Mixed Reaction To Govt. Marijuana Banking Guidelines
Long considered a linchpin in normalizing the legal marijuana trade, the federal government has issued new guidelines clarifying how banks can provide services to marijuana-related businesses.
The memo effectively gives the green light for banks to work with marijuana shops — within certain boundaries. That’s good news for many dispensaries, which right now are largely working in a cash-based system.
“It’s not just the deposit side, which is a public safety issue,” said Jim Marty, an accountant for several dozen Colorado marijuana businesses. “It’s the ability of banks to make loans to this industry. It provides them with lines of credit and allows them to finance their inventory. There’s all kinds of services that this industry needs.”
Beyond that there's the headaches when it comes time to pay employees and taxes.
For the Colorado Banker’s Association the guidelines didn't go far enough. In a statement they pointed out that for banking and marijuana to mix, Congress needs to act.
While recent comments by U.S. Attorney General Holder indicate his plans to issue “guidance” against prosecuting banks for providing accounts to marijuana businesses, he cannot change the fact that marijuana remains illegal at the federal level and banks must follow all laws. You can’t change water into wine. Banks are responsible to regulators, most of which are independent and uncontrolled by the President’s Executive Branch. The idea of no prosecution is nice, but to banks regulators have the real power.
That congressional call-to-action was repeated by Michael Elliott, Executive Director of the Marijuana Industry Group.
“It is imperative that Congress not view today's guidance as the ultimate solution to this public safety crisis,” Elliott said in a press release. “Congress must act quickly to solve the problem before we witness a tragedy."
While the announcement isn’t a perfect solution, accountant Jim Marty says he thinks smaller banks will step in to offer services in the coming months.
Another huge hurdle for legal pot sellers in Colorado will be revising the IRS tax code 280E, which was originally written for illegal drug traffickers. It limits which deductions licensed dispensary owners can take, creating high federal income tax rates.
“If you get the banking and the 280E issue fixed, then this industry is starting to look more and more just like any other industry in Colorado,” said Marty.