The recent enactment of marijuana liberalization laws in some states beckoned a nascent pot industry to put their “whole selves in” to setting up shop. But, a federal recent court ruling suggests that banks or credit unions keep their “whole selves out” of extending accounts or loans to pot purveyors. The conflict has industry watchers wondering: “what’s it all about?”
Examples this week come from the western part of the country.
In Oregon, sales tax collection began for marijuana on Monday, in accordance with legislation passed last year. S.B. 460 permitted early sales of retail marijuana to begin tax-free at medicinal marijuana dispensaries last October. H.B. 2041 required these dispensaries to begin collecting taxes (currently 25 percent of the retail sales price) on Jan. 4.
While those enjoying tax-free pot this past fall are likely to grouse about shelling out more money in taxes, this is one step further in establishing marijuana as a normal part of Oregon commerce.
However, in Colorado, the leafy green suffered a setback. Judge R. Brooke Jackson of the United States District Court for the District of Colorado dismissed the Fourth Corner Credit Union’s lawsuit against the Federal Reserve in Kansas City. The Fourth Corner Credit Union established itself to be a credit union for marijuana industry companies and received a state charter in 2014. However, it needs a master account with the Federal Reserve to operate. The Federal Reserve Bank of Kansas City denied the organization’s application and Fourth Corner sued last year.
In the Court’s Jan. 5 ruling, Judge Jackson denied Fourth Corner’s request to require the Federal Reserve to issue it a master account. Jackson said in the opinion that issuing an injunction against the bank would facilitate criminal activity, since marijuana is still illegal under federal law.
Despite Fourth Corner’s arguments that the Cole Memorandum and FinCEN guidance permit financial institutions to give marijuana companies accounts, the court states that the federal guidance upholds the Controlled Substances Act’s ban on marijuana and only sets law enforcement priorities. Jackson concluded with “[i]n short, these guidance documents simply suggest that prosecutors and bank regulators might ‘look the other way’ if financial institutions don’t mind violating the law. A federal court cannot look the other way.”
Essentially for now, marijuana remains a mostly cash-only industry, requiring business owners to cha cha down to their local revenue departments with dollars in hand to pay their taxes.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What marijuana tax and regulation predictions are you making for 2016?
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