Federal Exemption – January 2020

Iowa State Capitol Building

Does the Iowa Medical Cannabidiol Act, Iowa Code Chapter 124E, authorize violation of federal law?  Does anyone know?  Iowa citizens have a right to know and should not be left guessing.

One way of knowing for certain that our law is consistent with federal law would be to obtain a federal exemption like the one that currently exists for another federal schedule 1 controlled substance, peyote.  See 21 C.F.R. §1307.31 (2020).  If there is any doubt whether Iowa Code Chapter 124E is consistent with federal law, a federal exemption would resolve that question descisively.

The listing of peyote as a controlled substance in Schedule I does not apply to the nondrug use of peyote in bona fide religious ceremonies of the Native American Church, and members of the Native American Church so using peyote are exempt from registration.  Any person who manufactures peyote for or distributes peyote to the Native American Church, however, is required to obtain registration annually and to comply with all other requirements of law.

In 1981, the U.S. Department of Justice explained the peyote exemption, Memorandum Opinion for the Chief Counsel, DrugEnforcement Administration, December 22, 1981.  On page 408 of the memorandum it says the legislative intent was to vest discretion in the federal administrative agency to determine which substances were to be brought under control.  On page 418 it says the exemption should not be viewed as having a religious purpose.

The United States Supreme Court looked at this issue in the context of assisted suicide and determined that federal drug law does not prohibit a state from authorizing the use of a controlled substance to assist in suicide.  See Gonzales v. Oregon, 546 U.S. 243 (2006).  If a state can authorize the use of a controlled substance to end a life, it can certainly authorize the use of a controlled substance to save a life (ranging from making the process of dying more comfortable to prolonging life).

The Attorney General has rulemaking power to fulfill his duties under the CSA.  The specific respects in which he is authorized to make rules, however, instruct us that he is not authorized to make a rule declaring illegitimate a medical standard for care and treatment of patients that is specifically authorized under state law.

Gonzales v. Oregon, at 258.

The Attorney General is likewise not authorized to deny a rule (an exemption) to a state government if the absence of that exemption would force a state into positive conflict with federal law.  See 21 U.S.C. §903 (2020).

No provision of this subchapter shall be construed as indicating an intent on the part of the Congress to occupy the field in which that provision operates . . . to the exclusion of any State law on the same subject matter which would otherwise be within the authority of the State, unless there is a positive conflict between that provision . . . and that State law so that the two cannot consistently stand together.

Gonzales v. Oregon, at 251.

Beyond the obvious risk factors, life in prison, see 21 U.S.C. §841 (2020) and 21 U.S.C. §848 (2020), and even the federal death penalty, see 18 U.S.C. §3591(b)(1) (2020), for cultivation of marijuana (RICO Threat Looms Over Cannabis Businesses, by Gerald Arth and Joshua Horn, October 21, 2019), Iowa cannabis businesses are being hit with a federal tax burden that can result in a effective federal tax rate of up to 90%.  See Tax pitfalls of owning a marijuana business, By Jackie Fountain, CPA, MST, Irvine, Calif, November 1, 2018.  This tax burden falls directly on suffering Iowans to which the act was intended to bring relief.  Former state representative Clel Baulder’s dream of tax-free medical cannabis in Iowa has hardly become a reality.  See Legislation expanding Iowa’s medical marijuana program filed in House, by Brianne Pfannenstiel, February 20, 2017.

By some estimates, that effectively equates to a 70 percent tax penalty.  Inevitably, those costs are passed on to people who purchase medicine through the state-authorized businesses.

“That’s an absurdly high amount.  … That directly impacts patients,” Lucas Nelson, general manager of MedPharm Iowa, told me recently.

Marijuana remains illegal under federal law – that harms Iowa patients, by Adam Sullivan, August 11, 2019.

In a letter dated September 29, 2019 Iowa Attorney General Tom Miller complains that the federal classification of cannabis is forcing Iowa residents into a confusing and dangerous regulatory limbo:

As noted, the majority of Americans are affected by this issue.  Today, some 33 states and several territories have passed laws that legalize the use of marijuana in at least some capacity.  However,under the Controlled Substances Act and 18 U.S.C. § 1956 and 1957, businesses and individuals who produce, sell, or possess marijuana, or engage in financial transactions with proceeds thereby derived are still in violation of federal law.  This inconsistency puts a significant burden upon businesses working to operate in a legal industry in a manner that is safe and compliant with state law, as well as on law enforcement agencies trying to ensure complicity to regulations.  It also represents a substantial imposition on the prerogative of states and territories to choose those policies that work best for them and their citizens.

