Managing California Cannabis Businesses

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aBIZinaBOX Cannabis Licensing FAQ’s

aBIZinaBOX Publishes Cannabis Licensing FAQ’s aBIZinaBOX Publishes Cannabis Licensing FAQ’s covering a substantial number of BCC issues. What are the definitions applicable to Cultivation? What are the requirements for Cultivation licenses? What are the fees and requirements for Cultivation licenses? What are Cultivation site requirements? What are the record-keeping and reporting requirements for Cultivation? What … Continue reading “aBIZinaBOX Cannabis Licensing FAQ’s”

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aBIZinaBOX Publishes Cannabis Licensing FAQ’s aBIZinaBOX Publishes Cannabis Licensing FAQ’s covering a substantial number of BCC issues. What are the definitions applicable to Cultivation? What are the requirements for Cultivation licenses? What are the fees and requirements for Cultivation licenses? What are Cultivation site requirements? What are the record-keeping and reporting requirements for Cultivation? What … Continue reading “aBIZinaBOX Cannabis Licensing FAQ’s”

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BCC Subcommittee Materials

BCC Subcommittee Materials

The BCC Subcommittee Materials from meetings in Sacramento on February 13 are almost 500 pages. aBIZinaBOX submitted five items which are reproduced in the reports.

The Cannabis Advisory Committee will be holding a series of Subcommittee Meetings on Tuesday, February 13 in Sacramento. Ten Subcommittees will meet to discuss and develop recommendations to the state cannabis licensing authorities’ formal rulemaking packages.

MEETING NOTICES: The Meeting Notices and Agendas for each Subcommittee Meeting will be posted on the Bureau of Cannabis Control’s website – www.bcc.ca.gov – at least 10 days
prior to the meetings. A webcast will not be available for the meetings. All Subcommittee Meetings are open to the public.

Bureau of Cannabis Control

CA Cannabis Licensing

Cannabis Advisory Committee Mtg 2 13 18

Cannabis Advisory Committee Mtg 2 13 18 Cannabis Advisory Committee Mtg 2 13 18 in Sacramento The Cannabis Advisory Committee will be holding a series of Subcommittee Meetings on Tuesday, February 13 in Sacramento. Ten Subcommittees will meet to discuss and develop recommendations to the state cannabis licensing authorities’ formal rulemaking packages. The agenda and meeting materials … Continue reading “Cannabis Advisory Committee Mtg 2 13 18”

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Cannabis Advisory Committee Mtg 2 13 18 Cannabis Advisory Committee Mtg 2 13 18 in Sacramento The Cannabis Advisory Committee will be holding a series of Subcommittee Meetings on Tuesday, February 13 in Sacramento. Ten Subcommittees will meet to discuss and develop recommendations to the state cannabis licensing authorities’ formal rulemaking packages. The agenda and meeting materials … Continue reading “Cannabis Advisory Committee Mtg 2 13 18”

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Water Board – Small Irrigation Use Registration

Water Board – Small Irrigation Use Registration Water Board – Small Irrigation Use Registration was announced earlier this week. It represents important information for cannabis cultivators in California. Yesterday the State Water Board announced that the Small Irrigation Use Registration is available through the Cannabis Portal. This is an exciting development, providing for streamlined registration … Continue reading “Water Board – Small Irrigation Use Registration”

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Water Board – Small Irrigation Use Registration Water Board – Small Irrigation Use Registration was announced earlier this week. It represents important information for cannabis cultivators in California. Yesterday the State Water Board announced that the Small Irrigation Use Registration is available through the Cannabis Portal. This is an exciting development, providing for streamlined registration … Continue reading “Water Board – Small Irrigation Use Registration”

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Important Information for Cannabis Distributors

Important Information for Cannabis Distributors CDTFA issued an Important Information for Cannabis Distributors on February 2, 2018 The following is the text of an announcement that CDTFA released on Important Information for Cannabis Distributors As a cannabis distributor, you must electronically file your cannabis tax returns and pay the cultivation tax and cannabis excise tax due … Continue reading “Important Information for Cannabis Distributors”

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Important Information for Cannabis Distributors CDTFA issued an Important Information for Cannabis Distributors on February 2, 2018 The following is the text of an announcement that CDTFA released on Important Information for Cannabis Distributors As a cannabis distributor, you must electronically file your cannabis tax returns and pay the cultivation tax and cannabis excise tax due … Continue reading “Important Information for Cannabis Distributors”

