U.S. Attorney General Jeff Sessions. Credit: Diego M. Radzinschi / ALM

The U.S. Justice Department, defending an Internal Revenue Service summons targeting a Colorado marijuana dispensary, said the recent rescission of federal marijuana enforcement policy doesn't ratchet up the risk of cooperating with a tax audit.

Rejecting the dispensary's demand for immunity, Charles Butler, a trial attorney in the DOJ's tax division in Washington, said in court papers filed on Wednesday that the so-called Cole memo—named after Obama-era Deputy Attorney General James Cole—never hindered the IRS from enforcing tax laws.

“Congress, not the Justice Department, sets policy directives,” Butler wrote, “and in any event the Justice Department could 'displace these memoranda at any time.'”

Butler added: “The department's action, however, does not mean that petitioners now face an elevated danger of self-incrimination by cooperating with the IRS audits.”

The IRS, fighting in Colorado federal district court, is seeking access to state-held records as part of its investigation into Standing Akimbo's 2014 and 2015 tax returns. The owners of the dispensary have asked the court to block the summonses the tax agency has issued to Colorado's Marijuana Enforcement Division for data from its marijuana tracking system.

Standing Akimbo's owners contend tax agents could share that information with federal prosecutors, putting them at risk of drug charges. That threat was compounded last month, according to the dispensary's attorney, when U.S. Attorney General Jeff Sessions revoked Obama-era guidance shielding certain state-legal marijuana operations from federal scrutiny.

“If absolute immunity is not granted to the taxpayer, there will be a full claim of Fifth Amendment privilege,” James Thorburn of Thorburn Walker, said in a letter to the IRS last month.

Thorburn could not immediately be reached for comment Thursday.

In Wednesday's filing, Butler said the dispensary owners had cited no legal basis for requiring the IRS to grant immunity in these circumstances. The IRS is limited by statute in what it can share with prosecutors, he said. If law enforcement agents want to pursue federal drug charges against Standing Akimbo, they could simply look for evidence on the dispensary's website or check out the store's “shelves or displays stocked full of marijuana,” he said.

“It is unlikely, therefore, that any law enforcement authority would need the information the IRS summonses seek to prove that petitioners are violating federal drug laws,” Butler wrote.

Thorburn Walker represents a number of dispensaries challenging IRS authority to pursue state-legal marijuana businesses. The Green Solution Retail Inc. petitioned the U.S. Supreme Court in October to consider whether the IRS has any role in determining whether a taxpayer has violated anti-drug laws. The U.S. solicitor general's office has not yet responded to the petition.

The Justice Department's court filing is posted below:

Read more: