Chambers USA researches and compiles a list each year of the country’s top lawyers and law firms. This year, Fox Rothschild’s Cannabis Practice Group and 3 of its attorneys made the list!

The firm was included in the 2019 Chambers USA guide for Cannabis Law, as were three of its attorneys: Jennifer Benda, Joshua Horn, and Matthew Kittay.

  • Jennifer Benda, a Partner in Fox’s Denver, CO office, is an experienced tax attorney who handles tax controversy and income tax planning and compliance matters. She has significant experience assisting companies in the cannabis industry with tax planning, transactional matters, IRS examinations, and other tax compliance matters.
  • Joshua Horn is the Co-Chair of Fox’s Cannabis Practice Group and is a sought-after authority on complex cannabis law issues. He advises companies in the cannabis industry on all aspects of their business, including licensing, banking, mergers and acquisitions, corporate finance and structure, securities, lending. intellectual property, advertising, and litigation.
  • Matthew Kittay is a Partner in Fox’s New York, NY office who focuses his practice on corporate law, particularly venture capital, private equity and private M&A. Matt regularly advises on venture capital financings, restructurings, lending transactions and operations for companies and funds in the cannabis industry and cannabis industry service providers.

Last week, North Carolina regulators followed the lead of public health officials in several other states and began cracking down on CBD-infused products. Cannabidiol, better known as CBD, is one of over 100 cannabinoids, such as THC, found in the cannabis plant. Unlike THC, it doesn’t have consciousness-altering effects and can’t give you a “high.” Many believe CBD consumption has a variety of health benefits, from relieving pain and anxiety to treating epilepsy, which has recently made CBD a popular food and drink additive. While the 2018 Farm Bill made the sale and production of hemp-derived CBD oil legal, the FDA has stated that it is unlawful to add CBD to food or dietary supplements, regardless of whether it is hemp-derived. In the past week, New York, Ohio, and Maine have banned the sale of CBD edibles. Now the North Carolina Department of Agriculture (NCDA) has started sending out warning letters to businesses selling food, drinks or animal food containing CBD and notifying them that doing so violates state and federal law. It is the NCDA’s position that CBD oil can’t be added to human or animal food for sale and CBD products can’t make health claims, such as curing or preventing a disease. For now, the NCDA will take an “educate before regulate” approach, informing businesses that sell these products about the NCDA’s stance on them before taking a more assertive approach in the future, if necessary, that could potentially result in seizures and embargos, or fines and penalties.

A recent case out of Pennsylvania serves as a good reminder that even in states where medical marijuana is legal, individuals cannot “self-prescribe” and then seek to claim protections that might be available to properly registered medical marijuana users.

In this case, the employee applied for and was granted leave under the Family Medical Leave Act (FMLA) in order to undergo and recover from foot surgery. Several months after returning from leave, the employee was selected for a random drug test in accordance with the employee’s drug testing policy, and tested positive for marijuana. Based on this positive test, the employer placed the employee into a drug assistance program, after which the employee returned to work and participated in a “fact-finding” hearing with the employer to determine if there was a legitimate explanation for the positive drug test.

At the hearing, the employee admitted that he was using marijuana he obtained on his own to treat pain from his foot condition. He testified that he had consulted with a doctor in Delaware regarding a certification for medical marijuana, but did not receive a certification or recommendation from the Delaware doctor to use marijuana. He also admitted that he was not certified to use medical marijuana in Pennsylvania and had not consulted a Pennsylvania doctor about medical marijuana use.

After the fact-finding hearing, the employee was terminated for failing the drug test, which was consistent with the employer’s drug testing policy. The court granted the employer’s motion for summary judgment and dismissed the employee’s claims that his termination was the result of disability discrimination and/or retaliation.

The Takeaway – This case should ultimately be read as a disability discrimination decision. In fact, neither the employee nor the Court raised the Pennsylvania Medical Marijuana Act as a defense or explanation for the employee’s positive drug test. But it does offer an important lesson for employees, employers, and businesses as more states legalize medical marijuana.

