The federal appeals court based in Denver declined to apply a 2021 statement of U.S. Supreme Court Justice Clarence Thomas in deciding last week whether to block federal authorities from investigating a marijuana dispensary’s compliance with the tax code.

Previously, Thomas cast doubt on Congress’s ability to regulate cannabis within states by pointing to the federal government’s tolerance of widespread retail and medical marijuana legalization, despite its continued federal status as an illegal substance. Standing Akimbo, Inc., a Denver dispensary, seized on Thomas’ statement in its own fight with the Internal Revenue Service, arguing the IRS’S quest for business records was illegitimate because of the government’s receding interest in enforcing the marijuana prohibition against states.

But on Friday, the U.S. Court of Appeals for the 10th Circuit decided a statement from a single Supreme Court justice did not outweigh the Supreme Court’s own precedent, specifically a 2005 case endorsing federal crackdowns in states with legal marijuana.

“The non-precedential statement of a single justice ... however esteemed he may be,” wrote Senior Judge Bobby R. Baldock, “does not call the integrity of that decision into question.”

For years, Standing Akimbo has pushed back on the IRS’S investigation into the business’s compliance with a provision in the tax code called Section 280E. The provision prevents tax deductions for business expenses for those whose activities consist of “trafficking in controlled substances.” Marijuana is still illegal under the Controlled Substances Act.

The IRS requested documents from Standing Akimbo’s owners but, after receiving incomplete responses, issued a summons on Colorado’s Marijuana Enforcement Division, seeking inventory and sales reports from the state’s compliance system. Standing Akimbo then sought to quash, or invalidate, the summons, alleging the IRS’S investigation was not a legitimate, tax-related proceeding.

“In the circumstances here, it is clear that the purpose of these summonses is not to determine income or expenses, but to determine whether the Petitioners have violated the CSA,” wrote attorneys for Standing Akimbo.

The 10th Circuit originally decided in 2020 that the IRS’S investigation of Standing Akimbo for tax years 2014 and 2015 was legitimate, noting the IRS had not referred the dispensary to the U.S. Department of Justice for criminal prosecution.

Standing Akimbo then appealed to the Supreme Court. Although the justices declined to hear the case, Thomas took the unusual step of issuing a statement, in which he called Standing Akimbo a “prime example” of the federal government’s inconsistent practice of enforcing the marijuana prohibition.

“Once comprehensive, the Federal Government’s current approach is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana,” he wrote.

Thomas raised the 2005 decision of Gonzales v. Raich, which held that Congress’s authority to regulate marijuana reached into the states. However, marijuana legalization has expanded since then, including with Colorado voters’ own enactment of retail marijuana in 2012. While the federal government does not crack down on cannabis more broadly, Thomas noted, it is apparently interested in enforcing Section 280E.

“Suffice it to say, the Federal Government’s current approach to marijuana bears little resemblance to the watertight nationwide prohibition that a closely divided Court found necessary to justify the Government’s blanket prohibition in Raich,” Thomas concluded, questioning whether the regulation of marijuana cultivation within states is still a proper exercise of federal authority.

Standing Akimbo immediately raised Thomas’ statement in Colorado, where a similar IRS enforcement case was pending about the dispensary’s 2016 tax records. U.S. District Court Chief Judge Philip A. Brimmer eventually sided with the IRS based on the 10th Circuit’s prior decision finding the investigation to be legitimate.

Thomas’ “non-precedential statement” had no bearing on the case, Brimmer added.

Once again, Standing Akimbo appealed to the 10th Circuit, now centering its arguments around the Thomas statement. If regulating cannabis within states is no longer a legitimate exercise of federal authority, argued Standing Akimbo, the basis for the IRS’S Section 280E investigation “evaporates.”

“What good does that (statement) do you?” Baldock replied during oral arguments last year. “That isn’t even a holding of the Supreme Court.”

“What does it do to your case? Why do we care?” added Judge Allison H. Eid, a former clerk for Thomas.

James D. Thorburn, the attorney for Standing Akimbo, argued Thomas’ statement provided a window into “what was being discussed” at the Supreme Court. The statement also allegedly undermined the IRS’S claim that it was conducting a legitimate Section 280E investigation into Standing Akimbo’s business expenses.

The government countered that even if Section 280E were unconstitutional, the IRS would still have the ability to verify Standing Akimbo’s tax returns generally.

The 10th Circuit panel ultimately reiterated the court’s position in Standing Akimbo’s previous appeal, finding the IRS could proceed with its summons for the dispensary’s records.

“But we want to be very clear: We will continue to faithfully apply Gonzales v. Raich unless the Supreme Court instructs us otherwise,” wrote Baldock in the Jan. 27 order. “The Taxpayers cannot show the IRS lacked a legitimate purpose based on Justice Thomas’s statement.”