Republicans joined with Democrats to vote down the cannabis implementation bill, only to resurrect it later.
By Arren Kimbel-Sannit, Daily Montanan
Mike Milburn, Gov. Greg Gianforte’s senior advisor, was on Thursday walking the Capitol halls past the legislative chambers—where the governor had just visited to gladhand and backslap with House Republicans—when Sen. Jason Ellsworth, R-Hamilton, appeared from a side door to the Senate floor to get his attention.
Milburn leaned in to listen.
“The bill is coming back,” Ellsworth told the former House Speaker. “701 is coming to the floor.”
That morning, grand ambitions from the governor’s office and the Republican legislative establishment for implementing recreational marijuana in Montana were nearly derailed in committee when the GOP’s right flank and Democrats joined to vote down this session’s flagship pot proposal, only for the bill to be revived less than an hour later after a series of frenzied negotiations within the majority party.
Democrats had already been planning to vote against the bill, House Bill 701; despite propping up a comprehensive recreational pot market, the proposal diverted most revenues from taxes on the product to the state general fund, a departure from the language in I-190, the legalization initiative that voters approved last year.
But a contingent of Republicans voted against the bill as well. Some just don’t like marijuana, or are sensitive about adult use due to the rocky rollout of medical marijuana many years before. Some, echoing a concern among Democrats, worried about the speed of the process. For months, lawmakers and stakeholders from the governor’s office and the industry had been crafting the bill, but it only had its first committee hearings this week, with the days ticking down until the deadline to transmit revenue bills to the opposite chamber.
HB701, sponsored by Rep. Mike Hopkins, R-Missoula, was slated to hit the floor Tuesday, the first day back after a four-day Easter break.
“We flat ran out of time,” said House Speaker Wylie Galt, R-Martinsdale.
But the primary reason for opposition, at least among the GOP, had less to do with what was happening in the House Taxation Committee and more to do with what was going on across the hall, where lawmakers in the Business and Labor Committee—which heard HB701 earlier in the week—were considering two other marijuana proposals.
The first, HB670, passed 11-9. That bill, crafted by Reps. Derek Skees and Matt Regier, both Kalispell Republicans, would tax recreational marijuana at a lower rate (15 percent) than HB701 (20 percent) while slightly raising the tax on medical marijuana. It would set aside most of the tax revenue for paying down public employee pension obligations while leaving some in a trust fund to address “the economic and social costs” of legalization, while HB701 would put most of the money into the state general fund.
The second was Rep. Brad Tschida’s HB707, which would overhaul I-190’s taxation structure entirely, only taxing wholesale marijuana at a rate of 20 percent, a system modeled after the state’s alcohol regulations. Tschida, R-Missoula, said earlier this week that he hoped to have part of his bill inserted into the main vehicle, HB701. But HB707 failed.
Meanwhile, the Taxation Committee was preparing to vote on HB701 as word reached from across the hall that one of the other bills had fallen. To some House Republicans, putting all of the Legislature’s weight behind HB701 without considering all other options didn’t make sense; they didn’t like aspects of the bill, especially its approach to spending and saving pot revenues, and the fact that there was little time for amendments in the House frustrated them.
So four Republicans voted no: Rep. Lola Sheldon-Galloway, R-Great Falls; Rep. Caleb Hinkle, R-Belgrade; Rep. Scot Kerns, R-Great Falls and Rep. Jeremy Trebas, also of Great Falls. Along with a unified Democratic block, which had been fighting to increase funding for the environment and public lands in HB701 per the language in I-190, it was enough to kill the bill 10-12.
“We wanted all three bills to come across the House floor. I didn’t realize that Taxation was going to be voting on the big bill, because we had the smallest hearing,” said Sheldon-Galloway, who preferred the Skees-Regier plan due to the fact that it invested weed revenues in an interest-collecting trust.
It was a rare moment of accidental transparency for the Republican majority. The hallway between the two committee rooms was abuzz, with more reporters and lobbyists arriving by the minute. At first, several key players—Hopkins, Rep. Becky Beard, the House Taxation Committee Chair, Rep. Mark Noland, R-Bigfork, the Business and Labor Chair, Sen. Jason Ellsworth, who will likely ferry the bill in the Senate, and others—huddled in a hallway behind a glass double door, out of earshot from the public, trying to put together the pieces.
The group dispersed. In one corner, Ellsworth leaned over Hinkle, speaking in quiet, urgent tones about vote counts. Other atomized groups clustered elsewhere in the vicinity, waiting for further clarity, processing what had happened. The bill that had failed, in addition to being the longest and most detailed marijuana plan, is also the bill that promised to fund the governor’s substance abuse treatment program, the HEART Fund, among other key priorities.
Even worse, from the perspective of the GOP, is total gridlock would mean that the Legislature could lose its chance to amend the language of I-190, an initiative that passed with 53 percent support in 2020 despite potentially violating the constitution by prescribing expenditure of tax revenues, a proprietary authority the Legislature guards jealously.
After the flurry, the committee decided to return just after noon, and the hallways cleared. Was one of the session’s weightiest bills—in both the literal and figurative sense—dead? Would its language be merged with Skees’ bill?
The key issue, as Sheldon-Galloway described, was the lack of options with limited time. She said she wanted to see the bills be reconciled in conference committee, and expected several amendments. Hinkle said something similar: All three bills should make it to the House floor, and ideally all three should make it to the Senate.
Lo and behold, Business and Labor returned from recess, Republicans took HB707 off of the table, and on a largely partisan vote passed it onto the floor. Noland and the rest of his committee hovered in front of the television that showed how the Taxation Committee, now back from its break, would act.
Indeed, Rep. Josh Kassmier, R-Fort Benton, moved to bring the bill off the table. Though it still lacked Democratic support, the motion passed, and shortly thereafter, Sheldon-Galloway, Hinkle, and the rest switched their votes, sending HB701 to the floor, alongside HB670 and HB707.
“We wanted more options, that’s what the whole thing was about,” Noland said. “More options gives we the people better chances. Some don’t like one of those bills. Some have hiccups with the big bill. If we get everything moving, then we can discuss all of these bills.”
Hopkins couldn’t be reached for comment in time for publication.
Beard and other lawmakers began working on amendments to HB701 after the dust settled. On the House floor Thursday, she said to expect some proposed changes to the tax rate, implementation date (retail could launch as early as next January), among other areas. Democrats, who want to expand HB701’s provision allowing for the re-sentencing of incarcerated people with marijuana convictions, loosen licensing restrictions on those with past drug charges, and above all put as much money toward lands and conservation as possible, plan to bring their amendments either or on the House floor or as the bill(s) makes its way through the Senate.
J.D. “Pepper” Petersen, a dispensary owner and CEO of the Montana Cannabis Guild, said he expects most of the action to occur in the upper chamber. Like many dispensary owners, he’s not a fan of HB701, which has one provision providing for counties to easily opt-out of recreational marijuana and another preventing outdoor grows. However, he predicted that to be the final vehicle.
“701 is the show,” Petersen said.
Galt couldn’t say with certainty that HB701 would get the votes in the House.
“It’s gonna be really interesting,” he said, referencing another profitable vice regulated in the state of Montana. “It’ll be a roll of the dice.”
Top IRS Official Says Marijuana Banking Reform Would Help Feds ‘Get Paid’
The Internal Revenue Service (IRS) would like to get paid—and it’d help if the marijuana industry had access to banks like companies in other legal markets, an official with the federal department said. She also talked about unique issues related to federal tax deductions for cannabis businesses.
At an event hosted by UCLA’s Annual Tax Controversy Institute on Thursday, IRS’s Cassidy Collins talked about the “special type of collection challenge” that the agency faces when it comes to working with cannabis businesses while the product remains federally illegal.
While IRS isn’t taking a stand on federal marijuana policy, Collins said that the status quo leaves many cannabis businesses operating on a cash-only basis, creating complications for the agency, in part by making it harder for banks to “pay us.”
“The reason why [the marijuana industry is] cash intensive is twofold,” she said. “Number one, a lot of customers don’t want a paper trail showing that they’re buying marijuana, and number two, the hesitancy of banks to allow marijuana businesses to even bank with them.”
Of course, the reason why many financial institutions remain hesitant to take on cannabis companies as clients is because the plant is a strictly controlled substance under federal law.
“There’s been a number of legislative bills that have been introduced—and I am definitely not expressing any opinion personally or on behalf of the IRS about any pending or proposed legislation,” Collins, who is a senior counsel in the IRS Office of Chief Counsel, said. “But it is interesting to note that, if the law changed so that the marijuana businesses could have banks, that would make the IRS’s job to collect [taxes] a lot easier. As part of collection, we want the money. That’s our end goal there.”
A major part of what makes cannabis businesses unique is that they don’t qualify for traditional tax credits under an IRS code known as 280E. That policy “prohibits them from claiming deductions for business expenses because they’re technically being involved in drug trafficking,” Collins explained at the event, from which small excerpts of her comments were reported by Bloomberg.
There are some options available to lessen the burden on marijuana firms, however. At the end of the day, “IRS will work with marijuana companies because, again, we want to get paid,” Collins said.
