Marijuana Businesses Pay Taxes, But Can't Get Federal Disaster Relief
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The federal government's prohibition against marijuana continues to rear its head. Few examples may prove as dire as the current one: federal funds aimed at providing relief for small businesses impacted by COVID 19 cannot go to marijuana businesses.
The cannabis industry has worked hard pitching into the coronavirus relief effort, including the donation of masks, gowns, and gloves. But when it comes to getting some help themselves from their own federal government, they are currently out of luck.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed by President Donald Trump last month, provides a fund from which the Small Business Administration can offer forgivable loans to businesses with 500 or fewer employees. The fund is meant to provide small businesses a way to keep paying employees' paychecks until the coronavirus crisis ebbs and they can safely reopen.
However, because marijuana remains a Schedule I illegal drug at the federal level, marijuana-related businesses cannot apply. The SBA’s Carol Chastang laid it down to the Cannabis Business Times: “SBA does not provide financial assistance to businesses that are illegal under federal law. Businesses that aren’t eligible include marijuana growers and dispensers, businesses that sell cannabis products, etc., even if the business is legal under local or state law.”
Greg Hubly, a Washington State-based cannabis business owner, expressed a response in more emotional terms, telling the Boston Globe there are, “10 families I’m responsible for and know all this talk about business relief is just more [expletive] messaging for my industry.”
The SBA is not giving loans to cannabis companies.
The cannabis industry employs an estimated 240,000 people in the United States - or, more accurately, it did before the coronavirus outbreak. Job loss in the industry has yet to be recorded, there is not a federal agency keeping track, only Leafly and Marijuana Business Daily have kept count. Unfortunately, some businesses have already laid-off employees. But declaring marijuana as an “essential” business has helped maintain jobs in some states, increasing demand for delivery.
Getting blocked from CARES aid is an extension of the federal government position on marijuana. Marijuana businesses cannot get access to the SBA’s business loan program even during the best of times.
A 2019 document from the SBA on the loan program said the agency would not approve loans to businesses, “engaged in illegal activity under federal, state, or local law.” It goes on to specifically mention the marijuana industry, stating that “because federal law prohibits the distribution and sale of marijuana, financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity. Therefore, businesses that derive revenue from marijuana-related activities or that support the end-use of marijuana may be ineligible for SBA financial assistance.”
It is these rules the SBA is turning to for guidance on the CARES funds. These rules extend to companies that do “indirect” business with the marijuana industry, including those that offer testing services, sell or install grow lights, and companies that offer legal, financial, and regulatory consulting services to the marijuana industry.
Is there a way out of this for marijuana businesses?
At this point, all anyone can do is attempt to change the regulations.
A group of 11 U.S. senators is attempting to do just that. Led by Senator Jacky Rosen, the lawmakers wrote a letter to the Senate Appropriations Committee asking that it include language that prohibits the SBA from denying loan applications to cannabis firms.
In the letter, the senators wrote: “Over the last decade, there has been a clear shift in public opinion toward supporting the legalization of cannabis in the United States,” first reported by Marijuana Moment, which obtained a copy of the letter. That acceptance should convince lawmakers to allow cannabis businesses to get federal funding, the senators argue.
That’s in the long term. For the short term with the CARES bill, some senators said they would continue working to get cannabis companies the disaster relief funding they need. The law changed.
“I'm frustrated Senate Republicans refused to allow us to include them in this legislation," Sen. Patty Murray, a Democrat from Washington, told Politico. “But we aren’t giving up.”