Introduction

Standing Akimbo, LLC, et al., v. United States (141 S. Ct. 2236) is a significant case that touches upon the intricate balance between federal authority and state sovereignty in the realm of marijuana regulation. Presented before the Supreme Court of the United States on June 28, 2021, the case involves Standing Akimbo, a medical marijuana dispensary operating under Colorado state law, challenging the federal government's taxation policies under the Controlled Substances Act (CSA).

The key issues revolve around the application of 26 U.S. Code §280E, which restricts businesses dealing with controlled substances from deducting ordinary and necessary business expenses on their federal taxes. This provision poses substantial financial burdens on state-legal marijuana businesses, leading to the contention that it may violate the Sixteenth Amendment regarding the authorization of income taxes.

Summary of the Judgment

The Supreme Court denied the petition for a writ of certiorari, effectively upholding the decision of the lower courts. Justice Thomas, in his statement regarding the denial, highlighted the evolving landscape of federal marijuana policy. He contrasted the comprehensive federal prohibition established in GONZALES v. RAICH (2005) with the current inconsistent federal stance that both tolerates and forbids local marijuana use.

Justice Thomas emphasized that the government's fragmented approach undermines the principles of federalism and creates legal uncertainties for businesses operating under state laws. He noted that the Internal Revenue Service's enforcement of §280E against state-legal marijuana businesses, despite varying federal enforcement policies, reflects a disjointed federal strategy that may no longer align with the needs of a changing legal landscape.

Analysis

Precedents Cited

The judgment references several key cases and legal provisions that shape the discussion:

• GONZALES v. RAICH, 545 U.S. 1 (2005): Established that Congress' power to regulate interstate commerce permits the federal prohibition of locally grown and consumed marijuana.
• National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012): Discussed the scope of the Sixteenth Amendment concerning income taxes.
• TAFT v. BOWERS, 278 U.S. 470 (1929): Addressed issues related to direct and indirect taxation under the Sixteenth Amendment.
• United States v. McIntosh, 833 F.3d 1163 (CA9 2016): Interpreted legislative riders preventing the Department of Justice from prosecuting individuals complying with state marijuana laws.

These precedents collectively underscore the tension between federal authority and state sovereignty, especially in areas where state laws diverge from federal statutes.

Legal Reasoning

Justice Thomas critiqued the federal government's inconsistent policies post-Raich, highlighting a "half-in, half-out" approach that both tolerates and enforces marijuana prohibition. This ambiguity strains the federal-state relationship and complicates the operational landscape for businesses compliant with state laws but potentially violating federal statutes.

He pointed out that while memorandums in 2009 and 2013 signaled a lenient federal stance toward state-legal marijuana operations, later actions such as the 2018 rescission of these memoranda introduced further uncertainty. The continued enforcement of §280E by the IRS against businesses operating legally under state law exemplifies this disjunction.

Justice Thomas suggested that the original reasoning in Raich—which justified comprehensive federal prohibition to maintain a uniform regulatory system—may no longer hold, given the evolved federal policies that inadvertently undermine the comprehensive regime once intended.

Impact

The denial of certiorari in this case underscores the lower court's ruling against Standing Akimbo, thereby maintaining the application of §280E to state-legal marijuana businesses. This decision reaffirms the federal government's taxing authority over controlled substances, irrespective of state legalization efforts.

Moreover, Justice Thomas's observations signal a critical examination of federal marijuana policies, potentially paving the way for legislative or judicial reconsideration of federal-state dynamics in drug regulation. The broader impact includes continued financial burdens on marijuana businesses and the perpetuation of federal oversight despite growing state-level acceptance of marijuana use.

Complex Concepts Simplified

Controlled Substances Act (CSA)

The CSA is a federal law that regulates the manufacture, importation, possession, use, and distribution of certain substances. Marijuana is classified under this act as a Schedule I drug, making its possession and distribution illegal under federal law.

26 U.S. Code §280E

This tax code provision prohibits businesses involved in the trafficking of controlled substances from deducting ordinary and necessary business expenses, except for the cost of goods sold. This results in higher taxable income for marijuana businesses, increasing their financial strain.

Sixteenth Amendment

Ratified in 1913, the Sixteenth Amendment grants Congress the power to levy an income tax without apportioning it among the states or basing it on the United States Census.

Writ of Certiorari

A legal mechanism by which the Supreme Court agrees to review a case from a lower court. Denial of certiorari means the Supreme Court will not hear the case, leaving the lower court's decision intact.

Conclusion

The denial of certiorari in Standing Akimbo, LLC v. United States reinforces the enduring complexity of federal-state relations in marijuana regulation. Justice Thomas's commentary highlights the federal government's inconsistent policies post-Raich, emphasizing the challenges faced by state-legal marijuana businesses under federal law. This judgment underscores the need for clear and cohesive policies that respect state sovereignty while maintaining federal regulatory standards. As the landscape of marijuana legalization continues to evolve, this case serves as a pivotal reference point for future legal and legislative developments in the intersection of federal authority and state autonomy.