Cannabis, Politics, and Land Use

• Publication year: 2020
• Author: Julia Sylva

Cannabis, Politics, and Land Use

Julia Sylva

Julia Sylva has been a real estate/land use lawyer her entire career. She graduated from Loyola Law School, 1983, started as city attorney—where she drafted initiatives and ordinances regulating commercial cannabis—and is now in private practice. She is a former mayor and is very familiar with the politics-of-it-all. She is also an Adjunct Law Professor at Southwestern School of Law, Los Angeles, where she teaches Cannabis Law 101. Ms. Sylva also serves as a mediator and as an expert witness in real estate/land use and commercial cannabis disputes.^*

Commercial cannabis activity and its regulation have evolved tremendously since America's founding, especially during the last fifty years. This evolution affects the ways of producing, manufacturing, transporting, dispensing, and even ingesting cannabis. Cannabis has generated enormous business opportunities for states and cities, and investors and operators. The cannabis industry now boasts professional certifications and endless resources for research and development—including scholarly books and articles.

Commercial cannabis was legal in the United States until the 20th century. The federal government still deems cannabis illegal, though its regulation falls to local governments with state-by-state variation. Sometimes cannabis regulations conflict.

Legal professionals serving the cannabis industry should have the ability to decipher the current law—federal, state, and local—and to provide legal advice to clients with confidence and decisiveness. This article discusses the evolution of the cannabis industry's regulation and endeavors to provide some direction and insights for the legal practitioner in this political quagmire.

I. FEDERAL REGULATION

A. Commercial Cannabis Activity—Legal or Illegal...

In early 1619, King James I decreed that the American colonists of Jamestown must increase efforts to contribute their fair share towards supporting England; landowners were asked to grow and export 100 hemp plants. George Washington grew hemp at Mount Vernon as one of his three primary crops. By the 1850s, medicinal preparations of cannabis had become available in American pharmacies. In 1937, the Marihuana Tax Act effectively banned possession or transfer of marijuana throughout the United States.¹ This federal law imposed an onerous excise tax on all sales of hemp with exceptions only for medical and industrial uses.² This act was overturned in 1969, and was repealed by Congress the next year.³

In 1970, President Richard Nixon declared a national "war on drugs." He signed the Comprehensive Drug Abuse Prevention and Control Act of 1970 ("Controlled Substances Act" or "CSA").⁴ The CSA makes it unlawful to manufacture, distribute, dispense, or possess any controlled substance, even if based on medical necessity.⁵

The CSA created five schedules (classifications) with varying qualifications for a substance to be included in each:

Schedule I: Ecstasy, LSD, Heroin, and Marijuana;
Schedule II: Cocaine and Morphine;
Schedule III: Anabolic steroids, Vicodin, and Marinol, for nausea caused by chemotherapy;
Schedule IV: Ambien, Xanax, and Valium; and
Schedule V: Lyrica and cough suppressants.⁶

The CSA gave powers to the Food and Drug Administration and the then-newly created Drug Enforcement Administration, two federal agencies, to add or remove substances from the schedules.⁷ The CSA's classification criteria include:⁸ (1) potential for abuse, (2) currently accepted medical use in treatment in the United States, and (3) international treaties.

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The CSA listed marijuana as a "Schedule I" substance, meaning it has a "high potential for dependency and no acceptable medical use."⁹ The possession, distribution, and cultivation of marijuana remains a federal offense.¹⁰

B. Hands-Off Policy

In August 2013, the United States Department of Justice ("DOJ") issued a document entitled "Guidance Regarding Marijuana Enforcement" (the "Cole Memo"). It stated that the federal government's primary objectives are to prevent marijuana from being distributed to minors and thwart criminals from earning revenue from its sale. Accordingly, the DOJ has not prosecuted marijuana users and businesses, provided they comply with state and local laws. The Cole Memo was subsequently revoked, but the following laws were already in place, which made revocation a moot act.

The "Rohrabacher-Farr Amendment" passed the House on May 30, 2014, as an attachment to the Commerce, Justice, Science (CJS) Appropriations Bill; FY 2015, became law as a part of an omnibus spending bill, and was signed into law by then-President Barack Obama on December 16, 2014. The amendment's passage was the first time either chamber of Congress had voted to protect medical cannabis patients, prohibiting the DOJ from spending funds to interfere with the implementation of state medical cannabis laws. It is viewed as a historic victory for cannabis reform advocates. The amendment does not change the legal status of cannabis and must be renewed each fiscal year to remain in effect. To this day, the Rohrabacher-Farr Amendment (now "Rohrabacher-Blumenauer Amendment") remains in effect.

