California cannabis operator seeks US Supreme Court ruling on $1.3 million tax case

A California cannabis business is taking its fight over a $1.3 million tax bill to the U.S. Supreme Court after losing a lower-court ruling based on the company filing its challenge to the U.S. Tax Court one day late.

Organic Cannabis Foundation, which does business as Organicann Health Center, claims in its 35-page petition that the 9th Circuit Court of Appeals contradicted Supreme Court precedent in ruling that the case lacked jurisdiction.

The petition to the nation’s highest court also claims that Organic Cannabis was denied due process of law.

As support for that argument, Organic Cannabis said the IRS deficiency letter didn’t immediately reach the company because it omitted a P.O. Box number on the address.

The legal challenge doesn’t get to the heart of Section 280E provisions, which prevent marijuana companies from deducting ordinary business expenses. The IRS said Organic Cannabis owed $1.1 million in taxes and $225,855 in penalties.

But the case, Organic Cannabis argues, is of national significance because it concerns the ability of taxpayers “to contest a proposed (and potentially erroneous) assessment in the only available pre-payment forum other than the Bankruptcy Court – the United States Tax Court.”

Organic Cannabis’ appeal to the IRS notice of deficiency was due to the U.S. Tax Court in Washington DC on April 22, 2015. It was delivered via FedEx “First Overnight” at 7:35 ET on the morning of April 23, 2015, according to court records.

For that reason, both the Tax Court and the Circuit Court denied to review the case.

– Jeff Smith