Even though medical marijuana may be “legal” in your state, nearly all states experience an extended period of time between legalization and full implementation. For example, Pennsylvania passed the Medical Marijuana Act in April 2016, and it was not until almost two years later (February 2018) that the first registered patients received medical marijuana from licensed dispensaries. Furthermore, even when a state’s medical marijuana program is fully implemented, only those individuals who are properly certified under the state’s program can legally use medical marijuana, and must do so as it is recommended to them by their doctor.

Since marijuana is still classified as a Schedule 1 controlled substance under the federal Controlled Substance Act, medical marijuana users (and business operating in the medical marijuana industry) must comply with all provisions of a State’s medical marijuana program in order to receive any rights or protections granted by that law.

A link to the Court’s full decision can be found here.

Joseph McNelis works in Fox Rothschild’s Blue Bell, PA office and focuses his practice on labor and employment matters. Joe also tracks legal developments in the cannabis industry in Pennsylvania and nationwide. Joe can be contacted at 610-397-2332 or

On March 22, 2019, the Pennsylvania Bar Institute will hold its second annual Medical Marijuana & Hemp Law Symposium, a full-day interactive event that will touch on all aspects of the emerging cannabis industry in Pennsylvania.

Light bulb symbol composed of cannabis, illustrating concept of cannabis-related patents

Speakers will include attorneys, government officials, doctors, and other experts in the industry, and the Symposium will feature Fox Rothschild attorneys Josh Horn and Joseph McNelis. The Symposium will be held live in Philadelphia, simulcast to 18 locations around Pennsylvania, and offered in a webcast.

Josh will co-lead the opening “Year in Review” presentation, discussing developments in Pennsylvania’s cannabis industry in 2018 and an outlook for the future, as well as a session on “Transactions in the Medical Marijuana Industry.” Joe will co-lead a panel on Employment Law issues, where he will discuss recent case law developments around the country, and what the PA Medical Marijuana Act means for the workplace.

For more information, or to register for the event, click here. We hope to see you there!


Despite the fact that oral arguments were just held in the appellate case involving the State of Florida’s appeal of a court decision legalizing smoking medical marijuana, new Florida Governor has announced and hinted at big changes to Florida’s regulatory and legal structure for medical marijuana.

First, Gov. De Santis recently stated that he wants Florida’s legislature to strip the ban on smoking from the medical marijuana law, but if that doesn’t happen he will drop the State’s appeal of a lower court ruling which permitted smoking medical marijuana.  If the State of Florida abandons the appeal that would effectively legalize smoking in Florida.

Second, and more importantly for those in the industry, Gov. De Santis heavily criticized the current licensing structure in Florida which is limited to 14 vertical licenses which require seed to sale for those companies that own a license.  Gov. De Santis called the current license structure a cartel.

They created a cartel essentially, I don’t know that the amendment necessarily prohibits that, but that is not good policy.

A change in licensing structure would open up competition and reduce prices for consumers and permit smaller companies to get involved in the industry.  On the other hand, a change in licensing structure would negatively impact the value of the current licenses.



Dori K. Stibolt is a West Palm Beach, Florida based partner with Fox Rothschild LLP.  She focuses her practice on litigation and labor and employment issues and has taken a special interest in the cannabis business.  You can contact Dori at 561-804-4417 or

Despite the rumor that Florida’s new governor (Ron De Santis) will be friendlier to medical marijuana than Rick Scott, oral arguments were held earlier this week and the attorneys representing the State of Florida vigorously argued to uphold the current smoking ban.  Leon County Circuit Judge Karen Gievers had previously agreed with the plaintiffs and struck down the smoking ban, but her decision had been stayed after the State of Florida appealed.

During oral argument, the appellate panel of judges raised the question of whether the Florida legislature has the political power to veto what the people have passed.

