Justice Dept. Targets Marijuana Distributors in Calif.

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In addition, the IRS asked Harborside Health Center to pay $2 million in back taxes and $500,000 in penalties last week for taking business deductions that were related to "trafficking in controlled substances." The penalty is based on section 280E of the tax code, passed during the Reagan administration in 1982, which prohibited drug dealers to take any deductions based on trafficking activities.

Aaron Smith, executive director of the National Cannabis Industry Association, called the Justice Department's actions "absurd."

A spokeswoman said the association is lobbying Congress to change banking and tax policies and organizing "hundreds" of business owners across the country to "educate the public on the merits of a regulated industry versus the black market."

Jill Lamoureux, executive director of the Medical Marijuana Business Alliance and chairwoman of the National Cannabis Industry Association, owns four medical marijuana centers and grow facilities in Colorado.

She said Colorado medical marijuana dispensaries are concerned about the threats in California, though Colorado citizens' right to access medical marijuana is legalized in the state's constitution.

"We have the most regulated system in the country," she said. "It would be a travesty to shut down businesses providing alternative medicine to patients that are licensed and taxed on a local and state level. Our industry is creating jobs, taking revenues out of the hands of cartels and instead providing badly needed tax resources for infrastructure and services."

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