The marijuana and banking industries may seem like an unlikely lobbying duo, but both are tuned into Washington D.C., where a bill currently meandering through a Senate committee could open the regulatory door for the two to work more closely together.
Although marijuana has been legalized in some way in more than 30 states—including Louisiana—its ban at the federal level has largely cut the cannabis industry off from banking services, leading many companies in the industry to operate by cash only.
Operating on a cash basis, however, is risky and can open up a multitude of problems for companies, including security threats and difficulty in accessing credit, says Chanda Macias, president of Ilera Holistic Healthcare, which grows therapeutic cannabis for Southern University.
There are also tax implications. Because of the plant’s status as a Schedule I drug by the U.S. DEA, marijuana-related companies can’t write off their business expenses, only the cost of goods sold, and can pay up to 70% of revenues in taxes, estimates Macias, who owns marijuana dispensaries in Washington D.C.
Those businesses without a bank account are also unable to pay their tax bill electronically, leaving them to send an employee to carry large sums of money to the local IRS office.
“At times, you might be counting money for days before you can even pay an IRS bill,” Macias says, adding some banks that agree to work with cannabis-industry companies may only agree to provide basic services on the condition of astronomical fees.
The issue is one that Macias is working to solve on a federal level. She serves as the vice chair for the National Cannabis Roundtable, whose honorary chairman is former Republican Speaker John Boehner. Founded earlier this year, the roundtable’s membership is made up of growers, processors, dispensers, investors and entrepreneurs. Since being founded in February, the organization has taken up cannabis banking reform as its capstone lobbying issue.
Despite the known banking challenges facing cannabis-industry companies, LSU requires its growing partner to be backed by a financial institution. Similarly, the Louisiana Board of Pharmacy required that applicants vying for the state’s nine medical marijuana pharmacy permits be serviced from a Louisiana-headquartered bank.
Ashley Mullens, LSU AgCenter’s medical marijuana program coordinator, says early in the program’s development, the AgCenter met with LSU’s internal accounting division for guidance because the university banks with a federally chartered bank. Through the bid process with growing vendors, the AgCenter required a documented relationship with a Louisiana-chartered bank.
GB Sciences, the company LSU chose, had a relationship with Avoyelles Parish-based Cottonport Bank, so the school also chose Cottonport for its new account.
“Cottonport was the saving grace of us all,” Mullens says.
It’s unclear why executives at Cottonport Bank are electing to do what others here will not. Cottonport Bank owner AJ Roy did not respond to multiple requests for comment. But David Boneno, general counsel with the Louisiana Bankers Association, says when deciding when to do business with a company in the cannabis industry, a bank’s management has to consider the risks.
“Since marijuana is still a controlled substance, Schedule I, we’re dealing with a product that is illegal under federal law, which means it potentially exposes a bank to punishment, enforcement or risk of losing its FDIC insurance,” Boneno says. “Knowing that risk, are you willing to take that risk or not?”
A solution to the banking conundrum, Boneno says, must come from Washington. And a solution may soon be on the way.
In September, the U.S. House of Representatives passed the Secure And Fair Enforcement Banking Act, also known as the SAFE Banking Act, which would offer protections to banks doing business with the cannabis industry.
Though largely touted as bipartisan and passing the House on a 321-103 vote, the bill failed to garner much support from Louisiana’s delegation. Republicans Steve Scalise, Mike Johnson and Garret Graves each voted against the proposed federal protections, with only Democratic Rep. Cedric Richmond voting in favor. Reps. Ralph Abraham and Clay Higgins, both Republicans, did not vote.
The bill is now in the Senate, where it resides at the Committee on Banking, Housing, and Urban Affairs. Senate Banking Chair Mike Crapo, an Idaho Republican, reportedly expects the bill to have “good support” and wants the committee to vote on the bill before the end of the year.
It’s still unclear if any of that support will be coming from the Bayou State. Sen. John Kennedy, who serves on the banking committee, is undecided on the bill, according to a spokeswoman. Sen. Bill Cassidy does not serve on that committee, and since a final bill has not been passed through, Cassidy’s communications director, Ty Bofferding, says his team hasn’t completed its review.
Mullens and Macias say both LSU and Ilera Holistic Healthcare has reached out to the Louisiana congressional delegation in favor of the bill.
“Any safeguard we can get, we support,” Mullens says. “We want to use the funds for research and the Ag Center.”
Although LSU’s medical marijuana program has been supplying the state’s nine medical marijuana pharmacies for nearly two months now, behind the scenes the program has been operating at some level for the past four years.
Student interest in the program and in medical cannabis is growing, and the university formed a medicinal plants specialization. Mullens wants to grow those offerings into to a concentration, minor or possibly a major one day, with students supporting and conducting supplementary work to what the AgCenter is doing.
“The dream is to have graduate students in this work,” Mullens says. “We want to bring students on board, more researchers on board, and to be able to provide for those people.”