State lawmakers argue that the tax revenue and jobs created by a retail market for cannabis could help the state devastated by the coronavirus pandemic.
With a state budget devastated by the coronavirus, some Democratic lawmakers are hoping the economic crisis could become an opportunity to coax Texas into joining a growing number of states opting to legalize — and tax — recreational marijuana use.
The chances are slim.
State Sen. Roland Gutierrez of San Antonio and state Rep. Joe Moody of El Paso filed bills this week in advance of the 2021 legislative session that would legalize, regulate and tax personal cannabis use. State Rep. Terry Canales of Edinburg has proposed putting the question of legalization to Texas voters.
The coronavirus pandemic has blown a $4.6 billion hole in the state budget, according to the comptroller’s latest estimate, and the lawmakers argue that a legal marijuana industry could bring in hundreds of millions in tax revenue and create tens of thousands of jobs.
Voters in more and more states, they note, have legalized recreational cannabis use, including four more this month bringing the total to 15.
At the same time, marijuana arrests and prosecutions across Texas have been plummeting, largely because a bill passed last year that legalizes hemp has thrown prosecutions into disarray, and some cities have already eased off on pursuing small pot cases.
“As we see a number of states engaging around the country in a retail market, this is no longer an experiment,” Moody said. “It is also no secret that we are heading into some rough economic waters and we need to explore every possible revenue stream.”
But changes to marijuana laws still face powerful opposition at the Texas Capitol. The handful of legalization proposals filed in recent years have received little to no attention from lawmakers. And even less controversial measures, like lowering criminal penalties for marijuana possession, have fallen flat in the Texas Senate. With Lt. Gov. Dan Patrick, a staunch conservative, at the helm of the upper chamber, it remains unlikely that a legalization bill will make it out when the Legislature reconvenes in January.
In 2019, Patrick said he and other Senate Republicans opposed the bill that would have lessened penalties for possession, calling it a “step toward legalization of marijuana.” A spokesperson for Patrick did not respond to questions on his current stance on legalization efforts. Nor did state Rep. Dade Phelan, a Beaumont Republican expected to be the next House Speaker, or a spokesperson for Gov. Greg Abbott.
Gutierrez and Moody recognize the powerful opposition to legalization in the Senate. And Moody said while the Republican-majority House overwhelmingly passed a bill in 2019 to lessen penalties, many have still resisted legalization. But given the state of the economy and more states following the trend to legalize and tax cannabis, they said action was needed.
Gutierrez estimated Tuesday that legalization could create up to 30,000 Texas jobs, and Moody said the legislation could “add hundreds of millions of dollars in revenue, if not billions.” A recent analysis by a cannabis law firm said if Texas taxed cannabis similarly to Colorado, the state could take in more than $1.1 billion dollars per biennium.
Senate Bill 140 and House Bill 447 would both legalize the possession of up to 2.5 ounces of cannabis by anyone over the age of 21. For concentrates, the limit would be 15 grams. Texans would also be able to have up to 12 cannabis plants at their homes.
The Texas Department of Licensing and Regulation would regulate the manufacture and sale of marijuana, and there would be a 10% sales tax on any cannabis product. Moody’s proposed Texas Regulation and Taxation of Cannabis Act would funnel most of the tax revenue to teacher pensions and salaries, with some set aside for cities and counties. Gutierrez’s bill, dubbed the Real Solutions Act, would send the majority of revenue to school districts, with some set aside for border security and local law enforcement.
Both Gutierrez and Moody acknowledged lawmakers could shift where any revenue goes during the legislative process, but stressed the need for extra money in the state coffers — a need Gutierrez said other red states have recognized. On Election Day, voters in Montana and South Dakota leaned steadily toward reelecting President Donald Trump and also legalized recreational marijuana.
“[The states] are not exactly the home of liberal ideas,” Gutierrez said. “They see what every other state who has done this has seen: a source of revenue.”
Heather Fazio, director of Texans for Responsible Marijuana Policy, argues it would be irresponsible for the Legislature to not consider legalization next year. She pointed to a Pew Research Center survey that showed two thirds of Americans favored legalizing marijuana last year. Texas support is lower, but still at a small majority, according to a University of Texas/Texas Tribune poll. In March 2019, 54% of Texans in the poll said they supported legalization of recreational marijuana.
“I’m not sure that this is going to be the session that it happens, but I know that this session it’s definitely going to be talked about,” Fazio said. “If nothing else, it jumpstarts the conversation about repealing prohibition, so we can have a conversation about how prohibition has affected the lives of people.”
In 2019, Texas law enforcement arrested more than 45,000 people accused of possessing marijuana, according to the Texas Department of Public Safety. That number was considerably higher in 2018, before hemp was legalized, with nearly 63,000 arrests. A report by the American Civil Liberties Union found that in 2018, Black people in Texas were 2.6 times more likely to be arrested on suspicion of marijuana possession than white people.
Under Texas law, possessing any amount of marijuana is a Class B misdemeanor, punishable by up to six months in jail and a fine of up to $2,000. Possession of more than two ounces could mean up to a year in jail, and more than four ounces is a felony. Possessing any amount of any marijuana concentrate, including vape pens with more than 0.3% THC, is at least a state jail felony which carries a punishment of between six months and two years in the state prison system.
Medical cannabis is legal in very limited circumstances. The Texas Compassionate Use Act went into effect in 2015, allowing people with epilepsy to access cannabis oil with very low levels of THC. Last year, lawmakers expanded the list of qualifying conditions to include diseases such as multiple sclerosis, Parkinson’s disease and Lou Gehrig’s disease, or ALS.
Moody, who for years has carried bills that aimed to decriminalize marijuana and make low-level possession a civil offense, said he moved to legalization efforts this year in part to start the conversation.
“We have done a very good job around advancing the conversation around criminal penalties and medical use. We have had little to no dialogue on a retail market,” he said. “As this conversation continues to grow around the country, and specifically in Texas, I think there’s lots of room for people to change their mind on this topic.”
This article originally appeared in The Texas Tribune.
The Texas Tribune is a nonprofit, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues.
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: