Harborside’s Death Tax

The federal government is attempting to tax Oakland’s Harborside Health Center — perhaps the country’s largest and most prominent medical marijuana dispensary — out of existence.

The Internal Revenue Service delivered a $2.5 million tax bill to Harborside this week, according executive director Steve DeAngelo. The staggering bill, DeAngelo said, is designed to close the dispensary, which serves 94,000 patients annually. “This is not an effort to tax us. We’re happy to pay our taxes,” DeAngelo told the Chron. “This is an effort to shut us down.”

Federal law still designates marijuana as a schedule 1 controlled substance, which puts it in the same category as heroin, methamphetamine and LSD, which are regarded to have no accepted medical uses. And section 280E of the federal tax code disallows any deductions — including standard business expenses like rent and payroll — related to trafficking of controlled substances. Under this law, the IRS began auditing several California dispensaries more than a year ago.

In addition to Harborside, the Marin Alliance for Medical Marijuana, in Fairfax, was also billed for millions, according to executive director Lynnette Shaw. The Alliance is an industry icon because it was among the first dispensaries to open after California voters approved Proposition 215 in 1996, which legalized the use of marijuana for medical purposes. The Alliance also became an early industry model because of its professional management and activist ethos.

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