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CA Cannabis Advisors – Raise The Bar

CA Cannabis Advisors – Raising The Bar

CA Cannabis Advisors
aBIZinaBOX – PCPS Member Firm – CA Accountancy Corporation

CA Cannabis Advisors – Raising The Bar is focused on helping the commercial cannabis industry in California succeed. The fundamental principle that underlies any professional service firm is “THE FIRMS SUCCESS IS DIRECTLY TIED TO THE CLIENT’S SUCCESS”. Please the phrase in quotes and commit it to memory. aBIZinaBOX is a CPA firm. which is licensed in California, and the CPA’s that are employed by the firm are licensed in California [we will come back to why that matters later.]

The underlying concept is the same across every profession, occupation, and trade that support the “touch the leaf” businesses within the commercial cannabis industry in California [equally valid in other jurisdictions, however, we are going to limit the discussion to an environment where we have FIRST-HAND knowledge. Some examples of additional providers that serve the CA cannabis industry with focused skills include:

The Cannabis Story Lab – Public Relations, Branding
Nola Weis LLP – California  Lawyers For Cannabis Businesses

There are a select number of high-quality professionals that have chosen embrace the industry in California. Unfortunately, there are opportunistic, marginal firms that have pursued the cannabis businesses, due to the early lack of willingness by established firms to take on the risks of an industry that the Federal Government continues to persecute based upon antiquated, and irrational beliefs fostered by what we call Reefer Madness Think. “RMI”

If RMI were recognized for the paranoid mindset that it is, it wouldn’t be nearly so harmful. However, the cannabis industry continues to suffer from severe consequences such as:

 

  • Significantly enhanced penalties for routing California Dept. of Tax and Fee Administration [“CDTFA”] penalties starting at 50% of the tax versus 10% for every other
     Important Information for Cannabis Distributors
    Important Information for Cannabis Distributors

    business.

  • The Internal Revenue Service does not recognize Cannabis Cultivation as “agricultural activity” aka “farming” and there is not corresponding NACIS Industry Code for it. As such, cannabis cultivators in California could be denied significant tax benefits  [e.g ability to expense certain single purpose property used in farming such as greenhouses] .which are available to other industries under the recently enacted TCJA of 2018. You can review our analysis of the issue California Cannabis Cultivation as Farming.

Ther are over twenty State of California agencies involved in the regulation of the commercial cannabis industry. You can see an overview of all of them at the California Cannabis Portal site.

California Cannabis Chek
Building Confidence in the California Cannabis Industry

We have undertaken a focused effort to leverage the unique skills that certified public accountants possess to facilitate building confidence in the California cannabis industry as CA Cannabis Advisors.  We have developed California Cannabis Chek TM which is comprised of a SaaS software application, technical resources, training, and ultimately a certification process for CPA’s. The process is ground in core attest concepts which have been developed by the CPA profession including:

Agreed-Upon Procedures Reporting – SSAE 18, Attestation Standards: Clarification and Recodification(effective May 1, 2017), principally as AT-C section 215
SOC -2 and SOC-3 Reporting
Privacy Reporting Concepts

The standards contain a Maturity Framework for the evaluation of internal accounting controls over cash:

Level 1: UnreliableThe unpredictable environment for which controls have not been designed or implemented.

Level 2: Informal. Controls are present but inadequately documented and largely dependent on manual intervention. There are no formal communications or training programs related to the controls.

Level 3: Standardized. Controls are in place and documented, and employees have received formal communications about them. Undetected deviations from controls may occur.

Level 4: Monitored. Standardized controls are in place and undergo periodic testing to evaluate their design and operation; test results are communicated to management. Limited use of automated tools may support controls.

Level 5: Optimized. An integrated internal controls framework with real-time monitoring by management is in place to implement continuous improvement. Automated processes and tools support the controls and enable the organization to quickly change the controls as necessary.

The complexities of evaluating and reporting on internal controls, privacy, and other Agreed Upon Procedures is an attest function. The performance of attest services is specialized and required significant education and training and is RESTRICTED by the California Board of Accountancy [and every other state and territory in the US to CPA’s]. Enrolled Agents are NOT authorized nor capable of performing such work. If you observe an Enrolled Agent representing that they can provide such services, they should be immediately reported to the State Board of Accountancy, and the Internal Revenue Service Office of Professional Responsibility.

