Steep taxes force groups to halt pot donations to many ill users
Ed Gallagher, a former Army intelligence officer, reached into an armoire in the living room of his Twin Peaks home and pulled out his last bag of a medicinal herb he considers his salvation.
The blind, 67-year-old veteran smokes marijuana every night to ease pain, nausea and various HIVrelated problems. But his routine, he said, has become an unintended victim of Proposition 64, the California initiative that legalized and regulated adult cannabis use.
The law, requiring all marijuana to be tracked from seed to sale and subject to substantial taxes, does not make clear whether cost-free donations are allowed under what have long been known as compassion programs, advocates said.
The ambiguity has forced numerous aid organizations, growers and dispensaries that donate to patients suffering from AIDS, cancer and other diseases to put a halt to their charity.
Compassionate care programs at Sweetleaf Collective in San Francisco, Wo/Men’s Alliance for Medical Marijuana in Santa Cruz, San Leandro-based Educating Veterans About Cannabis and Harborside dispensary in Oakland have been among those put on hold since January.
“A lot of us compassion programs have been operating within the law, and now all of a sudden we are being told we can no longer operate,” said Joseph Airone, the founder of Sweetleaf, which has provided as much as 100 pounds of marijuana to cancer and HIV/AIDS patients every year since 1996, including
Gallagher’s stash.
Airone recently joined with 20 other groups to form the California Compassion Coalition, which has been lobbying the state’s Bureau of Cannabis Control along with the agriculture and health departments to let organizations provide cannabis to those who benefit from it and can’t afford it.
The state’s cannabis advisory board expressed a desire to address the matter during a hearing Thursday, but Cannabis Control officials said a fix may require legislation.
Prop. 64 imposed a 15 percent excise tax on retailers on top of local taxes, while cultivators pay $9.25 for every ounce they produce. Airone said regulators have told him that, without legislative changes, the taxes would apply to the full value of cannabis given to the sick and indigent.
His organization would be on the hook for $50,000 to $200,000 a year, he said, in addition to the burden of getting permits to transport and dispense marijuana.
“That is incredibly costprohibitive,” he said. “We understand that this is an oversight and it was never the intention of the new law, but my patients are terminally ill.”
Gallagher, an artist, sailor and former building contractor who once designed a wireless guidance system for blind sports enthusiasts, was diagnosed with HIV in the 1980s and now relies on charity for much of his food and medicine.
“Either I have money for my medication and I cut out food, or I have money for food and I cut out my medication,” said Gallagher. “Nobody is going to hire a blind old man, so it is impossible for me to go to work. This is my only remedy.”
The problem stems from uncertainty in the regulatory framework for adult and medical retail cannabis drafted after Prop. 64 was passed, said Anne Kelson, an Oakland lawyer who is advising the California Compassion Coalition.
In the past, compassionate care programs formed partnerships with growers and medical dispensaries, which provided excess marijuana for charitable use. Some programs grew their own cannabis for clients, Kelson said.
But the new regulations, she said, do not specify which taxes apply to donations or whether partnerships are allowed for charitable work. Donations are allowed only by licensed retailers under strict guidelines, and there’s no special consideration for charitable groups that grow their own plants.
“There’s an incomplete framework on how a charitable organization can provide donations to patients in this scheme,” Kelson said.
The compassion coalition wants California to create noncommercial cannabis licenses that are tax-exempt and specifically allow partnerships between charities and licensed suppliers. Since Jan. 1, the state has been granting commercial licenses to a variety of businesses and dispensaries.
Alex Traverso, a spokesman for the Bureau of Cannabis Control, said last week that the agency will consider the compassionate care issue “as we work toward our permanent regulations in a couple months.”
California is expected to bring in annual tax revenues of at least $1 billion from recreational marijuana sales, with the money paying for cannabis research, addiction prevention and law enforcement efforts to shut down the black market, among other things.
The fight over the give-away program amplifies long-held fears among some medical marijuana advocates that the neediest patients in California and other states could be pushed aside once the drug is fully legal.
Those fears were, in some ways, realized in Washington state, which folded together medical cannabis dispensaries and recreational shops in 2016. Many dispensaries went out of business, and retailers that donate some of their product must pay taxes on it.
“It is part of a larger context in which the recreational and medical movements, once allies, have become estranged,” said Robert MacCoun, a Stanford law professor and social psychologist who co-authored the book “Drug War Heresies.”
The task the state faces isn’t simple. Industry critics and some regulators have worried that give-away programs, including compassionate care, could become fronts for merchants looking to scam the system.
“A new provision would have to be written in a way that prevented suppliers to use this as a sneaky end run around the tax for nonmedical users,” MacCoun said. “But while it isn’t hard to fake insomnia or back problems, it is pretty hard to fake cancer or AIDS, so I don’t see this as a big concern.”
Concern about fraud shouldn’t deter the state from helping people, said many of those who testified this month before state cannabis subcommittees.
Forrest Hurd, whose Caladrius Network seeks to provide free cannabis to severely ill children, said the state need only focus on patients like his son, Silas, who has a rare form of epilepsy called Lennox-Gastaut syndrome that doesn’t respond to traditional medicines or therapies.
Hurd, who lives in Grass Valley (Nevada County), said he spent nearly two years working with growers and manufacturers to develop a tincture to help his son, who in 2013 was having as many as 2,500 seizures a month. He began administering a strain he calls MediHaze B in 2014, and believes it saved his son’s life.
“We had one of those miracle experiences,” Hurd said. “I’ve never seen anything like it. It was a complete turnaround. He still has seizures from time to time, but we’ve decreased them over the long term by about 90 percent.”
Hurd said he partners with farmers and Sequoia Labs in Sacramento to create the medicine. It takes as much as a pound and a half of donated flower a month, he said, to make a batch of medicine for one child — an amount that, if all the medicine he makes were added up, would cost as much as $500 a month in taxes under the current law.
“We are trying to get the law changed because families shouldn’t have to break the law to keep their children alive,” said Hurd, who provides medical cannabis to more than 120 families and consults with hundreds more. “We’re a small operation, but I think we could help tens of thousands of patients if the industry had a pathway to work with charitable organizations.”