office in 2016. “This is driving down investors,” he said. “Cannabis stocks are down 25 percent.”

Meanwhile, The Washington Post recently reported that two girls from Northern Virginia who suffered hundreds of seizures a day are now being treated with a THC extract that has rendered them all but seizure-free in Colorado. These are the kinds of heartrending stories that Dorian Des Lauriers of ProVerde Laboratories likes to hear, but all the more reason he went to lobby congress this week for a bill that would allow every state to offer medical marijuana without federal intervention.

“I’m here to lend my support to changing laws,” the former software developer told TAC. ProVerde is a Massachusetts-based consulting and testing lab that helps cultivators, dispensaries and patients determine the right strain and dosage of marijuana required for treatment. Currently the lab is helping 10 families in Maine find the right formula for treatment for epilepsy.

“It is mind-boggling that these laws still exist,” said Des Lauriers, who senses the charm for politicians on the Hill: “the fact that we come from a strict science perspective—people listen. Politicians, leaders listen to that, it’s science and fact-based. I bring credibility to the cause, which is getting rid of these ludicrous, arcane laws.”

He said he was running for the NCIA board because he believes the lobbying is working—and he’s right. There are several bills pending in Congress that would prevent the DOJ from prosecuting dispensaries in compliance with their state medical marijuana laws, as well as measures that would end the ban on medical marijuana. Another would repeal 280E to help bonafide businesses reap the same tax benefits as any other corporation.

That issue has drawn the support of Grover Norquist, president of Americans for Tax Reform, who won’t speak on the issue of whether pot should be legalized, but says 280E, which was established in 1982 after a convicted drug smuggler was able to apply federal deductions to his profits, is a matter of “taking the federalist approach.”

“Whether it is medical marijuana or recreational marijuana, you don’t want tax policy getting in the way of federalism,” he told TAC ahead of a planned appearance at the NCIA event. “If the state is taking a position that it is not a crime then the feds shouldn’t be taxing it like it is.”

In his opinion, the federal government is stifling free enterprise – and experimentation — by burdening potential entrepreneurs with “bad tax policy.” When federal taxation precludes state experimentation,” he said, “I think it’s dangerous.”

Bill Piper, director of national affairs for the Drug Policy Alliance, which has been working for 15 years on state and federal reforms, said they can “see victory” at the federal level, mostly because the lawmakers on both sides of the aisle are coming around to the sound economic arguments, and positive opinion polls. If Colorado’s “experiment” is any indication, it’s going okay, so far. Crime rates were down in Denver from 2013, and the tax benefits are rolling in, maybe not as much as advocates has predicted, but $50 million from July 2014 to January 2015 shows the financial get was more than just a pipe dream.

Meanwhile the industry is boasting  $2.7 billion in annual revenues and employs tens of thousands of people, according to NCIA.

“There is nothing that has more potential for explosive growth than this industry – it’s phenomenal,” said A.C. Braddock, CEO of Seattle-based Eden Labs, which specializes in marijuana extraction and distillation systems that turn marijuana plants into oils that can be taken orally, vaporized or smoked.  She is also running for the NCIA board.

“We can’t keep up with the demand,” she said to TAC. But there is so much more. She wants to open up space for women CEOs and to promote “green” extraction techniques, as well as success for the industry as a whole.

“We just have to get past the stigmas involved in this simple plant.”

Kelley Beaucar Vlahos is a Washington, D.C.-based freelance reporter and TAC contributing editor. Follow her on Twitter.



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