The fate of the Keystone XL oil pipeline is now in John Kerry’s hands — and greens say the secretary of state’s legacy as a climate champion is at stake.
Kerry spent much of his Senate career at the center of the global warming debate, fighting an unsuccessful battle for climate legislation in the face of an often apathetic Congress. He wrote a 2007 book on environmentalism that included a chapter saying we face a “decisive decade” on climate change, and he warns in his speeches that the world is “inviting catastrophe” by ignoring the issue.
Warren Buffett has fired a proverbial shot that is sure to send GOP leaders shrieking to their favorite conservative media outlets. In a race already dominated by the spending of billionaires such as Charles and David Koch, Sheldon Adelson and others, Buffet just bigfooted them all. So far, the conservative Super PACs American Crossroads, Restore our Future and Americans for Prosperity have spent about $80 million dollars on the presidential election, far more than the official Romney campaign.
Buffett’s answer: I see your $80 mil and raise you $920 million.* Yes, a cool one billion for the pro-Obama Super PAC Priorities USA Action.
More below the doodle.
Previously, Buffet was reluctant to inject his money into the race:
“I don’t want to see democracy go in that direction.”
Apparently, we can all presume Mr. Buffet got over his reluctance when he saw all the profits he could make at his railroad…..
Some reporter with a few resources ought to be looking into the source of the donations that support all those environmental groups that are opposed to the deadline and see if they might lead to Mr. Buffet or one on his companies. Oh wait, the Fourth Estate is no longer independent, it’s left to people like me and you to let the world know what is really going on without the bias of a political agenda.
Last week, Texas was slammed with seriously cold (for us, anyway) weather. Some people chalk this up to changes in the jet stream; others say it’s due to a disruption of El Niño or La Niña or perhaps Columbus’s other ship. I’ve even seen it attributed to a polar vortex (whatever that is – sounds like a Mannheim Steamroller album to me).
I’m here to tell you it’s none of these things. It’s cold here because hell has frozen over.
With Colorado, Washington and other states loosening up marijuana laws, investors and entrepreneurs are rushing in to take advantage, dubbing the phenomenon the “green rush.” But amid the excitement, CFOs of pot-related businesses will have to navigate a tricky landscape of banking issues, taxes and possibly discrepancies between federal and state laws.
Aside from licensed marijuana growers and dispensers, there is a diversity of companies in the field. For instance, High Times, a publication that covers the marijuana industry, recently started its own private-equity firm, HT Growth fund, which plans to raise $100 million over the next two years to invest in marijuana-related companies.
Another example is Advanced Cannabis Solutions, a real estate company that specializes in leasing space to growers and dispensaries. It signs clients to 10-year leases in facilities it owns. Banks and landlords are reluctant to do business with such companies, not only because of what they sell but also because most of them are cash-only operations.
The publicly traded company (CANN on the OTC Bulletin Board) issues convertible debt, which is appealing to investors because the debt eventually converts to equity and the investors get paid 12 percent interest annually over a five-year period, but they are not required to hold the debt that long. They can convert when the stock price is $5 per share and are forced to convert when the stock reaches $10; the stock currently is trading at $9 per share.
“We’re positioned to take advantage of the next two to three years by acquiring assets at a high rate,” says Chris Taylor, the firm’s CFO. The company is also working on ancillary nutrient and technology products as well as consulting services.
In Colorado, it became legal to buy marijuana for recreational purposes on Jan. 1, and Washington has passed constitutional amendments to accomplish the same early this year. And many more states are allowing the use of marijuana for medical purposes; New York this month became the 21st state to do so.
The legal marijuana market in the United States was a $1.4 billion industry in 2013 and will grow to $2.3 billion this year, according to an ArcView Market Research report. Colorado reported revenue of $329 million from July 2012 through June 2013, generating $9 million in state taxes, according to the Colorado Department of Revenue.
One major concern for companies doing business on Colorado has been that while marijuana is now legal in the state, federal laws still deem it illegal. Federal agencies can, for one thing, seize properties that are used for illegal activity. The Justice Department, though, eased the fears with an August memo saying that if a state tightly regulates the industry and marijuana businesses comply, the department will defer to the state’s rules.
Another continuing challenge for marijuana providers derives from the tax code. Internal Revenue Service Section 280E, which refers to marijuana sales as “drug trafficking,” prohibits marijuana retailers, regardless of state law, from deducting any expenses, including rent, payroll and equipment. Some retail pot businesses are effectively subject to 80 percent tax rates and are handicapped in their efforts to reinvest in their businesses, says Aaron Smith, co-founder and executive director of the National Cannabis Industry Association.
