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High Desert Relief, Inc. v. United States, 917 F.3d 1170 (10th Cir. Mar. 5, 2019)

Mar 5, 2019

This case arose out of the efforts of the IRS to investigate the tax liability of a medical marijuana dispensary in New Mexico.  The Tenth Circuit affirmed the district court’s denial of motions to quash third-party summonses the IRS issued to obtain audit information that the dispensary refused to provide.  It concluded that the government had demonstrated good faith for the summonses as required under U.S. v. Powell, 379 U.S. 48 (1964).  The dispensary had argued that the IRS had issued the summonses for the improper purpose of mounting a de facto criminal investigation against it.  The court also rejected the dispensary’s argument that 26 U.S.C. § 280E (prohibiting deductions for businesses engaged in unlawful trafficking of controlled substances) was a “dead letter” incapable of engendering adverse tax consequences due to the federal policy of non-enforcement of the Controlled Substances Act against medical marijuana dispensaries.