Senator Warren & Friends Propose Law Giving Pot Shops Access to Banking
Senator Elizabeth Warren and several other colleagues wrote a letter to the Financial Crimes Enforcement Network (FCEN) asking the agency to stop punishing financial institutions that conduct business with cannabis companies in states where pot has been legalized.
In the letter, the senators pointed out: “Most banks and credit unions have either closed accounts or simply refused to offer services to indirect and ancillary businesses that service the marijuana industry. A large number of professionals have been unable to access the financial system because they are doing business with marijuana growers and dispensaries.”
These senators explained that “these legitimate, indirect businesses have been unable to open checking accounts and accept credit cards or checks. In some cases they have also lost access to existing accounts, such as retirement accounts, and have been forced to pay their employees, taxes, and bills in cash. Locking lawyers, landlords, plumbers, electricians, security companies, and the like out of the nation’s banking and finance systems serves no one’s interest.”
For example, in 2015 the Fourth Corner Credit Union (FCCU) challenged the decision of the Federal Reserve Bank of Kansas (FRBK) in federal court that restricts the bank from accessing the US financial system.
The Fed rejected a request from FCCU to take in deposits and issue lines of credit to marijuana businesses which has left these corporations to operate on a cash-only basis.
FCCU maintains that since the Federal Reserve Bank is a “quasi-government institution”, it does not have the authority necessary to prevent pot banks from operating in the US; as well as keep them from the US financial system.
Mark Mason, attorney for FCCU, said that his clients “intend to take this money out of shadows and off of the street so that [the Fed] can track it and trace it.”
In response, Scott Barker, lawyer for the Fed, insisted that pot banks are “a risk” that the central bank “has decided they don’t want to take on.”
Presiding in this case was District Court Judge R. Brooke Jackson who agrees “there ought to be banking and regulation” for the pot industry; however the question presented to the court was “not [a] legal question” but rather one that FCCU “should take up … with Congress and not the courts.”
Jackson pointed out that “hundreds of banks already do take pot proceeds, even if they sometimes pretend they don’t know what they’re doing.”
He mentioned Wells Fargo in Colorado handles the business of the State, which includes the proceedings from the sale of marijuana within that state which ends up going “into the nation’s banking system already.”
The Fed is not the only “quasi-government” agency to hit the marijuana industry in the literal pocketbook.
In February of2015 news broke about how the Internal Revenue Service (IRS) had been using a technicality to justify penalizing Allgreens, LLC, a Denver medical marijuana dispensary, for not having a bank account.
In an appeals court, the IRS stated that “not being able to get a bank account is no excuse for not paying employee withholding taxes electronically, as required by federal tax law.”
During an IRS hearing, it was ruled that although Allgreens has not been able to secure a bank account does not preclude their corporation from adhering to “current banking laws” and this circumstance “is not considered reasonable cause to abate” the 10% IRS penalty attached to Allgreens.
According to IRS requirements, corporations conducting business must pay their quarterly taxes via bank wire. This poses a problem for marijuana dispensaries and recreational retail stores who are shunned by the mainstream banking industry.
Rachel Gillete, attorney for Allgreens wrote in her brief that “meets the requirements of reasonable cause because the petitioner exercised ordinary business care and prudence in paying its federal employment tax obligations.”
In fact, Allgreens pays their corporate taxes in cash delivered “on time” directly to the IRS offices located in downtown Denver “twice each month”.
However, this cash payment does not satisfy the IRS requirement for tax payments to be wired through a bank account.
Gillete maintained that “rather than waive the penalty for cash-only businesses paying the tax on time, the IRS has advised the companies to avoid the assessment by using techniques that amount to money laundering.”
Allgreens argued in court that “the penalty is unfair since many marijuana businesses cannot find banking because the drug remains illegal under federal law.”
Chris Edwards, executive director of Alternative Therapies Group (ATG), admitted the “big problem in this industry is the bank. It’s a public safety concern to say the least. This is an all-cash business and it would certainly be beneficial for dispensaries, patients, and the host communities if banks could participate in this industry.”