Another problem is the industry’s newness. While interest in investing in the industry is growing, investors are “much more cautious” about entering the field compared to more established industries, says Taylor. “It takes multiple meetings and much conversation” to win an investor over.
Taylor says he is optimistic that the Justice and Treasury departments will address some weighty banking issues in the first quarter of this year. As of now, marijuana dispensaries still have trouble obtaining small business loans from banks that are unwilling to hold money for fear of being implicated in money laundering.
ACS works around this by collecting rent twice weekly in cash and transport it to banks via armored cars. He says it’s “not a perfect solution” but one that he hopes will change in the next few months.
Once the banking and tax industry catch up with new state regulations, the marijuana industry’s potential will be massive, Taylor adds. For example, an operator can expect a 40 percent profit margin if an operator can sell 70 to 75 percent of what it grows. “It’s much more profitable than the restaurant business,” he says.
Image courtesy of United States Fish and Wildlife Service via CC
SEATTLE — In his second-floor office above a hair salon in north Seattle, Ryan Kunkel is seated on a couch placing $1,000 bricks of cash — dozens of them — in a rumpled brown paper bag. When he finishes, he stashes the money in the trunk of his BMW and sets off on an adrenalized drive downtown, darting through traffic and nervously checking to see if anyone is following him.
Despite the air of criminality, there is nothing illicit in what Mr. Kunkel is doing. He co-owns five medical marijuana dispensaries, and on this day he is heading to the Washington State Department of Revenue to commit the ultimate in law-abiding acts: paying taxes. After about 25 minutes at the agency, Mr. Kunkel emerges with a receipt for $51,321.
“Carrying such large amounts of cash is a terrible risk that freaks me out a bit because there is the fear in my mind that the next car pulling up beside me could be the crew that hijacks us,” he said. “So, we have to play this never-ending shell game of different cars, different routes, different dates and different times.”
Legal marijuana merchants like Mr. Kunkel — mainly medical marijuana outlets but also, starting this year, shops that sell recreational marijuana in Colorado and Washington — are grappling with a pressing predicament: Their businesses are conducted almost entirely in cash because it is exceedingly difficult for them to open and maintain bank accounts, and thus accept credit cards.
The problem underscores the patchwork nature of federal and state laws that have evolved fitfully as states have legalized some form of marijuana commerce. Though 20 states and the District of Columbia allow either medical or recreational marijuana use — with more likely to follow suit — the drug remains illegal under federal law. The Controlled Substances Act, enacted in 1970 classifies marijuana as a Schedule I drug, the most dangerous category, which also includes heroin, LSD and ecstasy.
As a result, banks, including state-chartered ones, are reluctant to provide traditional services to marijuana businesses. They fear that federal regulators and law enforcement authorities might punish them, with measures like large fines, for violating prohibitions on money-laundering, among other federal laws and regulations.
Marijuana business owners have devised strategies to avoid the suspicions of bankers. A number of legal operations have opened accounts by establishing holding companies with names that obscure the nature of their business. Some owners simply use personal bank accounts. Others have relied on local bank managers willing to take chances and bring them on as clients, or even offer tips on how to choose nondescript company names.
But the financial institutions eventually shut down many of these accounts after managers conclude the businesses are too much of a risk. It is not unusual for a legitimate marijuana business to go through a half-dozen bank accounts in a few years. While they are active, however, these accounts may have informal restrictions placed on them — some self-imposed — so they do not draw the scrutiny of bankers who may file suspicious-activity reports or would be required to report deposits over $10,000 in cash. The account holders may make only small deposits, and only at night and at certain branches. Mr. Kunkel of Seattle has such an account.
At the largest credit union in Washington State, BECU, about 20 accounts have been shut down in the last three years after it was discovered they were for businesses in the legal marijuana trade, Todd Pietzsch, a spokesman for the credit union, said.
Kristi Kelly, 36, who owns two dispensaries and several marijuana growing operations in the Denver area, said six bank accounts of hers had been canceled in the last 18 months. “Opening the account is not necessarily the problem,” she said. “Our cash deposit levels flag a bank’s compliance division.”
Ms. Kelly, who had just paid $10,000 in cash to the City of Denver for licensing and application fees to expand her business, said that several times a week she carried around tens of thousands of dollars in a bag. “I never felt as illegitimate as the day I had to buy a cash counter,” she said, adding that she spends three hours or so a day just managing the cash from her business’s multiple locations.
A.T.M.s are common in marijuana outlets, but the business owners often have to use their own cash in the machines in case law enforcement authorities conduct a raid and seize the money.
