California’s quest to generate more revenue through the legalization and taxation of recreational marijuana has highlighted the difficult plight marijuana businesses face when it comes to collecting and remitting taxes to the state. Marijuana businesses are unable to access typical banking services due to marijuana remaining illegal at the federal level. As such, businesses have no or limited access to certain services, such as banking services from the majority of banks and credit unions, deposit insurance from the Federal Deposit Insurance Corporation or the National Credit Union Administration, check clearing from federal clearinghouses, and the issuance of business credit or debit cards. However, California lawmakers, along with a few members of the U.S. Senate, are attempting to change the status quo.
In an effort to address the lack of banking services available to marijuana businesses, S.B. 930 was introduced on Jan. 25, 2018, and recently passed the California Senate. The bill would establish the cannabis limited charter banking and credit union law (CLCL), administered by the Department of Business Oversight (DBO). The CLCL would allow the formation of cannabis limited charter banks (CLCB) and cannabis limited charter credit unions (CLCCU), which once licensed under the DBO, would be able to issue special purpose checks to fit certain needs of marijuana businesses. Special purpose checks would be used to:
The bill would ideally make it easier for marijuana businesses to pay their state and local taxes, without having to physically handle large amounts of cash, according to S.B. 930’s senate floor analysis.
However, there are some foreseeable problems for CLCBs and CLCCUs. For example, special purpose checks may not always be readily accepted, and not enough CLCBs or CLCCUs could be formed, which would make it harder to use special purpose checks. Additionally, there would be no access to electronic transmissions of money between businesses, and businesses would still be required to purchase their own deposit insurance. The benefits of S.B. 930 will remain unclear until the bill is enacted and the use of CLCBs and CLCCUs begin.
On the federal level, Sens. Cory Gardner (R-Colo.) and Elizabeth Warren (D-Mass.), sponsored and introduced to Congress the Strengthening the Tenth Amendment through Entrusting States (STATES) Act. The bill, an attempt to give states the power to govern marijuana laws without federal interference, comes in the wake of the Department of Justice’s Jan. 4, 2018, rescission of former DOJ guidance on state-licensed marijuana sales. Gardner and Warren believe that the “Act would resolve state-federal conflicts over the drug, remove barriers to development, and enact a common-sense, ‘states’-rights’ approach to marijuana regulation,” as the Daily Tax Report: State reports. The passage of this bill would surely have some states feeling more at ease with their marijuana legalization and regulation programs.
Track the progress of California’s S.B. 930 and the federal STATES Act with Bloomberg Tax coverage.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Is the formation of limited charter banks and limited charter credit unions the best way to address the lack of access to traditional banking services for marijuana businesses?
Get a free trial to Bloomberg Tax: State, a comprehensive research service that provides deep analysis and time-saving practice tools to help practitioners make well-informed decisions.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)