Sep 08 2017 . 18 min read
Elevating the Conversation with Neal Levine, Senior Vice President, Government Affairs, LivWell Enlightened Health, and New Federalist Fund Chairman
Elevating the Conversation with Neal Levine, Senior Vice President, Government Affairs, LivWell Enlightened Health, and New Federalist Fund Chairman
Neal Levine’s philosophy for life has always been focused on the journey, not the destination. “If you try to do the right thing, everything else will take care of itself. I was going to be a rock star and then work in third-party politics so it’s not like I had a career path really well planned out,” Levine wryly notes of his foray into the cannabis industry. “I was trying to do the right thing and it led me to the place I was supposed to be. It was about being on the adventure.”
Way back when, when I was in my early twenties I was going to be a rock star, turned out I wasn’t. I ended up going to Minnesota for a record deal, I didn’t get the record deal but I did get caught up in Jesse Ventura’s campaign for governor. After Jesse was elected, I was in my early 20s, I was elected as the chair of the 5th Congressional District for his party. So, I am this 24-year-old kid on the state executive committee of the third party that controls the governor’s mansion. From there I started to get hired to work on campaigns and at the end of 2002 I was hired by the Marijuana Policy Project (MPP) to run all their statewide and local ballot initiatives; and, in that role, I had the honor of leading the teams to pass a bunch of these laws. I left MPP in 2009 to work at R&R Partners, from there I went into private practice and worked on ballot initiative stuff and had some cannabis clients I was working with on regulatory and ballot initiative stuff. I was part of the lobbying that helped get the Nevada dispensary laws through the Nevada Legislature in 2013, I ran the signature drive that qualified the legalization measure for the ballot in 2016, I ran that signature drive in 2014. And I ran the Alaska campaign in 2014 and did a bunch of cannabis stuff. Then being one of the national experts in the field, I formally moved into the industry with LivWell.
It took about eight months on the job before I became completely dogmatic about and radicalized on the issue. I can tell you the exact moment I became radicalized. In 2004, I was overseeing the state lobbying campaign that would pass the first medical marijuana law in Vermont. I was filming a TV ad with a multiple sclerosis (MS) patient. This MS patient’s wife had passed away from cancer, he had two teenage sons and the state had taken away his sons because he was unable to care for them because his MS was so severe. Through the recommendation of a friend he started taking cannabis illegally and was able to wean himself off almost all of his prescription medication and was able to get his kids back. So, I am filming this gentleman for an ad to support our lobbying efforts at the state capital and while I am filming him, I am thinking I am going to put this on TV and he could lose his kids, and it’s really starting to get to me. During a break in the filming he leans in and he asks me, ‘Do you know why I am doing this?’. I said, ‘I didn’t,’ and he said, ‘cause it’s the right to do.’ And he says, ‘I want you to promise me one thing. I want you to promise me that when you go back to Washington, D.C. and you are back in your office, you are going to work nonstop to get this law passed because, yes, by doing this I could lose my kids. This isn’t so much for me as for the people who come after me. So, if you make me that promise I will sign any release that you have.’ With tears running down my face, I promised on the spot and I did exactly what I promised I would. A couple of months later we passed the first medical marijuana law in the state of Vermont in 2004. That was the exact moment it went from being a job to me to being about something that became my life’s work that I care passionately and deeply about.
It didn’t really exist. When I started at MMP (Marijuana Policy Project) in 2003 there were eight medically legal states and the only industry that really existed was the unregulated industry in California, which, at the time, was the subject of active DEA raids. It was nothing like the industry that exists today. Since I started doing this work, the laws have become more and more defined and created an industry with real regulations.
Demographics and exposure. If you take a look at any polling on the issue, the Greatest Generation is really opposed to cannabis, Baby Boomers are a coinflip, Gen Exers are in favor, and Millennials are really in favor. As Baby Boomers become retirees and Gen Exers become middle-aged, you are just seeing the polling move with the demographics. I think that’s a large part of it. The other part of it is exposure. The Greatest Generation was not exposed to cannabis, whereas Millennials have grown up in a society where more than half the states have regulated cannabis and have been without prohibition in some form.
