A coalition of hemp industry associations sent a letter to the head of the federal Small Business Administration (SBA) on Monday, urging the agency to extend access to certain coronavirus relief loans to farmers who cultivate the crop.
While SBA has touted its support for the hemp market since the crop was federally legalized under the 2018 Farm Bill, the organizations said there is a lack of clarity surrounding which of the agency’s programs hemp businesses are eligible for, and they expressed frustration that farmers in general are excluded from participating in the Economic Injury Disaster Loan program.
The U.S. Department of Agriculture (USDA) typically addresses disaster relief needs in the agriculture community, which is why farmers can’t receive help from that particular SBA loan program. However, USDA handles natural disasters, not pandemics, so the groups said SBA needs to revise its eligibility requirements so farmers don’t get left behind.
“Farmers are experiencing significant headwinds and instability as a result of the COVID-19 pandemic and must be able to access disaster relief programs that can support them now,” the letter, which was signed by Vote Hemp, U.S. Hemp Roundtable, U.S. Hemp Growers Association, Hemp Industries Association, National Industrial Hemp Council, Midwest Hemp Council, Hemp Feed Coalition and Nebraska Hemp Industries Association, states. “We believe it was congressional intent to include in that expanded eligibility farms and other agricultural enterprises.”
“We urge SBA to clarify that agricultural enterprises are eligible for the EIDL program as well as the emergency grant program,” it continues. “We also ask that SBA issue clear guidance confirming that agricultural enterprises are eligible for other SBA programs included in the CARES Act. We request that this guidance also be provided to SBA regional and field offices where farmers will undoubtedly inquire.”
“Farmers and rural communities are essential to the food and energy security of our nation,” the groups said. “Family farm businesses are relying on SBA to help them stay afloat during this time of heightened market unpredictability and economic hardship. The families that run these businesses cannot afford the further unpredictability of uncertain SBA program access.”
Eric Steenstra, president of Vote Hemp, told Marijuana Moment that advocates “appreciate that SBA has advocated on behalf of the hemp industry but are concerned that hemp producers are not able to access SBA relief programs including the Emergency Income Disaster Loans.”
“We urge the SBA and Congress to provide the same relief to hemp farmers that is being offered to other businesses,” he said.
Hemp businesses do qualify for SBA’s Paycheck Protection Program, however—a benefit that specifically isn’t afforded to state-legal marijuana companies, or even businesses that work indirectly with the industry such as accounting or law firms.
That’s an issue that advocates, stakeholders and some lawmakers are attempting to address.
In a letter to state treasurers that was delivered earlier this month, a coalition of marijuana industry associations urged the officials to pressure their congressional delegations to include SBA access for cannabis firms in future coronavirus legislation. They also want the states to explore providing separate loan and lending programs for the market.
On Monday, Colorado Gov. Jared Polis (D) sent a letter asking a congressman from his state to take up the issue with his colleagues and ensure SBA access for the industry.
Rep. Earl Blumenauer (D-OR) and Sen. Jacky Rosen (D-NV) are actively shoring up congressional support for a sign-on letter imploring congressional leadership to include SBA access for marijuana businesses as part of the next COVID-19 response legislation.
Eleven senators also recently wrote in a Rosen-led letter to Appropriations Committee leadership that they want the SBA issue for cannabis businesses tackled in separate annual spending legislation.
Photo courtesy of Pixabay.
Congressional Researchers Analyze 280E Marijuana Tax Penalty And Legislative Solutions
In a new report published this month, Congressional researchers examine tax policies and restrictions for the marijuana industry—and how those could change if any number of federal reform bills are enacted.
The Congressional Research Service (CRS) analysis focuses on a section of Internal Revenue Services (IRS) code known as 280E, which precludes cannabis companies from taking certain federal tax deductions or credits that are available to other businesses, regardless of their state legality. But they are still obligated to pay taxes on their federally illegal income.
“The Schedule I status of marijuana means that marijuana businesses are treated differently from many other businesses for tax purposes,” CRS said. However, “Congress has broad authority to alter the tax treatment of marijuana businesses.”
