Join Brian Buss at the IR Global Miami Conference January 22-25, 2020

Doug Bania and Brian Buss Appointed to 2020-2021 INTA Committees

Doug Bania and Brian Buss Appointed to 2020-2021 INTA Committees

Doug Bania has been appointed to the International Trademark Association (INTA) Right of Publicity Committee, having previously served on the Internet Committee and ICAN Subcommittee from 2016-2019, while Brian Buss has been named to the Commercialization of Brands Committee.

The Right of Publicity Committee develops and advocates the Association’s policy regarding the right of publicity. The committee will monitor developments in treaties, case law, legislation and implementation in various jurisdictions, complete analyses and propose policy recommendations to the Board.

The Commercialization of Brands Committee develops resources including educational programs and best practice guidelines relating to the in-market commercialization of brand offerings. This committee considers such issues as marketing and advertising regulatory issues, agreements including licenses, distribution, supply and agency agreements, tax, brand valuation, brand evaluation, and related issues to support the commercial success of product and service offerings.

William Fowler Joins Nevium as Senior Advisor to Extend its Business Valuation Practice with a Focus on the Cannabis Industry

William Fowler Joins Nevium as Senior Advisor to Extend its Business Valuation Practice with a Focus on the Cannabis Industry

Finding out the Worth of a Cannabis Business—Before the IRS Does

During William Fowler’s nearly 20-year employment with the IRS as a Federal Commissioned Officer, he developed a process to assist with more accurately valuing businesses and corporations being audited.  By implementing the process and simply asking the right questions, along with his expertise in valuation, he increased the IRS’s western region’s receipts by over 500% in one year alone.

But now, the man who modernized the IRS business valuation process, to the chagrin of some of the largest net-worth entities in the United States, has partnered with Nevium to help businesses capture additional business value while minimizing their federal tax burden, particularly in the cannabis industry.

Cannabis Industry, Take Note 

Businesses that don’t properly substantiate their write-offs and deductions will always be at risk for triggering an audit from the IRS, but the legal landscape facing some emerging industries presents unique complexities for which they will need to be prepared. Take for instance, the cannabis industry. While the sale of marijuana is legal in some states but still against federal law, these businesses operate in a financial gray area.

“The IRS is determined to wade through this ambiguity to tax cannabis businesses to the fullest extent,” says Fowler. “They have a cannabis audit team ready to take on the industry.”

IRS Code Section 280E was created to address the write-off of expenditures associated with running marijuana businesses, which cannabis businesses must file because, although these businesses aren’t recognized as legal by the federal government, marijuana is still classified as a Schedule I drug under the federal Controlled Substances Act. Section 280E essentially eliminates the normal business expenses a non-cannabis business is allowed to write off. 

“When cannabis plant-touching businesses submit their tax returns, the IRS will be looking to see if the business is operating under legal guidelines or not, very likely through an audit,” says Fowler. “In fact, the taxpayer should expect a ‘full’ audit because as far as the IRS is concerned, the owner is operating a business that is considered illegal under federal laws.”

An audit could trigger inquiry into the Cost of Goods Sales ledger, as well as cross-checking expenses and revenues to their source, among many other areas of the business’s financials.  In the event the IRS audits a cannabis plant touching business, the owner would be wise to have their financials readily available with complete fact substantiated.

The IP Connection

In addition to scrutinizing a business’s transactions and expenses, the IRS would also look to see if the business has had its IP portfolio and other intangible assets appraised in order to determine if the business is allocating the correct amount to amortize expenses.

“The IP portfolio is also an area of opportunity, however,” says Fowler. “For cannabis entrepreneurs, the IP portfolio is basically the most opportune way to compensate for the taxing effect of 280E, and the IRS will not be able tax that portion of revenues that are not attached to the cannabis revenues as it applies to the IRC 280E issue.

Fowler is a pioneer of cannabis business valuation, having adapted the groundbreaking techniques he developed at the IRS for the industry and published on the topic. Read “What to Look for in Valuing a Cannabis Business” here.

“The potential for valuable IP in a cannabis business might surprise you,” he says. “New strains, approved trademarks, unique graphics, cultivation rights, etc., can all provide nontaxable revenue as it applies to IRC 280E.”

As in any new opportunity, such as the cannabis industry, there are risks and rewards. With Fowler on board, Nevium has a roadmap to help business owners, from growers to sellers, understand their business and IP value, minimize their federal tax burden, and enjoy more of the rewards of cannabis entrepreneurship.


IRS 280E Guidelines for Plant-touching, Cannabis Businesses

IRS 280E Guidelines for Plant-touching, Cannabis Businesses

IRS 280E penalizes traffickers of controlled substances by denying deductions from gross income for business expenses. Therefore, an after-tax discounted cash flow analysis is more appropriate for valuing plant touching cannabis businesses if the analysis has the correct segregation between state and federal taxes. It takes little imagination to discern that the denial of ordinary business deductions greatly impacts those doing business within the cannabis plant touching industry.

Read the entire article at Cannabis Business Times.

Corporate Valuations

Corporate Valuations

Join Brian Buss as he presents at the Connect Corporate Valuations event on October 24, 2019 at 8 AM. Topics covered:

  • Valuation issues related to intellectual property in licensing, manufacturing and M&A transactions 
  • How valuation methodologies can optimize transaction outcomes for both buyers and sellers  in M&A and other transactions
  • Valuation related to buy/sell agreements, shareholder agreements and partner/owner buyouts
  • How to value privately held shares and restricted stock and properly apply minority interest, marketability, blockage and other discounts
  • How to avoid pitfalls associated with Equity Incentive Plans and Private Company Stock issuances under Internal Revenue Code Section 409A

Register at the Connect San Diego Venture Group website located here.