It has been a year since medical marijuana became legal in Oklahoma. However, federal laws still stand in the way from these businesses operating freely and effectively.
State and federal laws disagree on how the medicinal marijuana industry should be treated. This presents the crux of the issue. State Question 788, approved in 2018, allowed legal growing, use, and selling of marijuana as a medication for ailments on the state level. But federal law still views the use of the drug as illegal, as per the Controlled Substances Act. It sees any form of cannabis selling as drug distribution, forcing businesses that deal in marijuana to suffer high tax penalties.
The situation is worsened since federal law dictates that banks cannot accept money from businesses which, in the law’s eyes, deal in drug distribution. This only exacerbates matters for any medicinal marijuana retailer, since most businesses deposit their earnings in banks. Seeing that Oklahoma residents spend up to $18 million on this kind of cannabis, the question of where to place the money only becomes more urgent.
Code Section 280E
One of the greatest obstacles for marijuana retailers lies in Internal Revenue Code Section 280E. The Internal Revenue permits you to take tax deductions for expenses on ordinary and necessary businesses. The above-mentioned section, however, excludes enterprises that engage in controlled substance trafficking. This applies to any Schedule I or Schedule II substance. Marijuana falls under the category of Schedule I drug (so does heroin), so any establishment that trades t faces severe tax limitations.
First Fidelity Bank Supports These Businesses
Suzanne Symcox, chief administrative officer of First Fidelity Bank, claims that FFB is currently the sole bank in Oklahoma that renders services to medicinal marijuana businesses. It has done so since a 2013 memo release put forward by a former Deputy U.S. Attorney General. The memo stated that federal law would maintain low priority when prosecuting banks for doing business with cannabis distributors if they’re in a country where the drug is legal.
Hope for Medicinal Marijuana Businesses
Marijuana-centered businesses may find a workaround in the form of “cost of goods sold” (COGS). The Internal Revenue Service has strictly defined limitations to what these organizations can put under COGS, though.
There is an effort to remove the legal walls disrupting the growth of these enterprises — the reintroduction of the Strengthening the Tenth Amendment through Entrusting States Act (also known as STATES). The Act would benefit those selling marijuana in countries where it has been legalized. It would do so by amending the Controlled Substances Act. Thus, it would alleviate medicinal marijuana stores’ limited access to banks.
Furthermore, HR 1595 (the SAFE Banking Act) aims to ameliorate the tense relationship between banks and cannabis sellers. HR 1595 would protect banks from penalties incurred for doing business with marijuana distributors. FFB, the National Cannabis Industry Association, as well as 50 other states, have shown support for SAFE.