The Michigan cannabis industry has had its share of struggles recently, as oversupply wreaked havoc on profit margins, causing insolvency and forcing many operations to close or pivot. The embattled industry has also faced regulatory challenges every step of the way. From barring cannabis workers from receiving 401(k) plans to the inability to utilize traditional banking services such as checking accounts, payroll, and lines of credit, the cannabis industry has had a hard time legitimizing itself as an industry.
Persistence leads to favorable ruling for cannabis companies
A Michigan-based cannabis business was repeatedly rebuffed in its efforts to achieve reclassification from a “commercial” business under the General Property Tax Act (GPTA) to “agricultural.” Their first attempt before the township assessor was denied. As was their second attempt before the Board of Review.
After the first two rejections from the assessor and the Board of Review, the cannabis operation took its case to the State Tax Commission (STC), where the assessor’s decision was upheld. The conclusion from the STC was based on the argument that growing cannabis did not qualify as an “agricultural operation” under the GPTA, which defines agricultural operations as the cultivation of agricultural, horticultural, or floricultural commodities.
The cannabis company appealed the ruling from the STC to the County Circuit Court, where they finally received the verdict they were hoping for. It was determined that cannabis cultivation meets the criteria of an agricultural operation as defined in MCL 211.34c(2)(a) of the GPTA.
The impact of the Circuit Court’s ruling on the Michigan cannabis industry
The ruling creates a significant opportunity for growers to challenge their current property tax classification to reduce future property tax assessments and create much-needed savings.
“The cannabis industry has overcome many obstacles,” said Todd Tigges, leader of the national cannabis practice. “The ruling from the Michigan Circuit Court solidifies what we have been doing to support our clients and legitimizes the cannabis industry, which was a much-needed win.”
This ruling is a microcosm of the complex and heavily regulated cannabis industry. Our dedicated team of cannabis specialists has assisted clients in all phases of managing a cannabis operation, including handling complex tax and compliance matters. Please fill out the form on this page to contact a member of our cannabis practice.
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