Mаrtin OLIVE, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
No. 13-70510
United States Court of Appeals, Ninth Circuit
July 9, 2015
792 F.3d 1146
Argued and Submitted April 16, 2015.
This argument is without merit. While Roaсh may have abandoned the premises in which the containers were stored, the containers were not abandoned. They continued to be stored in the same building in which they had always been housed, which was owned and overseen by the Powers Estate. This was not “an abandoned and unsupеrvised hazardous waste site.” Indeed, Roach violated the express terms of the stipulated judgment requiring AMP to “remove toxic material from” the building by March 16, 2007. Roach‘s “abandonment,” in effect, merely transferred custody of the storage containers to his former landlord.
Roach is therefore liable as a principal under
There is another reason why Roach‘s abandonment theory fails. Roach conceded at oral argument that he was guilty of storage before he abandoned the premises—and before the start of the time period charged in the indictment—but argues that the act of abandonment transformed his behavior from storage to disposal. This theory is premised on the notion that waste left within an abandoned site is more likely to “enter the environment.” See
AFFIRMED.
Kathryn Keneally, Assistant Attorney General, and Richard Farber (argued) and Patrick Urda, Attorneys, Tax Division, United States Department of Justice, Washington, D.C., for Respondent-Appellee.
Before: ALEX KOZINSKI and SUSAN P. GRABER, Circuit Judges, and DEE V. BENSON,* Senior District Judge.
OPINION
GRABER, Circuit Judge:
Petitioner Martin Olive appeals the Tax Court‘s decision assessing deficiencies and penalties for tax years 2004 and 2005, which arise from Petitioner‘s operation of the Vapor Room Herbal Center (“Vapor Room“), a medical marijuana dispensary in San Francisco. The Tax Court held, among other things, that
The Vapor Room is set up much like a community center, with couches, chairs, and tables located throughout the establishment. Games, books, and art supplies are available for patrons’ general use. The Vapor Room also offers services such as yoga, movies, and massage therapy. Customers can drink complimentary tea or water during their visits, or they can eat complimentary snacks, including pizza and sandwiches. The Vapor Room offers these activities and amenities for free.
Each of the Vapor Room‘s staff members is permitted under California law to receive and consume medical marijuana. Petitioner purchases, for cash, the Vapor Room‘s inventory from licensed medical marijuana suppliers. Patrons who visit the Vapor Room can buy marijuana and use the vaporizers at no charge, or they can use the vaporizers (again, at no charge) with marijuana that they bought elsewhere. Sometimes, staff members оr patrons sample Vapor Room inventory for free. When staff members interact with customers, occasionally one-on-one, they discuss illnesses; provide counseling on various personal, legal, or political matters related to medical marijuana; and educate patrons on how to use the vaporizers and consume medical marijuana responsibly.
All these services are provided to patrons at no charge.
Petitioner filed business income tax returns for tax years 2004 and 2005, which reported the Vapor Room‘s net income during those years as $64,670 and $33,778, respectively. Although Petitioner reported $236,502 and $417,569 in Vаpor Room business expenses for 2004 and 2005, the Tax Court concluded that
The Internal Revenue Code provides that, for the purpose of comрuting taxable income, an individual‘s or a business‘s “gross income” includes “all income from whatever source derived,” including “income derived from business.”
We turn first to the text of
The test for determining whether an activity constitutes a “trade or business” is “whether the activity ‘was entered into with the dominant hope and intent of realizing a profit.‘” United States v. Am. Bar Endowment, 477 U.S. 105, 110 n. 1, 106 S.Ct. 2426, 91 L.Ed.2d 89 (1986) (quoting Brannen v. Comm‘r, 722 F.2d 695, 704 (11th Cir.1984)); see also Vorsheck v. Comm‘r, 933 F.2d 757, 758 (9th Cir.1991) (per curiam) (applying the same standard to
Given the limited scope of Petitioner‘s “trade or business,” we conclude that the business “consist[ed] of trafficking in controlled substances ... prohibited by Federal law.” Thе income-generating activities in which the Vapor Room engaged consisted solely of trafficking in medical marijuana which, as noted, is prohibited under federal law. Under
Petitioner‘s argument relies primarily on the phrase “consists of,” rather than on the phrase “trade or business.” According to Petitioner, the use of the words “consists of” is most appropriate “when a listing is meant to be exhaustive“; the word “consisting,” he argues, is not synonymous with the word “including.” Relying on that proposition, Petitioner contends that, for
To support that line of reasoning, Petitioner cites the Tax Court‘s decision in Californians Helping to Alleviate Medical Problems, Inc. v. Commissioner (CHAMP), 128 T.C. 173 (2007). His reliance on CHAMP is misplaced. In CHAMP, the petitioner‘s income-generating business included the provision not only of medical marijuana, but also of “extensive” counseling and caregiving services. Id. at 175. The Tax Court noted that the business‘s “primary purpose was to provide caregiving services to its members” and that its “secondary purpose was to provide its members with medical marijuana.” Id. at 174. The court found, after considering the “degree of economic interrelationship between the two undertakings,” that the petitioner was involved in “more than one trade or business.” Id. at 183. That is not the case here. Pеtitioner does not provide counseling, caregiving, snacks, and so forth for a separate fee; the only “business” in which he engages is selling medical marijuana.
Petitioner‘s arguments related to congressional intent and public policy are similarly unavailing. He contends that
That Congress might not have imagined what some states would do in future years has no bearing on our analysis. It is common for statutes to apply to new situations. And here, application of the statute is clear. See Chamber of Commerce of U.S. v. Whiting, 563 U.S. 582, 131 S.Ct. 1968, 1980, 179 L.Ed.2d 1031 (2011) (stating that “Congress‘s authoritative statement is the statutory text” (internal quotation marks omitted)). Application of the statute does not depend on the illegality of marijuana sales under state law; the only question Congress allоws us to ask is whether marijuana is a controlled substance “prohibited by Federal law.”
Finally, for three reasons, we are not persuaded by Petitioner‘s argument that section 538 of the Consolidated and Further Continuing Appropriations Act, 2015, Pub.L. No. 113-235, 128 Stat. 2130, precludes the government from continuing to defend Petitioner‘s appeal. First, statements by a later Congress do not inform us about the intent of a previous Congress. See Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 840, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988) (“The views of a subsequent Congrеss form a hazardous basis for inferring the intent of an earlier one.” (internal quotation marks and brackets omitted)). Second, a decision not to expend funds to enforce a particular statute says nothing about the meaning of that statute. “What one house of Congress thinks, in the 2010s, about enforcement priorities for the agency is entirely uninformative about the intent of Congress when it enacted a statute in [an earlier year].” Navarro v. Encino Motorcars, LLC, 780 F.3d 1267, 1277 n. 5 (9th Cir. 2015). Third, section 538 does not apply. It provides that certain funds may not be used to prevent states, such as Californiа, “from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijua-
In summary, the Tax Court properly concluded that
AFFIRMED.
SUSAN P. GRABER
UNITED STATES CIRCUIT JUDGE