CPA’s and Attorneys with proper, verified eduction such and an LLM or MST in taxation are additionally uniquely qualified to address the tax, accounting, and regulatory compliance needs of Cannabis businesses in California. We have begun the discussion with the California industry regulators, tax authorities, and the profession about leveraging the unique skills of CPA’s to assist the industry. Engaging with FinCEN and other regulators is on our short-term roadmap. Let’s improve the skills for the choice of CA Cannabis Advisors.

You can verify a CPA’s credentials, disciplinary record and CPE at CPAVerify.com., an Enrolled Agent’s status here. You can learn more about the Regulation of Tax Professionals here.

You can learn more about the differences between CPA’s and Enrolled Agents here. 

CPA – Right Choice Business Taxes

CPA – Right Choice Business Taxes CPA – Right Choice Business Taxes.  There is a tremendous amount of misinformation, and outright FRAUD out there concerning the credentials, education and experience of advisors. Some would have you believe that software could take a bookkeeper and give them the education and experience of a CPA…HOGWASH!! The NAEA … Continue reading “CPA – Right Choice Business Taxes”

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CPA – Right Choice Business Taxes CPA – Right Choice Business Taxes.  There is a tremendous amount of misinformation, and outright FRAUD out there concerning the credentials, education and experience of advisors. Some would have you believe that software could take a bookkeeper and give them the education and experience of a CPA…HOGWASH!! The NAEA … Continue reading “CPA – Right Choice Business Taxes”

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EA Never Will Be An Astronaut

EA Never Will Be An Astronaut EA Never Will Be An Astronaut –  Some are generally accepted and others seem to be a constant source of butthurt and ill will. There is a reality in the business world that I usually refer to as “not everyone can be an astronaut”. I have often dreamed of … Continue reading “EA Never Will Be An Astronaut”

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EA Never Will Be An Astronaut EA Never Will Be An Astronaut –  Some are generally accepted and others seem to be a constant source of butthurt and ill will. There is a reality in the business world that I usually refer to as “not everyone can be an astronaut”. I have often dreamed of … Continue reading “EA Never Will Be An Astronaut”

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HRBlock – Taxpayers Nightmare

HRBlock – Taxpayers Nightmare

@HRBlock – Taxpayers Nightmare continues. Well, we reached another filing deadline and everything should have proceeded smoothly..no such luck. I am sitting here at 3 AM putting the finishing touches on what is nothing short of a nightmare. The cause of the nightmare…none other than an unresponsive, incompetent tax preparer that seems incapable of following directions. [Note – this is being published today so we have a baseline to follow what happens.] The individual is:

  • Employed by H&R Block –
  • Labeled as an H&R Block “Master Tax Advisor”
  • Purportedly an Enrolled Agent

The combination of these credentials means that the individual [we can call them the “Tax Master”] as it sounds like a suitably honorific title.

  • Has at least 310 hours of H&R Block Training
  • Has passed the IRS Special Enrollment Exam
  • May or may not have graduated from high school or anything beyond it.
  • May or may not have any formal accounting education.

The issues in the situation that we were engaged to address on an urgent basis:

  • The Tax Master asserted that foreign taxes must be credited rather than taken as a deduction [the “FTC issue”].
  • Was provided with a Schedule K-1 from a limited liability company for an individual that was a General Manager of the LLC, stipulated as an active individual [would satisfy material participation under IRC Sec. 469], income was earnings from self-employment,
  • The Tax Master finally acknowledged the gross error with the FTC issue and revised the return draft returning it to our client but refusing to reflect the K-1 in the return.

Given the recent H&R Block invective that CPA’s don’t know much about income tax, or at least that is what their advertising states, we undertook to explain our view of the situation, the manner in which we believe the statute applied, and

Your lack of response to Mr. R’s numerous communications over the prior three weeks, and of my urgent letter today has created the need for immediate action our part. We haven’t heard back from you and as such have obtained directly from Mr. R to extend his return. You were expressly directed that you did not have permission to file anything without his express consent.

The income has been clearly identified as:

  • Income/loss from a trade or business under IRC Sec. 162 and not investment income/expense subject to IRC Sec. 212 limitations.
  • Mr. R is a general manager of the LLC and accordingly, the income/loss is not subject to the IRC Sec. 469 passive loss rules and is subject to IRC Sec. 1402 gross income self-employment characterization.
  • A quick review of the return makes it apparent that you are either ignorant with respect to the rules that were explained to you, or you are intentionally disregarding the statute and the underlying regulations to the detriment of Mr. R for several thousand dollars.
  • Further, the lack of inclusion of the US source loss will create a distortion in the absorption of Foreign Tax Credits under IRC Sec. 901.