The Florida Department of Health attorneys argued that the immunity set forth in Florida’s Amendment Two was for medical use only.  Since smoking causes cardiovascular and respiratory health problems, the Florida legislature was well within its rights to limit delivery methods that would negatively impact health.

Regarding the section set forth in Amendment Two which provides for restriction on where medical marijuana patients can smoke marijuana, which restricts smoking in public, the DOH attorneys argued that section did not create a conflict because the section was set forth in the limitation section.

Attorneys for People United for Medical Marijuana (“People United”) and Catherine Jordan argued that since the definition of medical marijuana included smokable medical marijuana, the legislature could not restrict that method of delivery in its regulation without creating a constitutional conflict.

Additionally, attorneys for People United argued that the language permitting the Florida legislature to regulate for safety meant that issues like pesticides and the like could be regulated, but that safety regulations could not conflict with the constitutional amendment language which did not restrict delivery methods.

Counsel for People United made an emotional argument regarding patient Cathy Jordan who has suffered from ALS since 1986 and was given 3-5 years to live back in 1986.  Ms. Jordan claims that smoking medical marijuana has kept her alive.

Cathy Jordan is not trying to have a good time, she is trying to live.

A video of the oral arguments can be viewed here.

Dori K. Stibolt is a West Palm Beach, Florida based partner with Fox Rothschild LLP.  She focuses her practice on litigation and labor and employment issues and has taken a special interest in the cannabis business.  You can contact Dori at 561-804-4417 or

On January 15, 2019, Fox Rothschild attorneys Josh Horn and Joseph McNelis will present Employment Compliance in the Age of Legalized Marijuana to the Greater Valley Forge HR Association in King of Prussia, PA.

Joshua Horn, Partner, Fox Rothschild LLP

Joseph A. McNelis III, Associate, Fox Rothschild LLP

The presentation will discuss the challenges Pennsylvania employers face given the dichotomy between state and federal laws governing cannabis. Josh and Joe will will provide an overview of federal and state marijuana laws (particularly the Pennsylvania Medical Marijuana Act), discuss specific aspects of the employment relationship affected by the legalization of marijuana, and offer practical guidance for employers on how to navigate this new and developing area of the law.

For more information and to attend the event, click here.

Also–don’t forget to check out our “White Paper” on the same topic, which provides a great overview and important takeaways for employers.

Because of IRC Section 280E, accounting and tax planning are two essential functions of operating a viable cannabis businesses. Over at our Tax Controversy Blog, Fox Partner Jennifer Benda discusses the importance of a recent Tax Court decision which held that a management company established for the purpose of providing employees to work at a licensed dispensary, but which itself did not hold a license to dispense cannabis, was subject to Section 280E.

The case is Alternative Health Care Advocates v. Comm’r

Check out Jennifer’s post for more details and guidance!

Field of Hemp

Congress has passed the 2018 Farm Bill by an overwhelmingly majority and the President is expected to sign it into law. The Farm Bill has huge implications for the industrial hemp industry because it removes hemp from the federal list of controlled substances and enables farmers to apply for crop insurance. Hemp is a variety of the cannabis sativa plant that contains very low levels – .3 percent or less – of THC found in marijuana, and doesn’t have the psychoactive effects associated with its biological cousin. Hemp has a vast range of industrial uses that include textiles, clothing, plastic substitutes and as an additive to food and drink. Many proponents contend it can also be used to treat conditions such as chronic pain and anxiety. If the President signs the bill, hemp would be regulated by the U.S. Department of Agriculture, much like any other crop, and farmers will legally be able to grow, process and sell the plant and its derivatives such as CBD oil. The Farm Bill presents massive opportunities and a potential boon to the industry that produces and markets cannabidiol, or CBD oil, which has become increasingly popular in recent years. Last year, hemp sales reportedly reached $820 million in the U.S. and that was without it being completely legal. Some analysts now project hemp could grow into a multi-billion dollar industry by 2020 and that the global hemp market could increase to $10 billion by 2025.

