State vs. Federal: marijuana legislation and its effect on taxes

Marijuana is becoming increasingly popular and accepted within our society; so much so that certain states have legalized it for medical or recreational use, despite marijuana remaining illegal with regards to the federal government. This has lead, and will continue to lead, to complicated and uncertain tax scenarios for the businesses that produce and sell marijuana. Many problems stem from the federal government being unable to recognize or associate with businesses that deal with marijuana. This affects these otherwise legitimate businesses by disallowing the use of federally insured banks as well as taking away the ability to seek federal bankruptcy protection. An inability to operate as a normal business may lead marijuana businesses to explore other tax planning solutions such as organizing as a social welfare organization. At worst, they may be driven back underground. Additionally, it may be professionally risky for CPAs to perform services to these businesses for fear of violating ethical standards. These smaller problems inevitably become one big problem, highlighting the power struggle between state and federal governments. Should the federal government have the ability to make these decisions for all of the states or should each state and each county of each state be allowed to regulate marijuana on their own? At the heart of this issue is its time sensitive nature. As potential government power changes, the future of marijuana businesses and their associates is unfairly unclear. In order to solve these problems, the federal government has three choices; each with their own benefits and costs. They can legalize marijuana at a federal level, completely outlaw marijuana and begin enforcing laws against known state dispensaries, or they can change certain areas of the tax codes and other select laws to offer clear directions for businesses and assurances of limited liability to those with whom they work