SAFE Banking Act Included in New Coronavirus Relief Package

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Language from the cannabis industry’s long-sought banking reform bill, the Secure and Fair Enforcement (SAFE) Banking Act, has been included in the House Democrats’ new $3 trillion coronavirus aid package.

Unveiled Tuesday, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act includes a second round of direct stimulus payments to individuals and $200 billion in hazard pay for frontline workers, among other relief provisions.

Of interest for cannabis industry stakeholders is a section nestled within the 1,815-page legislation that would protect financial institutions working with state-approved marijuana businesses. Currently, banks and credit unions face penalties for working with cannabis firms, since marijuana is still classified as a Schedule I drug under the Controlled Substances Act.

Identical language from the SAFE Banking Act -- which the U.S. House of Representatives passed last September by a vote of 321-103 -- has been included on page 1,066 of the bill, a welcome sight for cannabis firms that have been shut out from obtaining emergency relief or securing bank loans during the COVID-19 pandemic.

The inclusion of the SAFE Banking Act language in the HEROES Act comes just a few days after a coalition of 10 marijuana and banking organizations sent a letter to House Speaker Nancy Pelosi (D-CA) and House Minority Leader Kevin McCarthy (R-CA) urging them to include provisions that would allow "cannabis businesses to access traditional banking products and services.”

As proposed, the SAFE Banking Act portion of the new coronavirus stimulus package would enable “cannabis-related legitimate businesses and service providers” to establish bona fide banking relationships. If passed, it would further legitimize the cannabis sector and allow operators to move away from cash-only transactions.

“Our industry employs hundreds of thousands of Americans and has been deemed ‘essential’ in most states,” National Cannabis Industry Association (NCIA) executive director Aaron Smith said via a press release. “It’s critically important that essential cannabis workers are not exposed to unnecessary health risks due to outdated federal banking regulations.”

A 90-page summary of the HEROES Act was also released alongside the bill, outlining each proposal. Here’s what House Democrats said about cannabis:

“This section would allow cannabis-related legitimate businesses, that in many states have remained open during the COVID-19 pandemic as essential services, along with their service providers, to access banking services and products, as well as insurance,” the summary reads. “This section also requires reports to Congress on access to financial services and barriers to marketplace entry for potential and existing minority-owned cannabis-related legitimate businesses”

Inclusion of the SAFE Banking Act was cheered by pro-cannabis lobbyists and lawmakers alike.

NORML political director Justin Strekal called it a “positive development,” but said the absence of specific language permitting cannabis businesses to apply for Small Business Administration (SBA) loans was “akin to applying a band-aid to a gaping wound.”

“In the majority of states, these cannabis businesses have been deemed essential during this pandemic,” Strekal wrote in a blog post. “But at the federal level, they are being cast aside by Congress. Those small cannabis businesses facing tough economic times are essentially being told by Congress to shutter their doors and fire their employees.”

Indeed, the SAFE Banking Act language in the HEROES Act would not open the door to SBA-administered loans via the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EDIL)-COVID-19 plan.

“While larger, better capitalized players may be able to weather this storm, smaller cannabis businesses may not be able to do so absent some economic stimulus,” Strekal said. “By continuing to deny these small businesses eligibility to SBA assistance, it is possible that we could see an acceleration of the corporatization of the cannabis industry in a manner that is inconsistent with the values and desires of many within the cannabis space.”

For her part, National Cannabis Roundtable (NCR) executive director Saphira Galoob said “access to banking services removes some of the shackles that are holding back the full potential of the fastest growing sector of the US economy.”

“NCR applauds the House for acknowledging the legitimacy of cannabis businesses, and especially the work of Congressman Perlmutter who has been a tireless champion for the industry and its thousands of small businesses and workers,” she said via a statement.

Rep. Ed Perlmutter (D-CO) -- who last month co-sponsored the “Emergency Cannabis Small Business Health and Safety Act” that would give plant-touching marijuana companies and industry “service providers” access to federal coronavirus relief programs – also tweeted his support of SAFE Banking Act language in the HEROES Act.

“I have been pushing for this because the #COVID19 crisis has only exacerbated the risk posed to cannabis businesses & their employees & they need relief just like any other legitimate business,” he said.

While the inclusion of pro-pot language in the latest coronavirus response bill is no doubt a win for the cannabis industry, the odds of Senate Republicans backing the HEROES Act appear to be a longshot.

Sen. Mike Crapo (R-ID), who serves as the chairman of the Senate Banking Committee, has also long-opposed federal cannabis reform.

Meanwhile, Kevin Sabet, president of Smart Approaches to Marijuana (SAM), a group opposed to marijuana legalization and commercialization, believes that “pot companies are raking in major profits” and “should not be given consideration in a bill designed to help people who are suffering.”

“The inclusion of such a blatant giveaway to Big Marijuana – which would allow cartels and criminal syndicates to potentially access our financial system – should be a complete nonstarter as the discussions over this package continue,” he said via a statement.

It’s worth noting that most major publicly traded cannabis companies consistently report significant quarterly and annual losses. Several firms are taking drastic steps – including cancelling proposed mergers and acquisitions, conducting widespread layoffs, and closing facilities – to achieve profitability and remain in business during the coronavirus pandemic.

Additionally, marijuana firms pay an effective tax rate that is 3.5 times greater than other businesses because section 280E of the Internal Revenue Code forbids state-legal cannabis companies from taking ordinary deductions such as payroll, rent and utilities, among others.

A vote on the HEROES Act could come as early as Friday.

Additional information is included in the NCIA’s press release below.

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Cannabis Banking Reform Included in Latest COVID-19 Relief Legislation Being Considered in the House

House adds SAFE Banking Act and improved loan access to HEROES Act

WASHINGTON, D.C. – On Tuesday, Speaker of the House Nancy Pelosi unveiled the newest bill to provide the next stage of coronavirus relief funding and included language that would improve access to banking services and loans for the regulated cannabis industry. The banking language is identical to the House-approved Secure and Fair Enforcement (SAFE) Banking Act and would make it easier for financial institutions to work with cannabis businesses that are in compliance with state law, as well as help address serious public health and safety concerns caused by operating in predominantly cash-only environments. The relief bill, known as the HEROES Act, also includes language preventing applicants for Small Business Administration loans from being disqualified based solely on a criminal conviction.

The full relief legislation is available here, with banking language starting on page 1066.

The HEROES Act will now be taken up by the rest of the House before a floor vote. If passed, it will go to the Senate for consideration.

“On behalf of the legal cannabis industry, we commend the congressional leadership for prioritizing public health and safety by including sensible cannabis banking policy in this legislation,” said Aaron Smith, executive director of the National Cannabis Industry Association (NCIA). “Our industry employs hundreds of thousands of Americans and has been deemed ‘essential’ in most states. It’s critically important that essential cannabis workers are not exposed to unnecessary health risks due to outdated federal banking regulations.”

Last week, NCIA joined other cannabis advocacy and industry organizations in urging Congress to include the SAFE Banking Act in the next round of relief funding, citing the ability of cash to carry contagions and the personal proximity required by cash transactions as reasons for urgency in addition to the other safety and transparency concerns addressed by the legislation.

In September, an overwhelming bipartisan majority approved the SAFE Banking Act in the House, but the bill has been delayed pending a markup in the Senate Banking Committee.

The National Cannabis Industry Association (NCIA) is the largest cannabis trade association in the U.S. and the only organization broadly representing cannabis-related businesses at the national level. NCIA promotes the growth of a responsible and legitimate cannabis industry and works toward a favorable social, economic, and legal environment for that industry in the United States.


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