Five Stories That Matter in Michigan This Week – August 23, 2024

  1. Michigan to Receive $129 Million in Federal Funds for Renewable Energy 

It was recently announced that Michigan will receive $129 million in federal funds to accelerate the siting, zoning and permitting of large-scale renewable energy projects. The funds will come from the federal Inflation Reduction Act’s Climate Pollution Reduction Grant program.

Why it Matters: Michigan, like many other states, has set aggressive goals to decarbonize its electric grid over the next decade.

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  1. Strategic Alliance Announced Between Fraser Trebilcock and Cheltenham Law

Fraser Trebilcock Davis Dunlap & Cavanaugh P.C. is excited to announce a strategic alliance with Cheltenham Law, PLLC. As both firms have a strong presence in the Greater Lansing and Detroit regions, this collaboration brings together two prominent law firms seeking to strengthen their opportunities in Michigan.

Why it Matters:  Cheltenham Law offers clients the full spectrum of legal representation and guidance in matters such as divorce, custody, criminal defense, and estate planning. This arrangement allows Fraser Trebilcock to use its knowledge and expertise in the areas of family law, criminal defense, and estate planning, among others, to enhance its presence in the Greater Lansing and Detroit regions. Read more.

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  1. Fraser Trebilcock Welcomes John R. Fifarek to the Firm

Fraser Trebilcock is pleased to announce the hiring of attorney John R. Fifarek who will work primarily in the firm’s Lansing office.

Why it Matters: Mr. Fifarek is an attorney with over four decades of experience in real estate matters advising property owners, developers, buyers, sellers, commercial landlords and tenants in the development, sale, purchase and leasing of property, environmental, land use and planning matters, and in court and administrative proceedings. Learn more.

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  1. Michigan CRA Publishes July ’24 Data: Average Price Decreases

Per data released by the Cannabis Regulatory Agency (CRA), the average retail price for adult-use sale of an ounce of cannabis in July was $79.70, a decrease from $85.88 in June. This is a decrease from July 2023, where the average price was $98.65.

Why it Matters: While the prices of cannabis and cannabis-related products continue to decrease and make consumers happy, growers on the other hand are seeing profits decrease resulting in them seeking ways to halt new licenses to be granted in an effort to steady prices.

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  1. Comment Period Ends for Federal Cannabis Rescheduling

On May 20, the U.S. Department of Justice and the Drug Enforcement Administration issued a Notice of Proposed Rulemaking to initiate the proposed rescheduling of cannabis from Schedule I to Schedule II under the Controlled Substance Act. A 60-day public comment period then began, which ended in late July.

Why it Matters: Following the end of the public comment period, the DEA will review the public comments, may incorporate comments as appropriate, and then finalize the rescheduling rule. Typically, a final rule becomes effective 30 days after being published in the Federal Register.

Related Practice Groups and Professionals

John Fifarek
Energy, Utilities & Telecommunication | Sean Gallagher
Cannabis Law | Sean Gallagher

Five Stories That Matter in Michigan This Week – May 24, 2024

1.Michigan Supreme Court Endorses Third-Party Retaliation Claims

On May 10, 2024, in Miller v. Dep’t of Corrections, the Michigan Supreme Court endorsed third-party retaliation claims under the Elliot-Larsen Civil Rights Act. This decision aligns Michigan with the 2011 U.S. Supreme Court ruling that Title VII’s anti-retaliation provision covers third-party retaliation claims, even though the statute does not explicitly recognize such a theory.

Why it Matters: This ruling significantly expands the potential number of retaliation claimants to include third parties. As a result, employers in Michigan may face an increased number of retaliation claims. The exact parameters of what constitutes a sufficient connection for these claims will need to be clarified by lower courts in future cases.

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2.DEA Recommends Cannabis Rescheduling: Developments and Implications for the Industry

The industry may soon experience a major shift, as the Drug Enforcement Administration (DEA) moves to reschedule cannabis to Schedule III. This decision follows a recommendation from the Department of Health & Human Services (HHS), which is supported by scientific evidence reviewed by the FDA.

