United States District Court, D. Colorado
THE GREEN SOLUTION RETAIL, INC., a Colorado Corporation, GREEN SOLUTION, LLC, a Colorado Limited Liability Company, INFUZIONZ, LLC, a Colorado Limited Liability Company, and GREEN EARTH WELLNESS, INC., a dissolved Colorado Corporation, Petitioners,
v.
UNITED STATES OF AMERICA, through its agency the Internal Revenue Service, Respondent.
ORDER
PHILIP
A. BRIMMER Chief United States District Judge.
This
matter is before the Court on petitioners' Motion to
Alter or Amend Judgment [Docket No. 33]. Pursuant to Fed. R.
Civ. P 59(e), petitioners seek to alter or amend the
Court's February 12, 2018 Order [Docket No. 32]
dismissing petitioners' petition to quash summonses and
closing the case.
I.
BACKGROUND
This
case is one of a series of lawsuits between the Internal
Revenue Service (“IRS”) and companies involved in
Colorado's marijuana industry. Docket No. 32 at 1. The
IRS is conducting a civil audit of petitioners' tax
liability for fiscal years 2013 and 2014. Docket No. 1 at 4,
¶ 12; Docket No. 1-2; Docket No. 8-1 at 2, ¶¶
5-7. Petitioners, who are all involved in the marijuana
industry, seek to prevent the IRS from collecting information
about their business activities. Under 26 U.S.C. § 280E
(I.R.C. § 280E), companies who traffic in a
“controlled substance” such as marijuana are
forbidden from taking federal tax deductions and credits. In
relation to the audit, David Hewell, an IRS revenue agent,
informed petitioners that his department had made a
determination that petitioners were trafficking in a
controlled substance, and Mr. Hewell sought records to
establish the extent of petitioners' activities. Docket
No. 1 at 4, ¶¶ 13-14; Docket No. 8-1 at 1, ¶
1. After petitioners declined to provide their Marijuana
Enforcement Tracking Reporting and Compliance
(“METRC”) records, the IRS issued summonses to
the Colorado Department of Revenue's Marijuana
Enforcement Division seeking petitioners' METRC records
and inventory information. Docket No. 1 at 4, ¶ 14;
Docket No. 1-1. Petitioners sought to quash those summonses,
and the government sought to enforce the summonses. Docket
Nos. 1, 8.
In a
separate proceeding, petitioner The Green Solution Retail,
Inc. (“Green Solution”) sought similar relief
against the IRS. See Green Sol. Retail, Inc. v. United
States, 855 F.3d 1111, 1113 (10th Cir. 2017)
(“Green Solution”). The Tenth Circuit
affirmed the trial court's dismissal of Green
Solution's claims as barred by the Anti-Injunction Act,
26 U.S.C. § 7421 (I.R.C. § 7421). The Tenth Circuit
rejected Green Solution's argument that the IRS acted
outside its authority, concluding that “the IRS's
obligation to determine whether and when to deny deductions
under § 280E[] falls squarely within its authority under
the Tax Code.” Green Solution, 855 F.3d at
1121.
II.
LEGAL STANDARD
“A
motion to alter or amend a judgment must be filed no later
than 28 days after the entry of the judgment.”
Fed.R.Civ.P. 59(e). “Grounds warranting a motion to
alter or amend the judgment pursuant to Rule 59(e) include
(1) an intervening change in the controlling law, (2) new
evidence previously unavailable, and (3) the need to correct
clear error or prevent manifest injustice.”
Alpenglow Botanicals, LLC v. United States, 894 F.3d
1187, 1203 (10th Cir. 2018) (quoting Servants of the
Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir.
2000)). A Rule 59(e) motion is appropriate where “the
court has misapprehended the facts, a party's position,
or the controlling law, ” but not to “revisit
issues already addressed or advance arguments that could have
been raised in prior briefing.” Id.
Petitioners
filed their Motion to Alter or Amend Judgment [Docket No. 33]
on March 12, 2018, within 28 days of the entry of the order
closing the case on February 12, 2018.
III.
DISCUSSION
Petitioners
raise three arguments in their Rule 59(e) motion for why
altering or amending the judgment is warranted. See
Docket No. 33. First, petitioners argue that the Court erred
in applying the Tenth Circuit's ruling in Green
Solution to this case. Id. at 2-3. Second,
petitioners argue that the Court improperly criticized
petitioners' filing of petitions to quash summonses
because the petitions are necessary to protect
petitioners' right to obtain absolute immunity from the
IRS. Third, petitioners argue that the government has
“conceded” that METRC information is not relevant
to a determination of income and expenses. Id. at
5-6.
A.
Application of the Green Solution Ruling
Petitioners'
first argument is that the Court's application of the
ruling in Green Solution to this case is clear
error. They argue that the “District Court erred in its
assertion that the Court of Appeals in [Green
Solution] gave the IRS authority to administratively
investigate and determine violations of federal criminal drug
laws.” See Docket No. 33 at 2-3. Tellingly,
petitioners fail to cite anywhere in the Court's order
where the court interpreted Green Solution to give
the IRS authority to “determine violations of federal
criminal drug laws.” Instead, the Court noted that
[w]hile the IRS may lack authority to criminally prosecute
petitioners for trafficking in controlled substances, the IRS
has authority to make determinations about whether deductions
are allowable under the Internal Revenue Code, including
§ 280E. Revenue Agent Hewell's affidavit establishes
that the summonses are related to an investigation of
petitioners' tax liabilities, something within the
IRS's authority.
Docket No. 32 at 5. Petitioners again try to suggest that,
because the IRS made a preliminary conclusion that a company
is engaging in the marijuana business, the IRS is acting
outside its scope of authority in issuing summonses pursuant
to § 280E. However, that preliminary determination is
not a criminal investigation. Petitioners' argument was
rejected in Green Solution, where the Tenth Circuit
concluded unequivocally that “the IRS's obligation
to determine whether and when to deny deductions under §
280E[] falls squarely within its authority under the Tax
Code.” SeeGreen Solution, 855 F.3d
at 1121. In a recent case, the Tenth Circuit reaffirmed that
holding, stating that “it is within the IRS's
statutory authority to determine, as a matter of civil tax
law, ...