The governor of Colorado on Friday sent a letter to the Senate sponsors of a federal marijuana legalization bill, urging them to pass incremental cannabis banking and tax reform first before moving forward with the comprehensive legislation to end prohibition.
Gov. Jared Polis (D) is supportive of the Cannabis Administration and Opportunity Act (CAOA)—a bill to deschedule marijuana and promote social equity that’s being sponsored by Senate Majority Leader Chuck Schumer (D-NY), Senate Finance Committee Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ). But he insisted that there are more modest and practical steps that should be taken first to support state-legal markets and protect businesses.
“I am thrilled that you are bringing forward a long-term, comprehensive solution that deschedules cannabis while enhancing social equity pathways,” the governor wrote. “I hope that you will first focus your efforts on the two biggest barriers to the success of the cannabis industry: banking and IRS Code Section 280E.”
That latter statute has precluded state-legal marijuana businesses from making federal tax deductions that are available to other traditional industries.
Polis said the Secure and Fair Enforcement (SAFE) Banking Act, which has passed in the U.S. House of Representatives on several occasions, “has more bipartisan support than ever before and can be passed in the short-term as you continue to work on the details of the CAOA.”
The senators behind the CAOA recognize that banking reform has an easier path to passage, but they’ve insisted on prioritizing the legalization bill first, in part to avoid jeopardizing support for broader reform from on-the-fence members. Some advocates have also protested putting the SAFE Banking Act to a vote first, as it’s viewed as primarily friendly to the industry without concrete social equity provisions.
Booker said in July that he “will lay myself down” to block any other senators who seek to pass marijuana banking legislation before the body approves comprehensive cannabis reform
But Polis said that passing the banking bill is an important public safety issue because existing cannabis businesses operate on a largely cash-only basis. That makes them “targets for crime” and put them at a disadvantage “compared to other legal businesses by being unable to open bank accounts or obtain loans at reasonable rates.”
“The cannabis industry is simply too large to be prohibited from banking opportunities, and the Senate must remedy this harm by bringing this measure up for a vote in the Senate Committee on Banking, Housing, and Urban Affairs immediately,” the governor wrote.
“Similarly, the cannabis industry has been stymied by 280E, which prevents these businesses from taking business-related deductions associated with the sale of cannabis,” he continued. “Congress must swiftly act to pass any measure, a number of which have been introduced in past sessions, to make an exception for legal cannabis businesses from 280E. While the CAOA would address this issue by descheduling cannabis, a narrow measure focused on relieving cannabis businesses from the detrimental effects of 280E would expeditiously solve this problem.”
“Congress has the power and traction to address these inequities in the near-term while continuing to refine the CAOA, and I encourage you to efficiently take any opportunity to pass legislation concerning banking or 280E,” he said.
The letter is responsive to a public comment request from the senators on the draft legalization legislation. The comment period ends on September 1.
With regard to the legalization bill, Polis urged the senators to rethink the high tax rate that would be created by the draft legislation.
“It is critical that the tax level is not so cost prohibitive that it undermines the federal legal cannabis systems both already in place and being developed in emerging regulated cannabis states,” he wrote.
That’s a key point given that Colorado voters will see a measure on their ballots this November that would further raise state marijuana taxes to fund education programs.
The governor also wants to make sure that states be “empowered to retain their regulatory authorities” over most aspects of the cannabis trade.
“It is clear from the discussion draft that you are deeply considering the multifaceted aspects of this issue,” Polis concluded. “As a pioneer and leader in cannabis regulation, I would like to offer our state’s support and decade long leadership as you work to resolve challenging problems concerning taxes, regulatory overlay, enforcement, and more.”
This letter comes days after the attorney general of Colorado sent a separate message urging congressional leaders to ensure that small marijuana businesses are protected from being overtaken by Big Tobacco and other major industries as federal cannabis reform legislation advances.
Attorney General Phil Weiser (D) wrote that his state is “heartened” to see efforts on Capitol Hill to end federal cannabis prohibition and create a regulatory framework that still empowers states to make their own policy decisions. But he expressed concerns about large corporations potentially gobbling up the industry if preventative steps aren’t taken.
Schumer, for his part, has emphasized that his bill will specifically seek to restrict the ability of large alcohol and tobacco companies to overtake the industry.
Weiser concluded by saying that state attorneys general, and his office in particular, are ready and willing to support lawmakers in crafting federal reform legislation that takes into account all of these opportunities and challenges.
Weiser has previously led letters to Congress voicing support for bipartisan legislation to protect banks that service state-legal marijuana businesses. That effort was noted in this latest letter to lawmakers on broader reform.
Polis, for his part, has been a leader on marijuana issues dating back to when he was in Congress. Since becoming governor, he has signed numerous cannabis bills into law concerning equity and industry assistance.
Earlier this month he held a press conference at a hemp field to announce that the state’s hemp plan won federal approval.
Also this month he made a number of marijuana-related comments at an appearance with the creators of the TV show South Park.
Read Polis’s letter to the marijuana legalization bill sponsors below: