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06/14/2018
Bipartisan Legislation Seeks to Eliminate Some Business Concerns of Cannabis Companies
It was announced recently that Sens. Elizabeth Warren (D-Mass.) and Cory Gardner (R-Colo.) introduced a bipartisan bill that would allow states to regulate marijuana without federal interference.
Per news agency “The Hill”, Sens. Warren and Gardner, who both represent states with legal recreational marijuana, introduced the legislation, known as Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, as a response to the Trump administration's stance against the drug.
The bipartisan bill seeks to “allow states, territories and tribes to decide for themselves how to regulate marijuana without federal interference.” Within the bill’s language, the senators address inconsistencies between federal law and states that currently have some form of legalized marijuana use.
Governing Magazine reports that eight states and the District of Columbia have adopted the most expansive laws legalizing marijuana for recreational use. Most recently, sales of recreational-use marijuana in California kicked off on Jan. 1. In Massachusetts, retail sales of cannabis are expected to start later this year in July.
Cannabis is a Schedule I drug under federal law. This designation has caused business concerns for the many cannabis companies who operate legally under state law, but cannot utilize federally insured banks to transact business. While some state-chartered credit unions are willing to do business with cannabis companies, the inconsistency between federal and state law remains an issue.
The passage of this new legislation would recognize cannabis companies as legal businesses, in states where marijuana for both medicinal and recreational use is legal. This would allow these companies to deposit funds in federally insured banks, and operate as any other business.
If the legislation is passed, it may open the door for state-legal cannabis companies to avoid being subject to Internal Revenue Code Section 280E – the section that prohibits cannabis companies from deducting any ordinary and necessary business expenses from gross profit when calculating federal taxable income.
Overall, cannabis companies hope that this legislation moves forward quickly, as it would remove some of the obstacles that cannabis companies face and allow the industry players to form mainstream business.
Subject matter expertise
Ira Weinstein
Managing Principal – Real Estate, Cannabis Industries
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CohnReznick's Cannabis Industry Practice
This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.