“The legislative history of Section 280E indicates that Congress enacted the provision to codify a sharply defined public policy against drug dealing,” the report states.
The provision was enacted in 1982 as a way to prevent drug traffickers from writing expenses off their taxes, but it is widely applied today on state-licensed marijuana growers, processors and dispensaries, greatly increasing their effective tax rates as compared to businesses in other industries.
280E applies to substances in Schedules I and II of the Controlled Substances Act (CSA).
“Recent legislative proposals aim to relax federal restrictions on marijuana or to mitigate the disparity between federal and state marijuana regulation,” the new CRS report states. “Many of these proposals would alter the tax treatment of marijuana businesses by re-scheduling or descheduling marijuana under the CSA or by making marijuana-specific exceptions.”
“Under these proposals, Section 280E would no longer prohibit marijuana businesses from taking deductions and credits,” it says.
While several bills were introduced last session to federally legalize cannabis—including the House-passed Marijuana Opportunity, Reinvestment and Expungement (MORE) Act—they have not been refiled so far this year.
Senate Majority Leader Chuck Schumer (D-NY), Senate Finance Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ) are in the process of developing legislation to end cannabis criminalization and promote social equity, and they’ve met with advocates about how best to draft that proposal.
Meanwhile, House Judiciary Chairman Jerrold Nadler (D-NY) recently said he will soon be reintroducing the MORE Act.
A number of standalone bills to remove the 280E penalty’s application on marijuana businesses have also been filed over the years in Congress, but none has ever been given a hearing or a vote.
But for the time being, the marijuana industry continues to face tax policy challenges under the umbrella of prohibition. And CRS noted that IRS “has offered little tax guidance about the application of Section 280E.”
It did provide some guidance in an update last year, explaining that while cannabis businesses can’t take standard deductions, 280E does not “prohibit a participant in the marijuana industry from reducing its gross receipts by its properly calculated cost of goods sold to determine its gross income.”
The IRS update seemed to be responsive to a Treasury Department internal watchdog report that was released last year. The department’s inspector general for tax administration had criticized IRS for failing to adequately advise taxpayers in the marijuana industry about compliance with federal tax laws. And it directed the agency to “develop and publicize guidance specific to the marijuana industry.”
One note that IRS especially wants to make clear to cannabis firms is that they still have to pay income tax. And CRS articulated that in its report as well.
“Like non-marijuana businesses, marijuana businesses are subject to tax on all of their income,” it said. “Under federal law, all income is taxable, including income from unlawful activities. In contrast, not all expenses are deductible from a taxpayer’s gross income.”
But paying those taxes has proved onerous—both for cannabis businesses and the IRS itself. The head of the agency told Congress last month that it would “prefer” for state-legal marijuana firms to be able to pay taxes electronically, as the current largely cash-based system is complex and inefficient.
Former Treasury Secretary Steven Mnuchin said in 2019 that he’d like to see Congress approve legislation resolving the cannabis banking issue and he pointed to the fact that IRS has had to build “cash rooms” to deposit taxes from those businesses as an example of the problem.
CRS also discussed legislation that’s “attempted to increase marijuana businesses’ access to banking and financial service” like the Secure and Fair Enforcement (SAFE) Act, which passed the House in 2019 and also as part of two COVID-19 relief packages. “Many financial institutions are unwilling to provide state-sanctioned marijuana businesses with common banking products and financial services due to federal laws that impose civil and criminal liability on financial institutions handling money tied to marijuana.”
While there may be that reluctance, federal data released earlier this month shows that the number of banks and credit unions that report servicing marijuana businesses seems to be stabilizing.
For three quarters in a row, those numbers were consistently declining—due partly to revised reporting requirements from the Financial Crimes Enforcement Network (FinCEN) and also because of the coronavirus pandemic. But the latest report signals that the trend is lifting.
Lawmakers in the Senate and House filed new bills to address the marijuana banking issue in recent days.
Colorado Sold More Than $187 Million In Legal Marijuana In January
The state has now surpassed $10 billion in total sales since legal cannabis commerce began in 2014.