One of the ways the agency works with marijuana business operators is to have them visit designated IRS “tax assistance centers” that accept cash payments in excess of $50,000. But the official warned businesses to “be prepared to be there for a little while” as the center checks—and double checks—the amount of cash being submitted.
“Revenue officers will assist the marijuana companies in paying us,” she said.
IRS officials could also help cannabis firms by having officials accompany them “to the bank in order to try to help the taxpayer secure a cashier’s payment to pay the IRS, as well as using money orders,” she said, adding that “our revenue officers are are wanting to work with the marijuana companies to help assist them to pay us.”
“When the revenue officers are there in person with the taxpayer, that could potentially help increase the likelihood that the bank will cooperate and help the taxpayer transition into a cashier’s check,” she continued. “And that has been a trend since this first became legal [at the state level], that more and more banks are allowing cannabis companies to bank with them.”
In a report published earlier this year, congressional researchers examined tax policies and restrictions for the marijuana industry—and how those could change if any number of federal reform bills are enacted.
IRS, for its part, said last month 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.
As it stands, banks and credit unions are operating under 2014 guidance from the Financial Crimes Enforcement Network (FinCEN) that lays out reporting requirements for those that choose to service the marijuana industry.
Leaders in both chambers of Congress are working on legalization bills to end federal marijuana prohibition. But stakeholders are hopeful that, in the interim, legislators will enact modest marijuana banking reform. Legislation to protect financial institutions from being penalized for working with cannabis businesses passed the House for the fifth time last month.
Rodney Hood, a board member of the National Credit Union Administration, wrote in a Marijuana Moment op-ed this month 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.
IRS separately hosted a forum in August dedicated to tax policy for marijuana businesses and cryptocurrency.
Earlier this year, IRS Commissioner Charles Rettig told Congress that the agency would “prefer” for state-legal marijuana businesses to be able to pay taxes electronically, as the current largely cash-based system under federal cannabis prohibition is onerous and presents risks to workers.
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.
IRS released updated guidance on tax policy for the marijuana industry last year, including instructions on how cannabis businesses that don’t have access to bank accounts can pay their tax bills using large amounts of cash.
The update appears to be responsive to a Treasury Department internal watchdog report that was released earlier in the 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.”
Luxembourg Set To Become First European Country To Legalize Marijuana Following Government Recommendation
Luxembourg is poised to become the first European country to legalize marijuana, with key government agencies putting forward a plan to allow the possession and cultivation of cannabis for personal use.
The ministers of justice and homeland security on Friday unveiled the proposal, which will still require a vote in the Parliament but is expected to pass. It’s part of a broader package of reform measures the agencies are recommending.
Under the marijuana measure, adults 18 and older could grow up to four plants. However, under the non-commercial model that is being proposed, possessing more than three grams in public would still be a civil offense, carrying a fine of €25-500 ($29-581). Currently, the maximum fine for possession is €2,500 ($2,908).
In terms of access, adults would be able to buy and trade cannabis seeds for their home garden.
Justice Minister Sam Tamson said the government felt it “had to act” and characterized the home cultivation policy change as a first step, The Guardian reported.
👉🏻élaboration du projet de loi usage privé du #cannabis : jusqu’à 4 plantes à domicile & décorrectionnalisation <3g
👉🏻renforcement de la prévention & de l’accompagnement
👉🏻⬆️des moyens de la police
👉🏻élaboration d’un projet de production/vente #Luxembourg pic.twitter.com/8yre0Udt8J
— Sam Tanson (@SamTanson) October 22, 2021
“The idea is that a consumer is not in an illegal situation if he consumes cannabis and that we don’t support the whole illegal chain from production to transportation to selling where there is a lot of misery attached,” he said. “We want to do everything we can to get more and more away from the illegal black market.”
While limited in scope, the reform would make Luxembourg the first country in Europe to legalize the production and possession of marijuana for recreational use. Cannabis has been widely decriminalized in certain countries in the continent, but it has remained criminalized by statute.
Government sources in Luxembourg told The Guardian that plans are in the works to develop a program where the state regulates the production and distribution of marijuana. Tamson said they are working to resolve “international constraints” before taking that step, however, referring to United Nations treaty obligations that multiple U.S. states and other countries like Canada and Uruguay have openly flouted.
The measures include:
🟢 Regulation of cannabis use and cultivation: adults will be able to legally cultivate up to four cannabis plants for their own use, provided the cultivation is happening at their place of residence.
— European Greens (@europeangreens) October 22, 2021
For now, the country is focusing on legalization within a home setting. Parliament is expected to vote on the proposal in early 2022, and the ruling parties are friendly to the reform.