In the latest Tax Court opinion addressing the application of Section 280E to cannabis businesses there is no good news. However, there is some new guidance.  In Patients Mutual Assistance Collective Corp. v. Comm’r, 151 T.C. No. 11, the taxpayer made a litany of arguments to convince the court that their business, or a portion of their business was not subject to Section 280E.  These include arguments we have seen before, including (1) that the business was not trafficking in controlled substances, here, because the government had abandoned a civil forfeiture action, and (2) that because a portion of the business involved branding and the sales of non-marijuana products, deductions related to these operations should not be subject to Section 280E.  These arguments failed and only make it clear that similar arguments are likely to be unavailing.  In fact, the Court spends ten pages discussing why the entire business is integrated and subject to Section 280E.  Taxpayers hoping to establish a separate trade or business that is not subject to Section 280E now have clarity, but also an extremely high bar.

New Holdings:  Inventory Accounting Rules

The new developments addressed in this case involve the application of inventory rules to cannabis businesses.  Previous cases focused primarily on the previously discussed arguments and failed to give any detailed guidance on how to apply the inventory rules.  The Court clearly and strongly concluded that the more expansive Section 263A  inventory cost rules do not apply to businesses subject to Section 280E.  The Court reasoned that “if something wasn’t deductible before Congress enacted section 263A, taxpayers cannot use that section to capitalize it. Section 263A makes taxpayers defer the benefit of what used to be deductions-it doesn’t shower that as grace on those previously damned.”  Slip Op. at 53.

The Court’s conclusion is based on the notion that we go back in time to 1982 to determine what is includible in inventory costs.  The Court refers to Treas. Reg. section 1.263A-1(c)(2) which states:

Any cost which (but for section 263A and the regulations thereunder) may not be taken into account in computing taxable income for any taxable year is not treated as a cost properly allocable to property produced or acquired for resale under section 263A and the regulations thereunder. Thus, for example, if a business meal deduction is limited by section 274(n) to 80 percent of the cost of the meal, the amount properly allocable to property produced or acquired for resale under section 263A is also limited to 80 percent of the cost of the meal.

While this reasoning is understandable, if we turn the question on its head, we could also ask whether the section 280E disallowance is determined before or after inventory costs are calculated.  For example, even if there is a meals and entertainment expense that is clearly includible in inventory costs, no one is going to argue that 100% of meals and entertainment is includible in inventory costs.  In this case, you are determining inventory costs and deductions, and then applying Section 274.   So, it is easy to see how those provisions overlap.  However, if inventory costs are determined based on the applicable inventory rules and then Section 280E is applied, then you have a different result because Section 263A expands what can be included in inventory costs, and the remaining deductions are subject to Section 280E.  That result is not inconsistent with the notion that items such as meals and entertainment and penalties are not deducted in determining taxable income regardless of whether they are a deduction under Section 162 or an inventory cost under Section 471 or 263A.

The Harsh Result

It is important to note that the Court analyzed and concluded that the taxpayer was a reseller and not a producer.  Because the taxpayer did not itself grow marijuana, this is not surprising.  The Section 471 rules that apply to resellers do not allow for extensive indirect costs to be included in inventory.  Thus, for businesses that do not produce or manufacture, they will continue to face significant challenges by the IRS if they are including indirect costs in inventory costs.  For cultivators and producers, careful consideration should be given to how the 471 rules apply, depending on the activities of the business.

Still to Come

The Court reserved its analysis of whether penalties apply for a opinion to be issued at a later date.  However, the Court hints that there might be some relief when it states that the overlap between Section 280E and 263A created a “confusing legal environment.”  One can hope that given the lack of guidance addressing the specifics of how the inventory rules apply to cannabis businesses, the IRS and the court will give taxpayers  doing their best to apply Section 280E the benefit of reprieve from penalties.

Other Notes

If you are entertained by Judge Holmes’ opinions, be sure you read the footnotes.  Footnotes 3 and 6 are my favorites.