Hearing could lead to access to banks for cannabis industry
WASHINGTON—When a tax deadline approaches, county officials in the heart of California’s marijuana country ring up millions of dollars in cash deliveries from licensed growers.
Around the rest of the state, deep-pocketed cannabis growers and retailers make appointments three weeks in advance when they want to hand-deliver stacks of cash to the two dozen state tax offices that accept Benjamin Franklins.
The money comes in, but neither the government nor the marijuana companies are particularly happy about hauling around so much cash.
This week the House of Representatives plans to hold a hearing on legislation that could lead to licensed cannabis companies gaining easier access to banks six years after states began legalizing marijuana for recreational use. Representatives had raised the idea in the past, but it didn’t get anywhere in the Republican-controlled Congress.
For more than six years “we were not given one hearing, so the fact that we have an opportunity to even discuss cannabis banking next week represents a huge step forward,” said Rep. Ed Perlmutter, D-Colo.
Because marijuana is still considered an illegal drug at the federal level, banks that deal in the industry could be liable for charges of money laundering if the Department of Justice chose to prosecute them. Rather than take that risk, many banks have elected to not participate in the industry, which has been legalized for recreational purposes in 10 states and the District of Columbia. Even more states allow people to use marijuana for medical purposes.
“Around one in four Americans find themselves living in a state where recreational use of marijuana is legal, and a vast majority of Americans live in a state where medical use of cannabis is permitted,” said Rep. Denny Heck, D-Wash., who plans to sponsor a cannabis banking bill with Perlmutter.
Employees of cannabis companies and government workers alike worry that carrying large amounts of cash will make them targets for criminals. That’s why the California Department of Tax and Fee Administration carefully organizes payments at its offices, and it won’t say how much money it collects in cash.
California officials collected $228.2 million in tax revenue from the cannabis industry in the first three quarters of 2018, according to the tax department. Casey Wells, a spokesman for the department, said less than half of the money came in as cash.
All cash tax payments in California have to be made by appointment at one of the state tax department’s 22 local offices, with appointments scheduled 21 business days in advance. If the amount is more than $20,000 there are further strict regulations about the handling of the money and how it should be turned in.
In Humboldt County, an epicenter of the marijuana industry and home to about 140,000 Californians, taxes on cannabis have kept local officials busy. The county tax collector’s office had cash-counting machines working overtime as a filing deadline neared on Nov. 30. The North Coast Journal reported that half of the $10.3 million in marijuana-related taxes the county collected came in as cash.
Washington state in its 2017 budget year collected $319 million in licenses fees and taxes from the marijuana industry, according to its Liquor and Cannabis Board. It discourages marijuana companies from paying tax in cash, and it has relied on a cluster of credit unions and small banks that are willing to do business with the industry. That state voted to legalize cannabis in 2012.
Heck and Perlmutter submitted their bill Friday, which resembles bills they’ve put forward in the past. The two have been introducing versions of the bill since 2013. The bill had 95 bipartisan co-sponsors in 2017 and the companion Senate legislation had 20 bipartisan co-sponsors.
Neither ever received a hearing until this week.
They received one when Rep. Maxine Waters, D-Calif., became the chairwoman of the Financial Services Committee.
“It’s a serious issue and I’m concerned about the cannabis vendors and growers and others,” she said. “And I think they need someplace to bank—it’s very important so I’m doing everything I can to be helpful.”
The bill remains a longshot in the Senate, where Majority Leader Mitch McConnell, R-Ky., has made it clear he does not support cannabis legalization. He has called it “hemp’s illicit cousin.”
A spokesman for McConnell referred questions to the Senate Banking Committee, chaired by Sen. Mike Crapo, R-Idaho. His office did not respond to a request for comment.