As an industry, it all comes down to the fact that we are illegal under federal law. Coming out of the election with the names that were being floated for Attorney General and as a one-party government, we realized that we could be entering a potentially precarious time as an industry. The other thing that we realized was we didn’t see a lot of folks who were out there trying to engage these folks in a positive constructive dialogue. Because they were saying things about us that seemed to be based on misinformation or old tropes, it just became very apparent very fast that they didn’t know who we were and what we were doing as an industry. There was a real need for us to engage in a positive constructive dialogue along the lines of federalism. We are not asking for any special treatment, we are just asking to be treated like any other business in any other industry, that’s all we are asking for. Don’t close us down, let us have an equitable tax structure like any other business in the country and let us use a bank -- those are the lobbying principles that NFF is working toward. Because it is such an issue and such a strain on the industry, we could be providing so many more jobs and so many more economic benefits if we were treated like any other industry. That is why we formed NFF to work on those issues and tell our story and educate people because so many people are unaware of the regulatory environment we operate in and the enormous tax burden that we carry.
To engage in a constructive dialogue. As an industry, NFF is not weighing in on federal legalization one way or another. There’s lots of great organizations out there working on that so we have no formal position on federal legalization. We are focused on three buckets: allowing us to continue to operate, trying to get an equitable tax structure by reforming 280E, and allowing us to use a bank, which is really a public safety thing. It doesn’t serve anybody’s interest to have that much cash on the street and it serves the government’s interest that they can track the money electronically. We are a very odd industry in that we are going to government wanting to be taxed and regulated. We aren’t asking for special favors, we just want to be treated like everybody else.
Every day at LivWell we try to be the industry that we want to be a part of. That’s our core guiding philosophy as a company culture. Everything we do from our political engagement, to reinvesting in our communities, to paying our employees several dollars above minimum wage for entry level positions, to paying all their healthcare, to having a 401K that is three percent andt vests instantly, to being innovative and cutting edge in the kind of products we offer, to engaging with our regulators, to being at the forefront for safety features and pushing those sorts of things. As an industry, overall, we don’t lobby for any sort of competitive advantage or for any sort of regs, we lobby for a clean, level playing field for all. On the federal side, we are lobbying to be treated like any other industry. We would be incredibly hypocritical to lobby locally to get a leg up within our own industry. In everything we do and everything we say, we try to advance the industry as part of the culture of our company.
Cannabis is something that is incredibly popular and almost all of our customers are coming from the criminal markets. As far as cannabis use in this country, I think even we were surprised at how prevalent it actually is, and underreported. Yes, we absolutely want to disrupt the cartels. We think that is better for our community. We think it is better for our children if the folks who are selling cannabis are regulated or licensed, go through background checks, request ID, are under the age of 21, and that there is a camera on every square inch of every property that we own and operate. We feel that is how cannabis should be grown, licensed, and sold in this country. We absolutely want to disrupt the criminal markets. We pay taxes. Whereas if you go after the criminal market, it costs taxes to prosecute. And we self-regulate and every state system makes you go through a background check before you are even allowed to work in the industry and you get rebadged every two years in Colorado. It’s not just criminal background history that they are looking at. They want to make sure you paid your taxes, and are up to date on your child support. We are an incredibly transparent industry and feel this is how cannabis should be sold in this country and the upshot is we are able to provide all of these jobs and all of this economic benefit and increase public safety that comes with disrupting the cartels, it’s really exciting that we get to be part of that.
If we can all agree on one thing -- cannabis is not going to be eradicated off the face of this earth. If that’s true than someone is going to sell it. Cannabis is popular. It’s proven to be popular in criminal markets and regulated markets. Almost all of our customers come from the criminal market. We are not creating new cannabis consumers, we are taking this out of the dark and into the light. If we can agree that it’s not going to be eradicated off the face of the earth and someone is going to sell it, now you have a binary choice. It’s going to be sold by criminals or by a regular transparent business. You can know who we are because we go through safe background checks, know where we are, know who we are selling it to, and what’s in our product. Or you can have a product that you don’t know who is selling it, where they are, who they are selling it to, or what’s in it. So, we feel that regulation is a much better way as a society to deal with cannabis, and we feel that is going to be proven repeatedly in a more regulated market.
Based on his public comments, I think that the Attorney General certainly has a lot of misperceptions about who we are and what we do as an industry. We are just trying to engage in a dialogue to show him who we actually are. We think we are being somewhat impactful on that but I do not have a crystal ball to tell you what he may or may not do. We have heard they are working on revising the Cole memo. He hasn’t done that yet so I am guessing he is waiting for what comes out of the task force he has put together.
Under 280E, there is this stubborn misperception out there that we are marijuana moguls. I can tell you as one of the largest companies in the space, we have the honor of collecting the most money and handing it to the IRS. We are not allowed to take any of the standard business deductions outside of the true cost of goods. A lot of people don’t understand this. What that means in plain English is we have an effective tax burden that is just under 80 percent. There are companies I have seen with a tax burden of around 90 percent. Not only that, but if you are audited by the IRS and they disagree with what you call a true cost of goods, there is a 20 percent penalty on top of that. The story behind 280E is fascinating, people don’t realize the US Supreme Court in 1969 unanimously ruled that cannabis prohibition was unconstitutional. So, the Nixon Administration then responded with a constitutionally defensible prohibition scheme which is the Controlled Substances Act of 1970 which created the schedules. Nixon had a problem, there was no scientific basis to put marijuana in Schedule 1 so he formed a handpicked commission to give him the proof that he needed to put marijuana into Schedule 1. Nixon forms the Shafer Commission and comes back in a couple of years and says marijuana shouldn’t be legal and removed the temporary designation from Schedule 1 and that’s how marijuana becomes a Schedule 1 controlled substance. Fast forward to the mid-‘70s, an industrious cocaine, methamphetamine, marijuana dealer in Minneapolis filed for standard business dedications for his illegal drug dealing business. The IRS denies him and he goes to court and wins on a bunch of his deductions. So, in 1982 Congress responds by passing 280E. If you traffic in Schedule 1 or 2 controlled substances, that’s illegal under state or federal law. You may not take any standard business deductions outside of the true cost of goods sold. Then our industry comes to life 20 years later -- they never envisioned people like us existing and 280E was meant to apply to businesses like ours. So, the IRS’ aggressive use of 280E against legal licensed transparent businesses, and we are illegal under federal law, so we fall under 280E, because it says state AND federal law. It is not meant for businesses like ours and its being aggressively applied. It’s supposed to take profits away from drug dealers but it’s not allowing businesses like ours to properly scale and, more importantly, there’s this misperception out there that we are all rolling in cash and we are not.
We always knew that cannabis had medicinal properties specifically for hunger in AIDS patients, and for cancer in stimulating appetite and helping with pain relief. But what we didn’t know was how effective it could be in treating seizure conditions. The most surprising development for me has been meeting some of these parents and kids that have Dravet’s syndrome and these horrible seizure conditions and seeing how absolutely miraculous cannabis can be in treating that and how effective it is. When all these FDA medications just don’t work, these people are desperate and they will try anything to save their kids and then cannabis works. It goes in hand in hand with the most infuriating thing, which is that by now this should be figured out. You see these kids and their parents and they are trying to figure out what oil works, what dose works, how they can get the medicine, how they can get a steady supply of medicine that they can afford, and they can’t use their insurance for it. At this stage of the game, because cannabis is Schedule 1, the research hasn’t been done. This stuff should be dialed in. These kids should not be suffering the way that they are. The fact that we know that this exists, and the fact that parents are out there trying to put this together themselves is ridiculous. As a company, it’s our honor to be able to help patients like that. The biggest surprise to me is how absolutely effective cannabis has proven to be for these seizure conditions, and absolutely infuriating that we are not further down that road.
As a company, LivWell has shown that we have been incredibly engaged in our communities and politically. We have really stepped up in being engaged and involved on the federal, state, and local levels with basic engagement in the communities we operate in. Whether it’s lobbying for reform, forming the New Federalism Fund, engaging and telling our story on the federal level, working with our regulators to be upstanding corporate citizens on the state and local level, or engaged in charities in the communities in which we operate -- that is how we have had the greatest impact as a company. Being in this industry and being one of the largest players in the industry, we feel, as part of our culture, it is incumbent upon us to act like the industry that we would like to be a part of. We try to lead by example.
We will have an equitable tax structure like any other industry. We will be allowed to use a bank. Federal prohibition will likely end in some sort of 10th Amendment solution that defers to the states. I don’t know if we will ever have cannabis legal federally, but I think we will have it not illegal federally and it will go to the states, which is how it should be. I think we will see that within the next ten years.