Federal Exemption — January 2020

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”).