More pressure from states needed to break congressional logjam on marijuana industry’s access to banking, cannabis law expert says
By Ray Hagar, Nevada Newsmakers
The congressional logjam blocking U.S. banks from doing business with legal marijuana companies will only be cleared when more states legalize cannabis and pressure the federal government to change, a Nevada marijuana law expert said on Nevada Newsmakers.
“At some point, there is going to be enough states that are doing it (legal marijuana), that the federal government is going to be pushed to have to go there,” Eva Segerblom, a lawyer with Maddox, Segerblom and Canepa, told host Sam Shad.
Thirty-three states now allow for legal medical marijuana and 11 more — including Nevada — allow the sale and distribution of pot for recreational use.
However, at least six more states are trying to get recreational marijuana referendums on the ballot this year, according to published reports. U.S. banks cannot currently work with marijuana businesses because cannabis remains a Schedule I (illegal with no medical use) drug on the federal level.
“It is hard to know what they (federal lawmakers) are going to do,” Segerblom said. “There has been talk to try to allow for federal banking. That is one of the biggest issues right now for these businesses. They don’t have the ability to go through banks so it is such a cash market.”
The U.S. House overwhelming passed the SAFE Banking Act last year, which would clear the way for banks to work with the cannabis industry. However it stalled in the U.S. Senate Banking Committee. That committee is chaired by Sen. Mike Crapo, R-Idaho, whose state is one of the few left where all types of marijuana remain illegal.
“I remain firmly opposed to efforts to legalize marijuana on the federal level, and I am opposed to legalization in the state of Idaho,” Crapo said in committee late last year.
The federal government is also squeezing legal marijuana businesses because the tax code bars cannabis companies from taking any deductions on their federal income taxes, except for cost of goods sold. It can result in an effective tax rate of 70 percent to 90 percent, according to published reports, and can leave little income for reinvestment and hiring.
Yet trying to cut corners on federal income taxes can be ruinous for Nevada marijuana businesses, said Segerblom, even though marijuana businesses also pay heavy state wholesale and retail taxes.
“They (federal tax officials) are already getting their fair share of it,” she said about Nevada marijuana money. “These businesses, although it is still illegal on a federal level, they are still having to pay their taxes. And if they don’t pay their taxes they are going to get hit. In fact, I think that is the biggest issue that any (marijuana) business has to fear on the federal level. They need to be compliant with the tax requirement.” Tax issues and competition from black-market dealers have become major headaches for Nevada’s pot industry, Segerblom said. However, she insists the business is still strong in Nevada.
“A lot of weaker players are going by the wayside, being bought up or going out of business because of the taxes,” she said. “And the black market is still thriving and it is making it difficult for companies to make money.
“There is always going to be concern about the black market,” she added. “But in comparison to California, it is struggling much more than we are. And I think we have a better system in place and there are a lot of people who are really doing well in this industry and continuing to thrive.”
Nevada has a new plan — passed by the 2019 Legislature and signed into law by Gov. Steve Sisolak — to provide a payment alternative for the all-cash industry. The new law, pushed by state Treasurer Zach Conine, established a three-year pilot program in which cannabis businesses can use an online system where digital currency can be sent and received.
“He (Conine) has some really brilliant ideas,” Segerblom said. “We cannot have a better person in that position to be thinking about this pragmatically and in the best interest of the state. It hasn’t gotten there yet and we’re also trying to wait and see if that SAFE Banking Act can get enacted federally.”
Eva Segerblom is the daughter of Clark County Commissioner Tick Segerblom, who took the lead in forming Nevada’s current marijuana laws at the Legislature when he was a state senator. The law firm is based in South Reno but operates statewide.
Watch this episode of Nevada Newsmakers.