Why it Matters: The expected rescheduling of cannabis to Schedule III will have notable implications for cannabis businesses. The removal of cannabis from I.R.C. Section 280E will provide significant tax relief for state-legal cannabis operators, and the possibility of increased banking access could enhance the industry’s financial stability and growth potential. Nevertheless, cannabis companies will continue to face certain limitations stemming from the persistent federal prohibition of cannabis. Read more from your Fraser Trebilcock attorney.

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3.Michigan CRA Publishes April ’24 Data: Average Price Decreases

Per data released by the Cannabis Regulatory Agency (CRA), the average retail price for adult-use sale of an ounce of cannabis in April was $86.61, a decrease from $90.70 in March. This is a decrease from April 2023, where the average price was $87.76.

Why it Matters: While the prices of cannabis and cannabis-related products continue to decrease and make consumers happy, growers on the other hand are seeing profits decrease resulting in them seeking ways to halt new licenses to be granted in an effort to steady prices.

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4.June Business Education Series

Most entrepreneurs and business leaders face similar frustrations – employee conflicts, lack of sales, profit woes and inadequate growth. Decisions never seem to get made, or, once made, they fail to be properly implemented. There is a solution, and it is not complicated or theoretical.

Why it Matters: The Entrepreneurial Operating System (EOS) is a practical method for achieving the business success you have always envisioned. More than 100,000 companies have discovered what EOS can do. Learn more and to register.

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5.Fraser Trebilcock’s Growth Continues with Grand Rapids Office Relocation

Fraser Trebilcock Davis Dunlap & Cavanaugh, P.C., one of Michigan’s well established law firms with a history of providing excellent legal services, is pleased to announce it has relocated its Grand Rapids office. This move is a testament to the firm’s continued ability in taking a proactive approach in providing comprehensive legal solutions across a wide range of practice areas, helping clients capitalize on potential opportunities.

Why it Matters: In late April, Fraser Trebilcock’s Grand Rapids office moved to 300 Ottawa NW Suite 810, located within walking distance of all downtown restaurants, entertainment venues, museums, municipal buildings, and the Medical Mile. The office offers the full range of the firm’s legal services, including litigation, business, tax, real estate, trusts and estates, and other areas of specialty. Clients can expect the same level of professionalism and personalized attention that Fraser Trebilcock is known for. Read more.

Related Practice Groups and Professionals

Labor, Employment & Civil Rights | David Houston

Cannabis Law | Sean Gallagher

DEA Recommends Cannabis Rescheduling: Developments and Implications for the Industry

The state-licensed cannabis industry has been operating under significant constraints due to cannabis’s classification as a Schedule I substance under the federal Controlled Substances Act of 1970. This categorization, which groups cannabis with drugs like heroin and LSD, has faced growing criticism as an increasing number of states legalize cannabis for medical and recreational purposes. However, the industry may soon experience a major shift, as the Drug Enforcement Administration (DEA) moves to reschedule cannabis to Schedule III. This decision follows a recommendation from the Department of Health & Human Services (HHS), which is supported by scientific evidence reviewed by the FDA.

It’s important to note that the rescheduling process will take time before it officially takes effect. After the White House reviews the DEA proposal, a proposed rule will be published in the Federal Register. A public-comment period will follow before the proposed rule can become final. The process will almost certainly give rise to litigation and it remains unclear how long the process will take.

Impact on Taxation: Removal from Section 280E

One of the most significant effects of this rescheduling would be the removal of cannabis from the purview of I.R.C. Section 280E. This tax code provision has been a substantial obstacle for state-licensed cannabis businesses, preventing them from deducting many ordinary business expenses when calculating their taxable income. Under 280E, cannabis companies can only deduct the Cost of Goods Sold, leading to considerably higher tax burdens compared to businesses in other industries. With the rescheduling, state-licensed cannabis businesses would be able to deduct ordinary business expenses, creating a more equitable playing field and enabling them to allocate more of their revenues toward growth and expansion.

Challenges in Banking Access

Access to banking services has been another long-standing challenge for the state-licensed cannabis industry due to the federal prohibition on cannabis. Many banks have avoided working with cannabis businesses, concerned about potential legal and regulatory consequences. While the rescheduling to Schedule III might encourage more risk-tolerant banks to engage with the industry, many will likely remain hesitant as long as cannabis remains federally illegal. To comprehensively address these banking hurdles, federal legislation like the SAFER Banking Act is necessary. This act would provide protections for federally-regulated financial institutions such as banks that serve the cannabis industry in states where it is legal. The rescheduling could potentially increase legislative support for such measures, which would support the cannabis industry’s long-term financial stability and growth.

Limitations on Legal Rights and Remedies

Even with the anticipated rescheduling, state-licensed cannabis businesses will continue to encounter restrictions on their federal legal rights and remedies. Due to the ongoing federal prohibition on cannabis, state-sanctioned businesses in the industry will still face difficulties in establishing and protecting intellectual property rights, such as trademarks. Furthermore, access to bankruptcy courts will likely remain restricted, although some courts have recently demonstrated a willingness to allow cannabis-related businesses that are not directly involved in cannabis operations to utilize bankruptcy proceedings.

Conclusion

The expected rescheduling of cannabis to Schedule III will have notable implications for state-sanctioned cannabis businesses. The removal of cannabis from I.R.C. Section 280E will provide significant tax relief for state-licensed cannabis operators, and the possibility of increased banking access could enhance the industry’s financial stability and growth potential. Nevertheless, cannabis companies will continue to face certain limitations stemming from the persistent federal prohibition of cannabis. As the legal landscape evolves, it is essential for cannabis businesses to remain informed about industry developments and to collaborate with legal professionals who can offer guidance and support in navigating the shifting regulatory environment.

If you have any questions or require assistance, please contact Sean P. Gallagher.

This alert serves as a general summary and does not constitute legal guidance. Please contact us with any specific questions.


Fraser Trebilcock attorney Sean P. GallagherSean P. Gallagher is an attorney at Fraser Trebilcock with experience in the highly regulated cannabis industry, working with local and state officials to advance client interests and to help mitigate risks involved and increase opportunities. You can reach him at 517.377.0820 or at sgallagher@fraserlawfirm.com.

Five Stories That Matter in Michigan This Week – May 17, 2024

  1. Michigan Legislature Considers Tax Breaks for Data Center Development

With the emergence of artificial intelligence, and its massive computing needs, data center development has exploded across the country. Michigan may soon be making a push for more data center development with a package of bills (House bills 4905-4906 and Senate bills 237-238) which, if passed, would expand sales- and use-tax exemptions for data center equipment.

Why it Matters: The economic growth potential from data center development is significant. According to McKinsey & Company,  US data center demand is forecast to grow and compound by over 10 percent a year until 2030.

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  1. DEA Recommends Cannabis Rescheduling: Developments and Implications for the Industry

The industry may soon experience a major shift, as the Drug Enforcement Administration (DEA) moves to reschedule cannabis to Schedule III. This decision follows a recommendation from the Department of Health & Human Services (HHS), which is supported by scientific evidence reviewed by the FDA.

Why it Matters: The expected rescheduling of cannabis to Schedule III will have notable implications for cannabis businesses. The removal of cannabis from I.R.C. Section 280E will provide significant tax relief for state-legal cannabis operators, and the possibility of increased banking access could enhance the industry’s financial stability and growth potential. Nevertheless, cannabis companies will continue to face certain limitations stemming from the persistent federal prohibition of cannabis.

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  1. Michigan Cannabis Exceeds $278 Million in April ‘24

Cannabis sales surpassed $278 million in April, via the monthly report from the Michigan Cannabis Regulatory Agency. Michigan adult-use sales came in at $276,685,182.93, while medical sales came in at $1,861,261.02, totaling $278,546,443.95.

Why it Matters: Marijuana sales remain strong in Michigan, particularly for recreational use. However, there still are significant concerns about profitability and market oversaturation that the industry is contending with.

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  1. June Business Education Series

Most entrepreneurs and business leaders face similar frustrations – employee conflicts, lack of sales, profit woes and inadequate growth. Decisions never seem to get made, or, once made, they fail to be properly implemented. There is a solution, and it is not complicated or theoretical.

Why it Matters: The Entrepreneurial Operating System (EOS) is a practical method for achieving the business success you have always envisioned. More than 100,000 companies have discovered what EOS can do. Learn more and to register.

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  1. Fraser Trebilcock’s Growth Continues With Grand Rapids Office Relocation

Fraser Trebilcock Davis Dunlap & Cavanaugh, P.C., one of Michigan’s well established law firms with a history of providing excellent legal services, is pleased to announce it has relocated its Grand Rapids office. This move is a testament to the firm’s continued ability in taking a proactive approach in providing comprehensive legal solutions across a wide range of practice areas, helping clients capitalize on potential opportunities.

Why it Matters: In late April, Fraser Trebilcock’s Grand Rapids office moved to 300 Ottawa NW Suite 810, located within walking distance of all downtown restaurants, entertainment venues, museums, municipal buildings, and the Medical Mile. The office offers the full range of the firm’s legal services, including litigation, business, tax, real estate, trusts and estates, and other areas of specialty. Clients can expect the same level of professionalism and personalized attention that Fraser Trebilcock is known for. Read more.

Related Practice Groups and Professionals

Cannabis Law | Sean Gallagher

Five Stories That Matter in Michigan This Week – May 3, 2024

  1. Michigan CRA Plans to Open State-Run Testing Laboratory

Crain’s Detroit Business reported this week that Michigan’s Cannabis Regulatory Agency plans to open a new testing lab by January of next year in order to promote and enforce safety standards. While funds have been allocated for the establishment and operation of a testing lab, CRA regulators reportedly are asking Michigan legislators to pass a bill that would give the agency more explicit authority to take this action.

Why it Matters: Having an independent, state-run lab would, according to regulators, help establish trust in products and root out potential corruption in the legal cannabis industry.

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  1. Fraser Trebilcock Attorney Robert D. Burgee Recognized as a ‘Michigan Go To Lawyer’ for Business Transactions by Michigan Lawyers Weekly

Fraser Trebilcock attorney Robert D. Burgee has been recognized by Michigan Lawyers Weekly as a ‘Michigan Go To Lawyer’ in 2024 for business transactions. “I am honored to have been recognized by Michigan Lawyers Weekly as a ‘Michigan Go To Lawyer’ for business transactions,” said Bob.

Why it Matters: Mr. Burgee serves as Co-Chair of the firm’s Business & Tax Department and Chair of the firm’s Employee Benefits Department. He has over a decade of experience assisting business clients and entrepreneurs with startups, acquisitions, succession, and growth planning, as well as more general legal guidance, including navigating civil matters, regulatory compliance, employee benefits, and human relations. Read more.

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  1. June Business Education Series

Most entrepreneurs and business leaders face similar frustrations – employee conflicts, lack of sales, profit woes and inadequate growth. Decisions never seem to get made, or, once made, they fail to be properly implemented. There is a solution, and it is not complicated or theoretical.

Why it Matters: The Entrepreneurial Operating System (EOS) is a practical method for achieving the business success you have always envisioned. More than 100,000 companies have discovered what EOS can do. Learn more and to register.

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  1. Marijuana to be Rescheduled by DEA

It was announced this week that the DEA is planning to reclassify marijuana from a Schedule I drug to a Schedule III drug, following a recommendation from the Health and Human Services Department.

Why it Matters: While this move is still subject for review by the White House Office of Management and Budget, this clears a significant regulatory hurdle. Marijuana will still not be legal on the federal level for recreational use following this reclassification.

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  1. FTC Issues Final Rule Banning Non-Compete Agreements Nationwide

On April 23, 2024, in a 3-2 vote, the Federal Trade Commission (FTC) issued a final rule banning non-compete clauses in most employment agreements nationwide. The rule is scheduled to go into effect 120 days after it is published in the Federal Register.

Why it Matters: Under the final rule, “Non-compete clause” is defined as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from: (i) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (ii) operating a business in the United States after the conclusion of the employment that includes the term or condition.” Read more from your Fraser Trebilcock attorneys.

Related Practice Groups and Professionals

Cannabis Law | Sean Gallagher
Business & Tax | Robert Burgee
Labor, Employment & Civil Rights | David Houston
Business & Tax | Andrew Martin