Those marijuana operations that do have bank accounts or use the personal ones of their owners can use a cashless A.T.M. service in which a debit card is swiped at a dispensary and the money is transferred into the recipient’s account.
“It is operating over the A.T.M. network and not the credit card network,” said Lance Ott, whose company, Guardian Data Systems, provides this service. “The A.T.M. networks are not as regulated. This is the loophole.”
Since legal marijuana operations, for the most part, cannot get bank loans, these small businesses have to rely on short-term loans from individuals, usually with higher interest rates.
To help, High Times magazine is starting a private equity fund to invest in marijuana businesses. But many investors may feel uneasy about marijuana businesses that do not have bank accounts. And without bank references, entrepreneurs say, it is much tougher to get lines of credit from vendors.
Leaders in the marijuana trade point out that giving accounts to businesses would allow for more transparency and meticulous regulation and would help ensure that jurisdictions receive the taxes they are entitled to.
Marijuana entrepreneurs and banks both would like clear guidelines from the government on how financial institutions can serve the industry. On Friday, six members of Colorado’s congressional delegation sent a letter to the Treasury and the Justice Department requesting that they “expedite” that guidance.
In August, the Justice Department issued a memo indicating that it would not crack down on legal marijuana as long as eight regulatory requirements were met, like preventing revenue from the sale of marijuana from going to criminal enterprises and preventing the distribution of marijuana to minors. The memo did not address banking.
The Treasury Department’s Financial Crimes Enforcement Network hopes to circulate recommendations by the end of this month to officials at the Treasury and the Justice Department for their opinions, an official briefed on the situation said. There is no timetable for formal guidelines.
Richard Riese, senior vice president for regulatory compliance at the American Bankers Association, said banks wanted clear and comprehensive guidelines on how to do business with the legal marijuana industry.
Mr. Riese said, for instance, that banks would want to know that they were not “aiding and abetting” a criminal enterprise if they provided services to marijuana businesses. “Banks will need a lot of detail from regulators to get the satisfaction and comfort they are looking for,” he said.
“Banking is the most urgent issue facing the legal cannabis industry today,” said Aaron Smith, executive director of the National Cannabis Industry Association in Washington, D.C. Saying legal marijuana sales in the United States could reach $3 billion this year, Mr. Smith added: “So much money floating around outside the banking system is not safe, and it is not in anyone’s interest. Federal law needs to be harmonized with state laws.”
The limitations have created unique burdens for legal marijuana business owners. They pay employees with envelopes of cash. They haul Chipotle and Nordstrom bags containing thousands of dollars in $10 and $20 bills to supermarkets to buy money orders. When they are able to open bank accounts — often under false pretenses — many have taken to storing money in Tupperware containers filled with air fresheners to mask the smell of marijuana.
The all-cash nature of the business has also created huge security concerns for business owners. Many have installed panic buttons for workers in the event of a robbery and have set up a constellation of security cameras at their facilities beyond what is required, as well as floor sensors to detect break-ins. In Colorado, Blue Line Protection Group was formed a few months ago, specializing in protecting dispensaries and facilities that grow marijuana, and in providing transportation security. The firm largely uses military veterans who have Special Operations experience.
The IRS building in Happauge, Long Island.Photo: Kevin P. Coughlin
A Long Island man tripped over a telephone cord during an audit, sued the IRS and came away $862,000 richer — and he doesn’t have to pay any taxes on the windfall, The Post has learned.
William Berroyer, 66, the father of a Suffolk County cop, claimed he could no longer enjoy activities from golf to sex because of injuries suffered when the cord wrapped around his leg in a Hauppauge IRS office in 2008.
The IRS argued that Berroyer, of Nesconset, was exaggerating his injuries, but Judge Arthur Spatt found the agency liable for pain and suffering, court papers show.
The former businessman was hammering out a repayment deal with the IRS for his $60,000 bill when he was injured.
He testified that both he and the auditor — Richard Enterlin — were “shocked” by his tumble.
“I really can’t say whether I hit it with my shoulder, hand or elbow, but I broke my fall on the cabinet,” Berroyer testified.
He left the office on his own power but called Enterlin from the parking lot to tell him he had lost the feeling in his lower leg and had shoulder pain, according to court papers.
He spent the next 17 days in hospitals and rehab clinics to deal with the agony, Berroyer testified.
‘I was frightened,” he said in court. “I had gone from everything to nothing, and I was frightened.”
Berroyer claimed he and his wife had sex several times a week before the injury, but could manage only a single monthly session after the accident.