Beyond imposing on states’ rights, the status quo poses a serious threat to public safety.  Under 18 U.S.C. § 1956 and 1957, financial institutions face substantial constraints in providing financial services to the cannabis industry.  The result is that much of this industry is forced to conduct business on a cash-only model.  In turn, this contributes to a public safety threat as cash-intensive businesses are often targets for criminal activity and make it more difficult to track revenues for taxation and regulatory compliance purposes.

In its annual report to the legislature, the Iowa Medical Cannabidiol Board says schools and healthcare facilities are discriminating against Iowans who receive medical cannabidiol because of perceived conflict with the federal classification of cannabis.

Therefore, I propose amending Iowa Code Chapter 124E to include the following new section:

124E.20 Consistency with federal laws and regulations.

This chapter is consistent federal laws and regulations pursuant to 21 U.S.C. §903.  The non-prescription use of cannabis authorized under this chapter is exempt from the listing of cannabis as a controlled substance in Schedule 1 of both the state and federal controlled substances acts.  The department shall notify the federal Drug Enforcement Administration no later than July 1, 2020, pursuant to 21 C.F.R. §1307.03, that the non-prescription use of cannabis authorized under this chapter is exempt from the listing of cannabis as a controlled substance in Schedule 1 of the federal Controlled Substances Act.

In support of my proposed amendment, I offer the following from the Iowa Medical Cannabidiol Board:

Iowa Medical Cannabidiol Board – Meeting Minutes, February 1, 2019

5. Public Comment Period – Mike McKelvey, Chair

Carl Olsen – private citizen, addressed the board with a single question.  “Is everything authorized by 124E a federal crime?”  Mr. Olsen indicated that he has also submitted this question in writing to the Iowa Dept. of Public Health for comment.

Iowa Medical Cannabidiol Board – Meeting Minutes, August 2, 2019

6. Petition for Recommendation to the IDPH – Sarah Reisetter, Deputy Director

The petitioner, Carl Olsen, had an opportunity to address the Board.  The petitioner is asking the Board to recommend that the state board of health consider asking the DEA to recognize Iowa’s medical cannabis program as exempt from federal drug law in recognition of the state’s determination that marijuana does have a medical use by virtue of the adoption of Iowa Code chapter 124E.  Board members asked the petitioner if he had discussed the matter with legislators.  He shared that yes he had, and that an amendment passed in both subcommittee and full committee seeking to clarify that Iowa code chapter 124E does not conflict with any federal law.

A motion was made by Dr. Cheyne to forward the petition to the State Board of Health, with a recommendation for consideration; a second motion was made by Dr. Richards.

Cheyne – aye
Liesveld – aye
Miller – aye
Richards – aye
Shreck – aye
Stoken – aye
McKelvey – aye

Motion carried unanimously.

Iowa Medical Cannabidiol Board – Annual Report, January 1, 2020

Page 4

Board Meetings – August 2, 2019

The Board considered a petition to recommend that the Department of Public Health ask the federal DEA to recognize Iowa’s Medical Cannabidiol Program as exempt from federal drug laws, which the Board approved.

Page 7

Recommendations of the Board to the Iowa General Assembly

6. Develop Language to Protect Schools, and Long-Term and Acute Care Facilities

Facilities that receive federal funding are hesitant to allow medical cannabidiol products to be administered and stored at the facilities due to the current scheduling of Cannabis at the federal level.  There are Iowa patients within these facilities who are unable to store their medication at the facility, or have their medication administered by facility staff, because of concerns about adverse consequences for the facilities.  Developing language to protect these facilities or seeking exemption for Iowa’s program from federal drug laws would benefit patients and facilities.

On a final note, on January 7, 2020, the department says it refuses to apply for federal exemption at this time, because it says “neither the DEA nor any other federal agency has taken any adverse action we are aware of related to Iowa’s medical cannabidiol program”.  The department further says Iowa Code Chapter 124E does not specifically require the department to apply for federal exemption.

I’m not sure how the department can claim the threat is not imminent in light of the recent statements made by Attorney General Miller a few months ago.  Attorney General Miller said the threat to public health and safety is real and imminent.  I just have to assume the department would like the legislature to add this requirement to the statute, and I can agree with that.

As for previous federal policies and current federal spending restrictions on enforcement against state medical cannabis programs, President Trump has recently made it clear he thinks those policies and spending restrictions are a violation of separation of powers and his adminstration will not honor them.  Trump Says He Can Ignore Medical Marijuana Protections Passed By Congress, by Tom Angell, December 21, 2019.

I hope you find this information useful background material in your deliberations on medical cannabis this year.  I hope further that you can understand why the Medical Cannabidiol Board is recommending that Iowa obtain a federal exemption for its program.  Just last week, the current Iowa administration affirmed its commitment to working with the Medical Cannabidiol Board during this legislative session.  Medical marijuana to be a hot topic when Legislature convenes, by Cynthia Fodor, January 7, 2020 (“both parties say both chambers now need to work with the advisory board”).