On September 28, 2020, House democrats released an updated version of the Economic Recovery Omnibus Emergency Solutions Act (the HEROES Act) to address needs that have developed since its introduction on May 15, 2020. The updated version continues to include cannabis reform in the form of reintroducing the Secure and Fair Enforcement Banking Act (the SAFE Act), with the purpose "to increase public safety by ensuring access to financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such business." As with the introduction, the same ambiguities, problems and hurdles to Senate approval still exist as identified in our June 18, 2020 post, and passage appears unlikely.
Not lost on the timing of the reintroduction, however, are the 2020 ballot questions for adult use legalization in four states: Arizona, Montana, New Jersey and South Dakota. In each case, the ballot question specifically asks to permit an additional tax on adult-use marijuana purchases, thus highlighting the economic impact of the industry; taxes may be in the form of state and/or local taxes. In New Jersey, in addition to being subject to the NJ Sales and Use Tax Act, voters will determine if municipalities can impose a local tax in the form of a municipal or transfer tax on a cannabis transaction not to exceed 2%.
As adult use of cannabis increases, so does the number of cannabis-related financial transactions and the need for secure money handling. Also, the need for growth amplifies the issue of cannabis-related businesses (CRBs) facing increased capital needs, while also realizing that cash-based businesses are impeded by the lack of access to credit facilities. As states continue to legalize marijuana in all forms and the composition of the House and Senate will change between cannabis and non-cannabis members, pressure will mount to either (i) remove marijuana as a controlled substance or (ii) provide a viable work-around in the form of the SAFE Banking Act or other similar legislation.
While the SAFE Banking Act may not pass in 2020, the continued attention drawn to this issue is a step in the right direction in expanding the cannabis sector. We will continue to monitor the HEROES Act in general and the SAFE Banking Act components in particular, as the Senate considers it (and other similar bills regarding the ability of CRBs to use the federal banking system like every other legitimate business).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
