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Standing Akimbo, et al. v. United States
Standing Akimbo, Inc. is a Colorado-licensed marijuana dispensary owned by Spencer Kirson, Samantha Murphy and John Murphy. The IRS code prohibits such enterprises from taking deductions for business expenses. As a part of its efforts to enforce the tax code, the IRS began investigating Standing Akimbo’s tax filings to determine if they had taken deductions. The investigation led the IRS to audit Standing Akimbo for the 2014 to 2016 tax years.
The IRS requested documents from the group to substantiate their filings. When the IRS found the group’s responses insufficient, it issued summonses to the Colorado Marijuana Enforcement Division seeking reports from its Marijuana Enforcement Tracking Reporting and Compliance system.
Standing Akimbo petitioned the district court to quash the summonses in two separate actions — the first addressing the 2014 to 2015 summonses and the second addressing the 2016 summons. The district court denied the petition in the first action, and the 10th Circuit Court of Appeals resolved the appeal, ruling in favor of the IRS.
This appeal concerned only the summons for the 2016 tax filings. The IRS issued the summonses in question in September 2018. The first summons directed CMED to provide a complete list of Standing Akimbo’s licenses for 2016 as well as METRC’s 2016 annual gross sales report, 2016 transfer reports, 2016 annual harvest reports and 2016 monthly plants inventory reports for Standing Akimbo.
The second and third summonses instructed CMED to provide a complete list of all licenses held by Spencer Kirson, John Murphy and Samantha Murphy in their individual capacities.
Standing Akimbo responded before CMED complied by filing the petition to quash the summons in district court, arguing the IRS couldn’t satisfy a test laid out for establishing the requisite showing for enforcing the summonses, the summonses lacked good faith and there were various constitutional violations related to the summonses. The IRS moved to dismiss Standing Akimbo’s petition.
While the IRS’ motion to dismiss was pending, the 10th Circuit ruled on Standing Akimbo’s first case, which they then petitioned the U.S. Supreme Court for certiorari in that case. The Supreme Court denied the petition, but Justice Clarence Thomas authored a brief statement regarding his doubts about the integrity of Gonzales v. Raich, and Congress’s authority to regulate the intrastate growth of marijuana. Standing Akimbo attempted to add it to the arguments even though the motion was already fully briefed, and the IRS moved to strike Thomas’ statement.
The district court then granted the IRS’ motion to dismiss and ordered the summonses be enforced.
The 10th Circuit affirmed the district court’s ruling, finding the district court didn’t err in disregarding Thomas’ statement and it met its burden in demonstrating a legitimate purpose behind the summonses.