This has been a long time coming, as a coalition of major parties of Luxembourg agreed in 2018 to enact legislation allowing “the exemption from punishment or even legalization” of cannabis.
Meanwhile in the U.S., congressional lawmakers are working to advance legalization legislation. A key House committee recently approved a bill to end marijuana prohibition, and Senate leadership is finalizing a separate reform proposal.
In Mexico, a top Senator said this week that lawmakers could advance legislation to regulate marijuana in the coming weeks. The Supreme Court has already ruled that adults cannot be criminalized over possession or cultivation, but there’s currently no program in place to provide access.
Photo courtesy of Mike Latimer.
New Bipartisan Marijuana Research Bill In Congress Would Let Scientists Study Dispensary Products
A bipartisan group of federal lawmakers introduced a bill on Thursday to remove barriers to conducting research on marijuana, including by allowing scientists to access cannabis from state-legal dispensaries.
The Medical Marijuana Research Act, filed by the unlikely duo of pro-legalization Rep. Earl Blumenauer (D-OR) and prohibitionist Rep. Andy Harris (R-MD), would streamline the process for researchers to apply and get approved to study cannabis and set clear deadlines on federal agencies to act on their applications.
“Congress is hopelessly behind the American people on cannabis, and the quality of our research shows why that is an urgent problem,” Blumenauer told Marijuana Moment. “Despite the fact that 99 percent of Americans live in a state that has legalized some form of cannabis, federal law is still hamstringing researchers’ ability to study the full range of health benefits offered by cannabis, and to learn more about the products readily available to consumers.”
“It’s outrageous that we are outsourcing leadership in that research to Israel, the United Kingdom, Canada, and others. It’s time to change the system,” he said.
Late last year, the House approved an identical version of the cannabis science legislation. Days later, the Senate passed a similar bill but nothing ended up getting to the president’s desk by the end of the last Congress. Earlier this year, a bipartisan group of senators refiled their marijuana research measure for the current 117th Congress.
Meanwhile, lawmakers are also advancing a separate strategy to open up dispensary cannabis to researchers. Large-scale infrastructure legislation that has passed both chambers in differing forms and which is pending final action contains provisions aimed at allowing researchers to study the actual marijuana that consumers are purchasing from state-legal businesses instead of having to use only government-grown cannabis.
The new bill filed this week by Blumenauer and Harris, along with six other original cosponsors, would also make it easier for scientists to modify their research protocols without having to seek federal approval.
Marijuana Moment is already tracking more than 1,200 cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.
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It would additionally mandate that the Drug Enforcement Administration (DEA) license more growers and make it so there would be no limit on the number of additional entities that can be registered to cultivate marijuana for research purposes. It would also require the U.S. Department of Health and Human Services (HHS) to submit a report to Congress within five years after enactment to overview the results of federal cannabis studies and recommend whether they warrant marijuana’s rescheduling under federal law.
“The cannabis laws in this country are broken, including our laws that govern cannabis research,” Blumenauer said in remarks in the Congressional Record. “Because cannabis is a Schedule I substance, researchers must jump through hoops and comply with onerous requirements just to do basic research on the medical potential of the plant.”
The new legislation will “both streamline the often-duplicative licensure process for researchers seeking to conduct cannabis research and facilitate access to an increased supply of higher quality medical grade cannabis for research purposes,” he said, adding that expanded studies will help make sure “Americans have adequate access to potentially transformative medicines and treatments.”
For half a century, researchers have only been able to study marijuana grown at a single federally approved facility at the University of Mississippi, but they have complained that it is difficult to obtain the product and that it is of low quality. Indeed, one study showed that the government cannabis is more similar to hemp than to the marijuana that consumers actually use in the real world.
There’s been bipartisan agreement that DEA has inhibited cannabis research by being slow to follow through on approving additional marijuana manufacturers beyond the Mississippi operation, despite earlier pledges to do so.
In May, the agency finally said it was ready to begin licensing new cannabis cultivators. Last week, DEA proposed a large increase in the amount of marijuana—and psychedelics such as psilocybin, LSD, MDMA and mescaline—that it wants produced in the U.S. for research purposes next year.
Under the new House bill, the agency would be forced to start approving additional cultivation applications for study purposes within one year of the legislation’s enactment.
HHS and the attorney general would be required under the bill to create a process for marijuana manufacturers and distributors to supply researchers with cannabis from dispensaries. They would have one year after enactment to develop that procedure, and would have to start meeting to work on it within 60 days of the bill’s passage.
In general, the legislation would also establish a simplified registration process for researchers interested in studying cannabis, in part by reducing approval wait times, minimizing costly security requirements and eliminating additional layers of protocol review.
Read the full text of the new marijuana research bill below: