CBD Hemp Oil 2018 Farm Bill – (A Growers PARADISE?)🌴🤑

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– Good morning, good
afternoon, and good evening. My name is Aaron Soffer, I’m
an associate attorney here with Anderson Business Advisors, and today I’m going to
talk to you a little bit about CBD and the 2018 Farm Bill. Now, before I get into anything
substantive, of course, being an attorney, I got
to give you my disclaimer. Nothing’s intended to be legal advice specific for your situation. So, when it comes to
your specific situation, I ask that you give us a call, arrange some sort of consultation, and we will take a look
at your unique facts and circumstances and get you a solution that fits your needs. Now, as the title implies, CBD. Well, what is that? To those that are
uninformed, have no idea, maybe you’ve heard something
floating out on the internet about how cool and new
CBD is, how amazing it is. Well, let’s go over exactly
what CBD consists of. CBD stands for cannabidiol, okay. And that is a chemical compound derived from the cannabis plant. Yes, that same cannabis
plant that they were smoking back in Woodstock and now over 33 states in the United States have legislation allowing for some sort of marijuana usage. That same plant. Now, for those of you
that weren’t familiar with my description, there’s a nice little picture of it for you,
that is the cannabis plant. Now, when we’re going to be discussing, there’s many parts of the cannabis plant. So, the genus is cannabis
up here at the top. There’s two strains, sativa and indica. Today we are going to be talking about this one specific strain
down here, called hemp. The hemp strain has zero,
or close to zero, THC in it. THC is what gets you high. Hemp, or industrial hemp, contains, again, very little THC and high concentrations of CBD, the cannabidiol. So, with hemp derived CBD, as I mentioned, not going to get you high and it’s known to relieve
pain, anxiety, and nausea. Now, mind you, these statements
have not been filtered or studied by the FDA, although the FDA, as we’ll get into in a few minutes, is in charge, currently, of overseeing CBD and industrial hemp. There already are some FDA
approved drugs out there, one of them being Epidiolex,
that already contains CBD. So, as slow as the government
moves in everything, in every aspect that they do, the legislation is slowly
starting to catch up. Now, mind you, for those of you, you may live in a jurisdiction
where your state allows for the consumption of marijuana, again, marijuana being a
part of the cannabis plant. Still, federal legislation’s
lacking on the marijuana side but at least on the hemp
side and hemp derived CBD, the legislation is slowly
starting to catch up to the actual practical uses
of that part of the plant. Some of the applications of
CBD and CBD infused products, you’ve got candies,
coffees, creams, lubricants, the list goes on. Just do a simple Google search
for CBD infused products and the list is numerous. Now, the cannabis plant, in general, it’s been around for quite some time. Even as far back as in the mid 1500s, King Henry required that a portion of every single plantation,
at least a quarter acre, must be set aside for cannabis use, for cannabis production and cultivation. And it wasn’t until the 1930s
where the Marijuana Tax Act, that was the first federal legislation that took aim at the use of marijuana. And then in the 1970s you had
the Controlled Substances Act, which really put the breaks on any usage of the cannabis plant. Now, I mentioned the
Controlled Substances Act, that for the last, almost, 50 years has been what has been
prohibiting the use of hemp. Remember, hemp is just one
strain of the cannabis plant. Hemp, again, contains little to no THC, hemp will not get you high. There have been practical uses of hemp, making rope, soap, clothing, you name it, hemp has been used to make those products. Now, as it relates to the
Controlled Substances Act, there are five schedules and Schedule I being the most restrictive. Schedule I drugs listed on
the Controlled Substances Act have, according to federal legislation, have little to no medical use, there’s a lack of accepted
safety of the use of the drug, and there’s a high potential for abuse. Again, that is what federal law says about Schedule I drugs. Mind you, marijuana is still
listed as a Schedule I drug, as is cocaine, ectasy, and various other hardcore substances. So, by virtue of marijuana, or prior to, the federal 2018 Farm Bill, hemp was lumped in with
marijuana on that Schedule I of the Controlled Substances Act. So, in conjunction with
it being listed on that, again, those, even, that were engaged in the production of hemp,
they had severe restrictions on what they were able to do
with this vary versatile plant. Now, as it relates to the 2018 Farm Bill, this is the actual text of the Farm Bill, the legal name is actually the Agricultural Improvement Act of 2018. And then the very last
section of the 2018 Farm Bill is the one that, essentially, removes hemp from being lumped together with marijuana under the Controlled Substances Act. So, what does that actually
mean in a practical sense? So, if hemp derives CBD as
producing a matter consistent with how it’s laid out in the
bill, then it will be legal. Mind you, how I stated that. If the production of
CBD in hemp in general is in conformance with how
it’s laid out in the bill, then it’s legal, it’s not
just a blanket statement saying, oh, now it’s a free-for-all, all hemp, all CBD is now legal. Again, it must be produced
in conformance with the bill. And the bill stipulates that for a state to establish its own program,
it must submit a plan through the Department
of Agriculture, the USDA. Now, for those states
that wish to not set forth their own plan for how
to legislate and regulate the production of hemp in their state, the USDA will set forth
their own regulations and, so, for example, let’s say you
live in a state that, again, doesn’t set forth their
state specific regulations, you can apply for a
federal license to then be able to grow hemp in
accordance with federal law. Now, as I mentioned,
33 states already have some sort of marijuana legislation. That legislation is going to
be considered holy separate from this legislation as set
forth in the 2018 Farm Bill. Again, the USDA, they have
yet to release the regulations for how to go about actually
getting a license through them, but hopefully in the coming
months it will be released and those that are interested
in growing their own hemp, and thereby CBD, can do so
under federal regulation. Now, hemp CBD, it’s a vast, vast segment of the cannabis industry. Mind you, marijuana’s going
to gobble up the majority of the growth in that area. However, that is not to say that there is not growth potential with CBD and hemp. This is a very conservative
estimate set forth on this chart stating that it’s going to be
a 1.9 billion dollar industry by the year 2022. Again, conservative estimate,
I’ve read other estimates that’s going to put the hemp
market, industrial hemp market, closer to 22 billion dollars by 2022. Now, for those of you that are intrigued by the growth potential with this plant, along with the plant with
hemp being de-scheduled, taken off that controlled substances list as a Schedule I drug. Now those of you who
were previously precluded from taking your tax deductions in light of internal revenue
code provision 280(e), which prescribed that
expenditures in connection with the illegal sale of drugs, and I’ll go ahead and
read that for those of you who the text might be a little small for your eyes of the screen. It states, no deduction
or credit shall be allowed for any amount paid or incurred
during the taxable year in carrying on the trader business if such trader business
consists of trafficking in controlled substances. Okay, so, like I just mentioned, previously you had hemp,
which includes CBD, listed on your Schedule I
narcotics substance list, so, therefore, you weren’t
able to take ordinary and necessary business
deductions in your business. Now, in light of the
fact that the Farm Bill has now taken hemp off of the
Schedule I substance list, now you will, in fact,
be able to take all those ordinary and necessary
business deductions. So, now that hemp has been
taken off that Schedule I list, DEA is still going to keep
a little bit of oversight over the cultivation and
production of the hemp plant. However, most of the
regulation is now going to be delegated to the Food
and Drug Administration. The Food and Drug Administration, in conjunction with the US
Department of Agriculture, the USDA is going to oversee more of the industrial applications of hemp. So you’ve got the Food
and Drug Administration overseeing more of the
consumption, human consumption, or human and livestock
consumption, of hemp and, therefore, hemp derived CBD. Whereas the USDA will,
theoretically, just maintain oversight over the
industrial uses of the plant. And, again, this is all speculation. We only have some certain
statements that have been given by the commissioner of the USDA and the other federal
agencies in light of the fact that the 2018 Farm Bill
is only about a month old. So, with the FDA oversight
over CBD and hemp, it still bares to keep in mind that simply because
CBD is now not illegal, that doesn’t necessarily
mean that all forms of CBD are, in fact, legal. So, under the Food,
Drug and Cosmetics Act, it stipulates that anytime you introduce, into interstate commerce, any food, and included in food is drink, to which has been added a
substance, so, in this case, CBD, which is an active
ingredient in a drug product. So we already know that
the FDA’s overseeing several prescription
drugs that contain CBD, so CBD definitely falls
under that definition. Or a drug which has substantial
clinical investigations, have been instituted and
for which the existence of such investigations
has been made public. So, essentially, what this is saying is if a specific drug falls
under the purvey of the FDA, it is going to have to adhere
to all of the regulations that are set forth by the
FDA and its commissioner. Now, like I said at the beginning, if you were to Google
CBD infused products, you’re going to see a vast
list of all different types of creams, sodas, pills,
tinctures, you name it, that are going to be infused
with the actual substance, CBD, which has that antiinflammatory,
antianxiety properties. Now, simply because they
are listed for sale, that doesn’t necessarily
mean that they are, in fact, 100% legal under federal law. Now, the FDA commissioner, Scott Gottlieb, has made a comment that they realize there is tremendous
public outcry and interest in getting these types of products legalized in an expedient manner. And, so, how the FDA
has been, in large part, administering and overseeing
hemp and CBD derived products is that, so long as the product itself is not touting any medicinal benefits, in large part, the FDA’s
going to look away. And, again, in doing so, this is evidence of the larger sentiment at the FDA, that they are in lockstep, more or less, with consumers at large, in allowing for the widespread use
of CBD infused products. So, in summary, hemp is not marijuana. Hemp has been de-scheduled from the Controlled Substances Act. And, therefore, allows
for those tax benefits, those tax deductions, which
I previously mentioned. And, also very importantly,
hemp producers, hemp cultivators, can now get federal crop insurance as well, which they’re previously
precluded from doing since, again, before hemp was
lumped together with marijuana under the Schedule I of the
Controlled Substances Act. And then hemp derived CBD
infused food is still illegal. Now, for those of you that are watching and are thinking, all
right, well, you know, the tremendous potential,
you said on the low end it’s going to be a 1.9 billion
dollar industry by 2022, on the high end it’s going to be upwards of a 20 billion dollar industry by 2022, how do I get involved? I want to go grow my own hemp now. So, you can do so, however,
we have to first wait for the USDA to release the regulations and the licensing
procedures on how to do so from a federal standpoint. Now, once they do, what you’ll want to do is take acquisition, take
ownership, take title, to the actual real
estate where you’re going to be growing the hemp in its own LLC. And, again, for those of you that are already clients of Anderson, this whole structure will
sound a little familiar, where we’re going to use multiple entities to bifurcate the liability
that you may accrue in engaging in any ongoing business. So, on this end, you’ve
got the property owning LLC that is going to take title
to the property itself. We’ve got a little farm house right here, and then these are
crops, this is our hemp. I’m quite impressed with
my art skills. (laughs) So, then, again, you’re
going to take title to that property in its own LLC, and then you’re going to have another LLC that’s going to act as
the active business. Now, that active business side, that’s where you’re going
to hire your employees, potentially have your store front. So, here’s your commercial
building with your store front, and, as I mentioned,
you’ll hire your employees through here and, so, ideally, this entity will be taxed as an S corporation. What that will allow you to do is take advantage of some
preferential tax treatment and it’ll save you 15.3%
self-employment tax on a good portion of the income that you do generate
from the active business. And, now, how these two businesses will act in conjunction with one another. They’ll both be owned
by you, the tax payer, and there will be a lease agreement that’ll be executed
between your two entities. Again, this is so you have all
your documentation in place so as to solidify the fact that these are two separate business and, therefore, if you
get a law suit over here, it’s going to act as a barrier right here. And this law suit will
not be able to penetrate the LLC and, therefore, the
real property holding of you, the ultimate beneficial owner down here. Now, I realize what I’ve said might be confusing to some of you. For those of you that want
to talk about this strategy, or any other strategy similarly situated, the number’s up on the screen and you can reach us at the
web address at the bottom. Again, my name is Aaron Soffer, Associate Attorney with
Anderson Business Advisors, and I look forward to
working with you, thank you.

8 COMMENTS

  1. Without state legislative approval,  farmers still could plant hemp under federal regulations. Supremacy Clause of the United States Constitution.  No lawyer needed ! Thank you Mr. President   {Donald J Trump}  Recognizing the need for"Power to the People" the 2019 Farm Bill fits that definition.

  2. So does this mean that the sale of straight hemp flower is legal?

    That is to say the buds of the plant can be sold with no indication of what they are to be used for?

    aka someone could smoke it, eat it, bang it, melt it down into a pencil and use it to draw, use it as nose plugs, etc. what ever they want to do with it and it would be legal?

    Like say I have a bunch of farmers growing hemp flower and I buy it from them then open a store front.

    Then sell the flower directly to the public as is with no claims of how to consume or use it or what its affects either negative or positive could be.

    Then if asked how to consume it I just tell them they can do as they please with it but I can't recommend any particular way to use it and it's simply being sold as.

    Then it would be legal so long as the hemp growers are following state guidelines.

    Then as an added measure I could provide law enforcement information in packaging materials when distributing the flower regarding the source of my hemp flower supply with certified lab testing used by the farmers to ensure less than .3% THC is in it and it is indeed classified as hemp

    and after all that it would all be legal?

  3. The Academy of Cannabis Science, on April 27th we will have two MMJ workshops in Las Vegas, NV. Would you like more information?

  4. So pretty much its still illegal. Since it has to be produed consistent with guideline but there are no guidelines. What was the point of the 2018 legalization? It changed absolutely nothing as far as right now is concerned.

  5. can I sell hemp derived CBD tinctures, topicals, capsules, or edibles in Virginia as long as it maintains less than .3% THC if I already have fully legal hemp farmland in Oregon?

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