National Cannabis Industry Association Lobby Days | Observations and Insights | May 21-23, 2019

Washington D.C. in May is always the perfect time of year, summer weather but not too hot with temperatures in the low 80s and blue skies with puffy white clouds. This past May, the cherry blossom trees and flowers were in bloom everywhere. Just beneath the beautiful landscape, hyper-partisan politics lurked, and wrangling over the issues of the day was constant.

I recently attended the National Cannabis Industry Association Lobby (NCIA) Days and this is one of my favorite cannabis events of the year. While other cannabis events are business and marketing-oriented, Lobby Days is political and substantive, and the issues of the day are discussed. It was my fifth time attending Lobby Days, and to follow are some of my observations and insights:

This was the NCIA’s 9th Annual Lobby Days and it has grown every year. The first Lobby Days had about 30 attendees. This year, over 200 cannabis advocates spread out over Capitol Hill to attend more than 300 prearranged meetings with Congressmen and Senators and their staffs. In D.C. lingo, this is called a “fly in.”

When Lobby Days started, we were laughed at, and people asked, “Is there really a National Cannabis Industry Association? Ha ha ha.” Today, cannabis and CBD issues cannot be avoided by any politician, and everyone in public office needs to take a position.

The big issues continue to be banking and tax deductions. Safe access to banking for cannabis companies is being framed as a public safety issue. It could be fixed by a bill called the SAFE Banking Act  that is now before Congress.

Tax deductions for cannabis businesses, currently disallowed by the IRS, would be allowed if the States Act is passed, also a bill is currently being debated in Congress.

Don’t hold your breath on these bills passing anytime soon, my take-away is the SAFE Banking bill has a small chance of passing this year, but the States Act has more challenges to overcome. I learn more about how Congress and Washington work every time I go. During one of my first visits, a Congressman explained to me that Washington works very slowly and is years behind public opinion by design. When the Federal Government passes legislation, it is after taking into account the concerns and issues from all sides, and that takes time.

I learned there is opposition to these bills from Republicans and Democrats. Some Republicans will never support a cannabis bill of any kind. Democrats are demanding Social Justice Issues be addressed before supporting cannabis bills. Social Justice, in D.C. terms, means more consideration for licensing and access to capital for minorities.

From my point of view, the most significant change that I observed during this year’s visit to Capitol Hill is that legalizing cannabis at the Federal level seems to be a foregone conclusion. When this will happen is unknown, but what I saw this trip is that powerful constituencies are lining up to make sure when it does happen, their issues are addressed.

These issues, in addition to Social Justice, include the economics of Federal taxation of cannabis. Right now, allowing cannabis companies to take all business deductions is seen as a net revenue loser. The 280E issue needs to be re-scored by the Joint Tax Committee to see what the revenue to the Federal Government would be if the industry was fully legal and if the illicit market was eliminated. This would likely include some sort of a Federal excise tax.

Stay tuned…

 

If you have any questions, or are interested learning more about how legalization efforts effect your business in cannabis, hemp, or CBD, please contact Jim Marty at jmarty@bridgewestcpas.com.