Michigan marijuana companies wait to see what happens if federal regulations change

SOUTHFIELD – Molly MacDonald doesn’t know much about the complicated federal regulations surrounding marijuana. But she is grateful for a local cannabis company’s donation of more than $50,000 to her breast cancer charity.

“We accept monetary donations from almost anyone,” says MacDonald, CEO of the Southfield-based Pink Fund, which provides financial assistance to patients with non-medical bills. Patients often cannot pay their rent, mortgage, utilities or car loans while receiving medical treatment because they lose income.

Many companies not in the cannabis industry donate to nonprofits and benefit from tax breaks. Josey Scoggin, executive director of the Great Lakes Expungement Network, said the organization is largely funded by donations from the cannabis industry.

“It’s the only industry that has a legal obligation to do good, like in social justice — where you have to present a plan of what you’re going to do to help a community that you’re licensed to serve,” she said, adding that 88% of her donors don’t ask for a receipt for the money because they know it’s not deductible.

How can cannabis companies meet these requirements without violating federal laws that still consider the sale and consumption of cannabis to be illegal activities?

Cannabis businesses are not allowed to take deductions beyond the cost of storing the product itself. According to IRS rules, no business involved in the illegal trafficking of Schedule I or II drugs can take any deductions, “even if it operates in states that have legalized the sale of marijuana, because trafficking in marijuana remains illegal under federal narcotics law.”

Michigan voters approved legalizing recreational cannabis use in 2018, and sales began in 2019. Medical use was legalized in 2008.

Since then, Michigan has led the nation in medical and recreational cannabis sales, and the business continues to grow. Recreational and medical sales exceeded $279.6 million in May 2024, up nearly 14% from May 2023, when sales exceeded $245.9 million.

The U.S. Department of Justice is working to reclassify marijuana from a Schedule I drug with heroin and LSD to Schedule III, which includes drugs like ketamine and anabolic steroids.

The prospect of change gives hope to Michigan cannabis entrepreneurs, as they will now have access to the normal commercial banking system and standard corporate tax deductions.

According to attorney James Allen, the federal Controlled Substances (Consumers) Act is the reason why it is “still largely illegal to offer financial services to the cannabis industry, although legislation is being worked on to reverse the decades-old enforcement regime.”

Read more at MSN