Small businesses have lined up for loans following the passage of federal coronavirus relief legislation, but cannabis businesses aren’t among them. Excluded because of the federal prohibition against cannabis, struggling businesses associated with the plant won’t see any aid from the federal Small Business Administration.
Since passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act—known as the CARES Act—SBA representatives have reiterated the policy against working with cannabis businesses. As spelled out in a 2019 guidance, this means that even an “indirect marijuana business,” such as grow light retailers or testing services, is ineligible for loan programs administered by the SBA.
That hasn’t stopped a chorus of voices from urging the federal government to allow these businesses access to the relief funds. Last week, for example, Colorado Governor Jared Polis wrote a letter to Representative Jason Crow, the Colorado Democrat who is a member of the House Small Business Committee, calling for the industry’s inclusion in SBA programs. The state has deemed cannabis retailers essential, allowing them to stay open during the pandemic, as have several other states with legal adult use and medical cannabis.
While the CARES Act was making its way through Congress, cannabis industry groups sent a letter asking that businesses have access to SBA loan programs. They sent another letter on April 13, after the Act passed, urging Congress to include them in the next relief package. Some members of Congress also are calling for change. On April 17, 34 members of the House from both parties urged House leadership to ensure state-legal cannabis businesses are included in the next relief bill.
On March 26, a day after the Senate passed the CARES Act, Oregon Senator Ron Wyden and ten of his colleagues sent a letter to Senate Appropriations Committee leadership calling for cannabis businesses to get access to SBA loan programs via annual spending legislation. For Wyden and the others, the cannabis industry’s ineligibility for the SBA’s Loan Guarantee Program and Disaster Assistance Program stretches beyond the current crisis. He sees it as just one of many inequities in the way the federal government treats cannabis businesses.
So, Wyden is calling for more far-reaching changes at the federal level—including reforms to the tax code—and he believes the current economic crisis might be an opportunity to get them.
Eric Tegethoff, Cannabis Wire: Why did you write this letter that calls for financial relief for the cannabis industry?
Senator Wyden: I’ve been leading the push on what’s called 280E, the provision in the tax code that doesn’t allow state and legal cannabis businesses to claim tax deductions and credits like other businesses. This isn’t right, because when a state steps up on something that’s historically been left to the states, I don’t think the federal government should be standing in the way of the intent of legislators.
Small businesses are the backbone of our economy. It just seemed critically important to change this SBA policy.
Tegethoff: Have constituents told you they are struggling during COVID-19?
Wyden: All our small businesses are struggling now. I just think that cannabis businesses were hurt before the pandemic. Now, they’re especially worried about whether they’re going to be able to keep their employees on, whether they’ll be able to cover expenses. Just because the federal government is locked in a time warp doesn’t mean that state-legal cannabis small businesses ought to be disqualified.
Tegethoff: From the perspective of the federal government, wouldn’t this legitimize cannabis —in direct opposition to the federal prohibition?
Wyden: Every election season, more Americans choose to recognize that we ought to legalize adult use of cannabis. What was once a small number of states is a growing one and I just don’t think we should be handcuffing these small businesses at a time when so many folks are just getting clobbered. How about doing more—the federal government, specifically — to make sure that those small businesses can keep their employees on, keep getting their good wage and benefits so they’ll be in a position to replace wages? And by the way, those wages give people the dollars they need to pay rent, to buy groceries, to pay out-of-pocket medical—the goods and services that help the economy, generally.
Tegethoff: What about banks’ inability to lend to these businesses. Is that another barrier here?
Wyden: No question. This has obviously been a barrier since before the pandemic. But when you have a pandemic, this is the time when you step up and say we’ve got to meet the needs of people rather than time-warped, out-dated federal policies.
Tegethoff: What about states’ role in relief?
Wyden: Remember, the states that have legalized marijuana have basically said that it’s an essential business. It’s time for the federal government to play catch-up ball. What I’m pushing for is a change in federal policy. I’m interested in 280E, this discriminatory tax provision. I’m interested in changing SBA policies. I want to see federal policies in line with the spirit of states, not frustrating them.