It’s understandable given their rather limited and basic training, Enrolled Agents have limited tax knowledge. We have provided an explanation of the item and you have a Schedule K-1 which properly reflects the item. You are expressly granted the ability to rely upon our for purposes of avoiding penalties under IRC Sec. 6661 and thereunder. [Our letter is specifically intended to permit you to rely upon it as written advice which permits you to rely upon it using the standards provided in Circular 230, Sec. 10.37(b)]

You are further cautioned, that your failure to report the items and they have been explained might be construed as demonstrative of intentional disregard for the rule or reckless conduct which would subject you and H&R Block to possible penalties under IRC Sec. 6694(b)(2) which states:

(2) WILLFUL or reckless conduct – Conduct described in this paragraph is conduct by the tax return preparer which is—

(A)a willful attempt in any manner to understate the liability for tax on the return or claim, or(B)a reckless or intentional disregard of rules or regulations.

The imposition of an IRC Sec. 6694(b)(2) penalty mandates a referral of the practitioner and firm for review for possible professional sanctions under Circular 230 to the IRS Office of Professional Responsibility. If you aren’t aware of the function of the IRS Office of Professional Responsibility it serves in the oversight role for professional practice matters for attorneys, certified public accountants and those individuals who don’t possess the qualifications for the two professions that have passed the SEE exam and are included under the oversight of Circular 230 and OPR.

The potential consequences of a referral and sanction by OPR can be quite severe. We strongly urge you to carefully review the implications of your failure to properly reflect the information reported on the Schedule K-1 in Mr. R’s return.

I had an extended with our client with respect to all of the implications of the various actions in this matter. In the end, our client understands the issues and potential consequences. If the circumstances ultimately warrant it, we will draft a document which the taxpayer can use to initiate a formal to the Office of Professional Responsibility naming both the Tax Master and the H&R Block entity that employs them under Circular 230 Sec. 10.50.

If H&R Block truly believes that they are more highly skilled in dealing with income taxes than CPA’s that typically have perhaps TWENTY TIMES THE AMOUNT OF FORMAL EDUCATION, and NAEA believes that Enrolled Agents are “America’s Tax Experts” we are going take personal responsibility to see that they individually and and firms adhere to the identical rules that apply to CPA’s and attorneys.

I have written about this subject a number of times and proposed suggestions with respect to deal with it. [See  “EAs and Circular 230”    ]. If you are as frustrated with the on-going fraud, misrepresentation of skills and the manipulation of words in a money grab consider following my lead in undertaking appropriate action where appropriate and consistent with professional standards. If AICPA isn’t going to forcefully support us we are far from helpless.

Permit me to conclude by noting that I take great joy in seeing the analytics, where it is clear that this forum provides a force multiplier for sharing the documents which are linked to this one that H&R Block and NAEA are not happy with. If you share this view and are tired of the lying, please share the blog wide and the deep….a new conversation starts RIGHT NOW.

HRBlock - Taxpayers Nightmare
HRBlock – Taxpayers Nightmare

Finally, one of my favorites…..why Enrolled Agents are NOT professionals with some Yiddish Wisdom.

[1] Internal Revenue Service, Office of Professional Responsibility, SE: OPR, Room 7238/IR, 1111 Constitution Avenue NW, Washington, DC 20224, Fax Number (202) 317-6338

CPA Right Choice

aBIZinaBOX Inc. CACannabisChek Coming Soon!

aBIZinaBOX Inc. CACannabisChek Coming Soon! aBIZinaBOX Inc. Cannabis Practice Group is going to change your expectations about why the ONLY choice for your California commercial cannabis business for accounting, tax or regulatory compliance is a CPA licensed in California with an A endorsement. Find us at https://californiacannabischek.com The trademark application mentions “Software as a service … Continue reading “aBIZinaBOX Inc. CACannabisChek Coming Soon!”

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aBIZinaBOX Inc. CACannabisChek Coming Soon! aBIZinaBOX Inc. Cannabis Practice Group is going to change your expectations about why the ONLY choice for your California commercial cannabis business for accounting, tax or regulatory compliance is a CPA licensed in California with an A endorsement. Find us at https://californiacannabischek.com The trademark application mentions “Software as a service … Continue reading “aBIZinaBOX Inc. CACannabisChek Coming Soon!”

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