In PLR 201224036, the organization at issue was dedicated to providing education about using “cannabis as medical therapy” and to providing “safe, legal access to cannabis.” The law of the state apparently allowed such use when prescribed by a doctor. The organization also provided:
- information about how to ingest cannabis
- recipes that include cannabis instructions to grow your own cannabis
- grading services for homegrown cannabis
In order to pay for the cannabis, members pay a “suggested donation price” in cash or in exchange for ”homegrown cannabis.” Other fundraising undertaken by the organization includes quarterly cannabis raffles and selling cannabis, “t-shirts, organic pipes, topicals, butter and edibles”. The IRS ruled that notwithstanding the law of the state, federal law provides marijuana (cannabis) is a controlled substance and it is illegal to manufacture, dispense or possess it. And, not surprisingly, a 501(c)(3) cannot be created for a purpose that is illegal. In support of the preceding point, the IRS cited Mysteryboy Inc. v. Comm’r, T.C. Memo 2010-13; in that case, the service denied exemption to an organization–formed by a convicted sexually violent predator to repeal child pornography and exploitation laws–because its purposes violate public policy and promote illegal activities.