On 1-9-19, Rep. Earl Blumenauer (D-OR) introduced H.R. 420, the “Regulate Marijuana Like Alcohol Act.” Blumenauer, the co-sponsor of the Rohrabacher–Blumenauer amendment, better known as the on-going appropriations provision that prohibits the Justice Department from spending federal funds to enforce federal law that is in conflict with state medical cannabis laws.
Proposed Bill 420 is a total overhaul of the federal government’s treatment of marijuana. Among other things, the bill:
1. Decriminalizes marijuana by removing it from the Controlled Substances Act;
2. Amends the Federal Alcohol Administration Act to enable the Secretary of the Treasury to issue permits to those who want to to manufacture, distribute, or sell marijuana;
3. Transfers jurisdiction from the DEA to the Bureau of Alcohol, Tobacco, Firearms and Explosives;
4. Prohibits widespread advertising for marijuana; and
5. Grants to the FDA the same authority for marijuana as it has for alcohol.
Rep. Blumenauer noted: “Congress cannot continue to be out of touch with a movement that a growing majority of Americans support. It’s time to end this senseless prohibition.” In this vein, per a Pew Research Center study released last fall, nearly 66% of Americans support legalization at the federal level.
The new co-chairs of the 2019 bipartisan Congressional Cannabis Conference are Rep. Barbara Lee (D-CA) and Dave Joyce (R-OH), Rep. Earl Blumenauer (D-OR) and Don Young (R-AK).
Putting aside partisan points of view on the wall and whether a government shut down to get a wall paid for is a good idea, the shut down is already impacting US Treasury’s ability to finalize new regulations to clarify certain aspects of the Opportunity Zone program.
Comment letters have been sent in by various trade association and OZ groups my team and I are involved with to the IRS and Treasury but, unfortunately, the clarity we are looking for will need to wait until the shutdown has been resolved plus two weeks thereafter (at least) per a notice posted in the Federal Register. Open issues that the Real Estate Roundtable, Novogradac’s OZ team and others are seeking include the following:
- Defining original use and substantial improvements
- Two tiered structures and the “working capital” impact – 31 months
- How vacant land might qualify as “original use” property
- Clarifying how and when the 180 day rule applies to certain pass through entities
- Clarifying how Section 1231 gains of pass through entities are eligible for deferral
- Seeking a removal of the fixed end of 2047 for sale purposes to qualify for a stepped up basis
- Clarification regarding the methodology for applying the 90% and 70% asset tests
- Requesting limitations on non compliance penalties to the portion of the aggregate assets of a QOF that are funded with gains for which a deferral election has been made
- Definition of “substantially all” – keeping the definition at 70% and generally requiring real property businesses to hold 90% of tangible property inside a QOZ
- Clarifying if property that straddles a QOZ can treat the improvements as being all within the QOZ
- Clarifying the requirement that a substantial portion of the intangible property of a QOZB be used in the “active conduct of a trade or business” in the QOZ
- Clarifying the timing of capital gains and dividend treatment for REITs
While our clients are still closing deals and effectively using the OZ program to defer, reduce and ultimately, hopefully, create a capital gain free sale after 10-years at the federal level, additional clarity would, in fact, be nice.
Border security for sure, but let’s get these rules clarified now so we can spur investment where its needed without the histrionics and the child like tantrums.
See attached Novogradac letter to US Treasury for more details – https://www.novoco.com/system/files/group/Opportunity%20Zones%20Working%20Group/novogradac_wg_comment_letter_proposed_regs_122818.pdf