IRS attorneys accepted that he fell because of the wayward wire — but argued that Berroyer was grossly exaggerating his injuries to score a payday.
They even dispatched a surveillance crew to his house to catch him doing something rigorous to prove their point, according to the court records.
Testifying for the IRS, Dr. Arthur Rosen said, “There is no physical basis for the defect that the patient claims.”
Despite the award, it could have been worse for Uncle Sam.
Berroyer was seeking $10 million in the lawsuit and claimed that he had been wheelchair-bound ever since the injury.
But Judge Spatt didn’t buy that claim, and limited the amount of the payout.
Neither Berroyer nor his attorney, Alison Metzler, returned calls for comment.
China has just one thing to say to all those who engage in the now daily slamdowns of gold just around the time of the London fixing, after 8 am Eastern, which lately have gotten so vicious they have resulted in “stop logic” market halts not on one but at least two occasions, keeping the price of gold delightfully low for all those who instead of selling, are looking to buy: “thanks.”
As the chart below shows, in the past two years since September 2011 (ironically the same month we wrote “Wikileaks Discloses The Reason(s) Behind China’s Shadow Gold Buying Spree” namely that the PBOC was quietly seeking to make the renminbi the new gold-backed reserve currency) the mainland has imported an unprecedented 2,116 gross tons of gold from Hong Kong (in addition to the hundreds of tons produced domestically), for the first time crossing the 2k gross ton import barrier in a two year period!
Focusing on just the most recent import data for the month of August, seemingly unaware that all expert, hedge funds in the US have been “capitulating” on gold just because the momentum trade is no longer there, and because it somehow makes more sense to buy gold when the price is high rather than low, shows that China imported 131.4 gross tons of gold in the month, a 146% increase compared to a year prior, when the price of gold was substantially higher. Indeed, in a “shocking” turn of events, China actually buys more physical gold when the price is lower than higher. So much more, in fact, that August was the second highest gold importing month in history, lower only compared to March when it imported an unprecedented 223.5 tons.
But what about exports of gold, and China’s net monthly gold needs. The chart below should answer that particular question. Net of gold export to Hong Kong, China imported 110.5 tons,the second highest net number in history, and second once again, only to March’s 136.2tons. Year to date, China has imported a gross 997 tons, and a net 741 tons. Since this accounts for just two-thirds of the year in the history books, on a gross and net basis, China will likely import over 1500 gross and over 1000 net tons for all of 2013: an absolutely stunning record in gold demand by just one nation.
Finally, putting all this feverish gold accumulation in perspective, here is the latest amount of official Chinese gold holdings as per the IMF. Incidentally, this is a number that has not been “updated” since April 2009.
The unofficial China gold holdings number since 2009 based on our internal calculations: about 2500 tons higher, which would make it the world’s second largest official gold holder below the US and surpassing Germany, and rising at 100 tons per month.
The Internal Revenue Service is under mounting pressure to issue guidance clarifying how taxpayers should handle transactions involving bitcoin and other digital currencies.
In an annual report to Congress, National Taxpayer Advocate Nina E. Olson said the IRS has failed to provide clear guidelines for unregulated and fast-growing virtual money markets.
“It is the government’s responsibility to inform the public about the rules they are required to follow,” according to the report, unveiled Thursday. “The lack of clear answers to basic questions such as when and how taxpayers should report gains and losses on digital currency transactions probably encourages tax avoidance.”
Bitcoins exists only online, but they can be used to buy real-world goods and services and are accepted by a growing number of Internet retailers.
Its use is on the rise, increasing by more than 75 percent — from about 1,700 transactions per hour to more than 3,000 — in the four months between July and December 2013, the Taxpayer Advocate’s report found.
Over the same period, the market value of bitcoins in circulation spiked exponentially, from about $1.1 billion to $12.6 billion. More than 10,000 businesses reportedly accept payment in bitcoins, according to the report.
The Government Accountability Office (GAO) concluded last year that some transactions involving virtual currencies are subject to federal taxes. At the time, Congress’s investigative arm said formal rules might be premature, given the evolving nature of the market.
But the GAO said the IRS should take action to make sure people obey tax laws already on the books.
To that end, the Taxpayer Advocate report issued on Thursday calls for guidance detailing when digital currency transactions trigger losses or gains, and when they amount to capital gains.
The IRS should also explain how taxpayers should record and report the transactions, the report found.
Sen. Tom Carper (D-Del.) echoed Olson’s call for additional guidance.