In August 2016, the Ninth Circuit, in United States of America v. McIntosh,¹¹ held that the DOJ is prohibited "from spending funds ... for the prosecution of individuals who engaged in conduct permitted by the State Medical Marijuana Laws and who fully complied with such laws." McIntosh relied on the Consolidated Appropriations Act of 2016,¹² which "prohibits the DOJ from spending funds to prevent states' implementation of their medical marijuana laws." The appellate court ruled that "the Appropriations Clause constitutes a separation-of-powers limitation that Appellants can invoke to challenge their prosecutions." McIntosh is the leading case interpreting the Rohrabacher-Farr Amendment (a rider to the Consolidated Appropriations Bill).

William Pelham Barr, serving as the 85th United States Attorney General, and a member of the Donald Trump administration since February 14, 2019, personally "supports a federal ban on marijuana."¹³ However, in Senate testimony, at his January 15, 2019 confirmation hearing, presumptive Attorney General Barr committed to not use the limited resources of the DOJ to prosecute state-regulated and compliant marijuana businesses. He said, "I think the current situation is untenable and really has to be addressed . . . we either should have a Federal law that prohibits marijuana everywhere—which I would support myself because I think it is a mistake to back off on marijuana. However, if we want a Federal approach, if we want States to have their own laws, then let us get there and let us get there the right way."¹⁴

C. Pending Legislation

Essentially, Attorney General Barr supports the "Strengthening the Tenth Amendment Through Entrusting States" ("STATES") Act, a proposed bill that would recognize legalization of cannabis and the state laws that have legalized it through their legislatures or citizen initiatives. The STATES Act was introduced by Representatives Blumenthal (D-Oregon) and Co-Sponsor, Joyce (R-Ohio) on April 4, 2019.¹⁵ It would amend the Controlled Substances Act of 1970 ("CSA") to exempt from enforcement individuals or corporations in states who are following state, United States territory, the District of Columbia, or tribal law on cannabis. Representative Perlmutter (D-Colorado) in the House and Senator Merkley (D-Oregon) in the Senate have reintroduced the Secure and Fair Enforcement (SAFE) Banking Act of 2019, proposed legislation seeking to increase public safety by ensuring access to financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses.¹⁶ These bills are still pending.

Then-United States Senator Kamala Harris (D-California) introduced Senate Bill (SB) 2227 on July 2, 2019. The "MORE Act," as SB 2227 is called, seeks to de-criminalize and de-schedule cannabis, to reinvest in certain persons adversely impacted by the War on Drugs, and to expunge certain cannabis offenses, among other purposes.¹⁷ If the MORE Act were to leave committee it would then move on to the full Senate where things get cloudy. Senate Majority Leader Mitch McConnell (R-Kentucky) is certainly no fan of cannabis; he has successfully blocked cannabis reform. He is well-connected politically.¹⁸

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D. Senator McConnell Supports CBD

Interestingly, however, Senator McConnell fully supports the hemp industry. As a senior member of the Senate Appropriations and Agriculture Committees, he has secured millions of dollars for research and development for industrial hemp and now CBD derived from hemp. From the late eighteenth and nineteenth centuries, industrial hemp was a major agronomic crop in Kentucky.¹⁹ Hemp became impractical as a crop in 1937 with the passage of the Marihuana Tax Act, through which the federal government attempted to reduce the production of cannabis. Since the passage of the "2014 Farm Bill,"²⁰ hemp surged in the Bluegrass State, with strong financial support from the federal government (the "Hemp Pilot Programs").²¹ Also, Senator McConnell was a fervent proponent of the "2018 Farm Bill,"²² which declassified hemp as a Schedule I Substance; CBD derived from hemp with 0.3 percent of THC, or less, is federally legal. Kentucky processors reported $193.9 million in gross product sales in 2019, $57.75 million in 2018, and $16.7 million in 2017.²³ One estimate put the U.S. CBD world market at $2.3 billion to $23 billion by the 2020s—all enabled by the 2018 Farm Bill.²⁴ This exponential growth will continue even in the midst of COVID-19.

E. No Representation Without Federal Taxation

Regardless of the status of federal legislation and enforcement against cannabis, the federal government has not missed out on the opportunity to tax this industry. Congress is authorized to "lay and collect taxes on income."²⁵ The...