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Appellate ruling allows tax deduction for medical pot

Copyright © 2020 Albuquerque Journal

SANTA FE – A state Court of Appeals ruling that New Mexico medical marijuana producers can claim a tax deduction for prescription medication could affect prices for 80,000 or so enrolled patients statewide – and the state budget.

The ruling, which overturned a hearing officer’s decision, could carry a multimillion-dollar price tag for the state Taxation and Revenue Department, which had denied medical cannabis producers’ applications for gross receipts tax refunds for years.

“There’s a direct potential fiscal implication to the state,” said Sen. Jacob Candelaria, D-Albuquerque, who added that lawmakers will have to set aside enough funding to cover the tax claims either this year or next year if the ruling is not appealed.

A tax department spokesman said Friday that the agency was reviewing the ruling and weighing legal options.

But the agency cited data from the Department of Health showing that medical cannabis providers paid roughly $24 million in gross receipts taxes during a recent nearly three-year period.

Those taxes are paid by providers but typically passed on to patients, who could see a drop in prices for medical cannabis products because of the court ruling.

Duke Rodriguez, president and CEO of Ultra Health LLC, one of the state’s largest licensed medical cannabis producers, said tax claims could range from several hundred thousand dollars to several million dollars, depending on the producer.

“I think it’s good news, because we should never tax food or medicine,” Rodriguez said in an interview.

He said the ruling could also raise questions about medical cannabis costs being covered, either by private insurance companies or Medicaid.

It could also have other implications. Candelaria suggested the ruling could affect workplace policies on medical cannabis use.

In addition, the ruling could give inmates and parolees who are enrolled medical cannabis patients the right to use marijuana, just like other prescription medications, he said.

However, Candelaria also suggested lawmakers did not originally intend to grant tax breaks for medical cannabis sales under the 2007 Lynn and Erin Compassionate Use Act, which launched the state’s program, as the Court of Appeals suggested in its ruling.

“There’s a respectful disagreement between the two branches of government on this,” he told the Journal.

The Court of Appeals ruling was handed down this week and was a unanimous decision by a three-judge panel.

It represents the latest ruling in a string of court challenges filed by medical marijuana producers. Other lawsuits have targeted the state’s stance on plant limits and whether out-of-state residents can enroll in the rapidly growing program.

In its 11-page ruling, the Court of Appeals determined medical marijuana meets the definition of a prescription drug under the state’s tax code, because physicians are required to certify that patients have a qualifying condition before they can enroll in the program.

The state’s medical cannabis laws don’t explicitly define marijuana as a prescription drug.

Meanwhile, the ruling also found that the state’s medical cannabis laws and its allowable tax deduction for prescription drugs are both intended to make medicine more accessible to patients.

“These statutes should be read harmoniously to give effect to their commonality of purpose,” the appellate court said in its ruling.

The Taxation and Revenue Department has until Feb. 27 to appeal the ruling. The 30-day legislative session ends Feb. 20.

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