“We live in an increasingly technology-dependent world, which impacts every aspect of our lives, including how we conduct commerce and pay our taxes,” said Carper, chairman of the Senate Homeland Security and Government Affairs Committee.
“Our government has to recognize this reality and adapt accordingly,” he said. “We can’t afford to be behind the curve here.”
It seems that filing cabinets, pencils, erasers and other office supplies of a few years ago are either obsolete or will be soon. Much of the estate planning of yesteryear depended on paper files kept in safe places and instructions as to where to locate other documents in Letters of Instruction or other informal (and legally nonbinding) documents. Today, much of this information is kept in computers, stored on the internet, and passwords are necessary to access much of this information.
So, even though you’ve helped your clients plan their funeral arrangements and who inherits their assets, have your clients thought about what happens to their digital and other unique assets if they are incapacitated or die?
What Are Digital Assets? Digital assets include things like social media accounts, email accounts, photo books, PayPal accounts, websites and investment accounts. But digital assets also include client files, images, documents, audio, video and similar digital files stored on your electronic devices, be they a mobile phone, laptop, tablet or computer.
And these digital assets have sentimental, historical and financial value.
Thanks to advances in technology, what once was a love letter is now a love email. A family photo album is now on Photobucket. Historically tangible items that were passed from generation to generation are now digitally stored. But, are they still being passed down from generation to generation? Well, without proper planning and organization, it will be extremely difficult for your clients’ loved ones to access these materials.
The estimated average value of a person’s digital assets—such as photo libraries, personal communication and entertainment files—is about $55,000, according to McAfee. This value is based on sentimental attachments and financial investments. The following are challenges encountered when attempting to include digital assets in an estate plan.
No Planning or Information Left for Loved Ones: Most people do not plan their estates with their digital assets in mind. In fact, digital assets are often ignored until the person becomes incapacitated or dies.
Yahoo accounts are non-transferable, which means the user cannot give anyone else access to the account. Once Yahoo learns that someone other than the user on record is accessing an account because the account holder has died, it reserves the right to terminate the account and delete all of the contents. This is what Yahoo wanted to do in 2004, when Justin Ellsworth—a 20-year-old marine—died in Iraq. His parents wanted access to his Yahoo email account and were able to do so only after getting a court order. Find more online.
Facebook will allow a family member to close a loved one’s account or have it “memorialized,” but only after providing death certificates and ensuring the rightful person is accessing the account. A “memorialized” Facebook account looks the same as a regular Facebook account except no one can log into the account. It remains in remembrance of the deceased person.
Google has been the most innovative in this area. Earlier this year it launched Inactive Account Manager (IAM), which allows account holders to instruct Google what they want done with their Google accounts. The IAM controls Gmail, Google Drive, Picasa, Web Albums, YouTube and more. Account holders can choose to have account deleted after a certain number of months of inactivity, or they can designate a trusted contact to receive their data, among other features. Find more online.
Lack of Legislation: Only a handful of states—and California is not among them—have taken steps to enact some form of legislation that addresses digital assets.
For example, Idaho amended its probate code in 2011 to expand the powers of a personal representative of an estate to include digital estate administration.
Because of the lack of legislation, the realm of digital estate planning has been largely left in the hands of estate planning attorneys. With little direction, most estate planning attorneys will agree that having a Letter of Instruction with your estate planning documents will certainly provide some guidance to the personal representative of your estate.
Along with usernames and passwords, security codes, locations and types of digital assets, a Letter of Instruction should include details of what your client would like to be done with each digital asset at time of death or incapacity.
While a Letter of Instruction is not a legally binding document, it should be reviewed by the attorney who drafts the client’s estate plans to ensure that it does not conflict with wills, trusts, etc. A modern Letter of Instruction may also include instructions as to what will happen to a person’s unique assets, such as pets and disposition of family photos (digital or otherwise). Further, the Letter of Instruction should include beneficiary contact information (addresses, phone numbers, email addresses, etc.); credit card numbers; information about military service; parent’s names; birth places; etc. (for death certificate purposes); and any specific funeral wishes.
Conclusion Modern estate planning includes the preparation of relevant legal documents (wills, trusts, powers of attorney, etc.), but also instructions as to digital assets. These instructions include providing passwords along with other vital information that will be necessary to loved ones. Care must be taken to ensure that these instructions are stored in a safe place, such as a safety deposit box, and periodically updated. Armine Bazikyan, Esq. practices law and specializes in estate planning, probate, entity formation and trust administration. Michael B. Allmon, CPA, of Michael B. Allmon & Associates LLP CPAs, is founding chair of the CalCPA Estate Planning Committee.