The secretary of the U.S. Treasury Department said on Wednesday that freeing up banks to work with state-legal marijuana businesses would “of course” make the Internal Revenue Service’s (IRS) job of collecting taxes easier.
At a hearing before the House Financial Services Committee, Rep. Ed Perlmutter (D-CO) referenced recent comments from an IRS official about the “special type of collection challenge the IRS undertakes regarding tax collection from cannabis-related businesses forced to operate in cash only.”
“Do you agree if these business were simply allowed to access the banking system and didn’t have to transact business only in cash it would make the IRS job easier?” Perlmutter asked Secretary Janet Yellen.
“Yes, of course it would,” she replied matter-of-factly.
HAPPENING NOW: @SecYellen agrees allowing cannabis businesses to access the banking system would help the IRS do their job and enable them to better collect taxes from the industry. #SAFEBanking https://t.co/w23GdFPQFy
— Rep. Ed Perlmutter (@RepPerlmutter) December 1, 2021
The congressman also talked about his bill—the Secure and Fair Enforcement (SAFE) Banking Act—which has passed the House in some form five times now and would resolve the issue by protecting financial institutions that service state-legal cannabis businesses.
Numerous financial, labor and insurance associations, as well as key lawmakers, are pushing the Senate to attach the measure to must-pass defense spending legislation, as the House already has. Bipartisan members of the Senate Armed Services Committee, as well as senators representing Colorado, made the same request in recent letters.
While Yellen’s response was quick, it’s yet another example of a federal official recognizing the untenability of the status quo.
Steven Mnuchin, the Treasury secretary under the Trump administration, repeatedly addressed the issue, saying the current policy conflict creates “significant problems” for IRS and financial regulators. It “creates significant risk in the communities for collecting this amount of cash. It’s problematic,” he said last year.
IRS, for its part, said in September that it expects the cannabis market to continue to grow, and it offered some tips to businesses on staying compliant with taxes while the plant remains federally prohibited.
With respect to the SAFE Banking Act, a bipartisan coalition of two dozen governors recently implored congressional leaders to finally enact marijuana banking reform through the large-scale defense legislation.
A group of small marijuana business owners also recently made the case that the incremental banking policy change could actually help support social equity efforts.
Rodney Hood, a board member of the National Credit Union Administration, wrote in a recent Marijuana Moment op-ed that legalization is an inevitability—and it makes the most sense for government agencies to get ahead of the policy change to resolve banking complications now.
Federal data shows that many financial institutions remain hesitant to take on cannabis companies as clients, however, which is likely due to the fact that the plant is a strictly controlled substance under federal law.