By Robert Davis | The Center Square
Marijuana sales in Colorado reached $187,603,697 in January, the state’s revenue department said this week.
The state has now surpassed $10 billion in total marijuana sales since legalizing the drug in 2014. In return, the state has collected over $1.6 billion in marijuana taxes and fee revenues since then.
January’s sales were slightly more than the $186 million in sales in December 2020.
Marijuana taxes and fees are assessed against both recreational and medical marijuana. The tax and fee revenue is distributed to local governments and educational institutions.
Three-quarters of marijuana tax and fee revenue is appropriated to the state’s marijuana tax cash fund, which provides funding to the governor’s office, education department, and the attorney general’s office, among others.
Another 15.56 percent is apportioned to the state’s general fund, with the remaining 12 percent going to the state public school fund, according to the nonpartisan Legislative Council Staff.
Tax revenue is collected through a 2.9 percent state sales tax on marijuana sold in stores, a 15 percent tax on retail marijuana sold in stores and a 15 percent retail marijuana excise tax on wholesale sales or transfers of retail marijuana. Fee revenue comes from marijuana license and application fees.
In February, Colorado collected $34,747,575 in marijuana tax and fee revenue. The Colorado Department of Revenue will release the total sales for that month in April.
Colorado has collected a total of $69,728,521 in marijuana tax and fee revenue so far this year.
Legal Marijuana States See Reduced Workers’ Compensation Claims, New Study Finds
Legalizing marijuana for adult use is associated with an increase in workforce productivity and decrease in workplace injuries, according to a new study partly funded by the federal government.
In a working paper published by the National Bureau of Economic Research, researchers looked at the impact of recreational cannabis legalization on workers’ compensation claims among older adults. They found declines in such filings “both in terms of the propensity to receive benefits and benefit amount” in states that have enacted the policy change.
Further, they identified “complementary declines in non-traumatic workplace injury rates and the incidence of work-limiting disabilities” in legal states.
These findings run counter to arguments commonly made by prohibitionists, who have claimed that legalizing marijuana would lead to lower productivity and more occupational hazards and associated costs to businesses. In fact, the study indicates that regulating cannabis sales for adults is a workplace benefit by enabling older employees (40-62 years old) to access an alternative treatment option.
“We offer evidence that the primary driver of these reductions [in workers’ compensation] is an improvement in work capacity, likely due to access to an additional form of pain management therapy,” the study, which received funding from the National Institute on Drug Abuse, states.
The implementation of adult-use legalization seems to “improve access to an additional channel for managing pain and other health conditions, suggesting potential benefits on populations at risk of workplace injuries,” it continues.
The study is based on an analysis of data on workers’ compensation benefit receipt and workers’ compensation income from
2010 to 2018 as reported in the Annual Social and Economic Supplement of the Current Population Survey.
“Our results show a decline in workers’ compensation benefit propensity of 0.18 percentage points, which corresponds to a 20 percent reduction in any workers’ compensation income, after states legalize marijuana for recreational use. Similarly, we find that annual income received from workers’ compensation declines by $21.98 (or 20.5%) post-[recreational marijuana legalization]. These results are not driven by pre-existing trends, and falsification exercises suggest that observing estimates of this magnitude is statistically rare.”
Researchers said that they’ve found evidence that cannabis use increases post-legalization among the age cohort they studied, but no such spike in misuse. Further, they found a decline in post-legalization prescriptions for medications used to treat chronic pain, indicating that some people are using marijuana as a substitute for traditional painkillers.
“We hypothesize that access to marijuana through [recreational marijuana laws] increases its medical use and, in turn, allows better management of symptoms that impede work capacity—e.g., chronic pain, insomnia, mental health problems, nausea, and so forth,” the study says. “Chronic pain management is likely to be particularly important in our context as this is the health condition most commonly reported among medical marijuana users.”
Beyond decreasing workers’ compensation claims and costs, legalization also is a boon to the economy by adding jobs in legal states.
The cannabis industry added more than 77,000 jobs over the past year—a 32 percent increase that makes the sector the fastest in job creation compared to any other American industry, according to a report released by the cannabis company Leafly last week.