New York lawmakers continue to introduce legislation to help set the state’s forthcoming cannabis industry up for success.
The Cannabis Banking and Disclosure Act, or Senate Bill S8758, introduced on Tuesday, would allow the Office of Cannabis Management to disclose information about cannabis license holders and license applicants to various financial institutions that request this information.
“This will allow financial institutions to have access to verify personal and financial information for their prospective cannabis clients. It will improve the ‘Know Your Customer’ compliance and make it easier and less costly for financial institutions who want to bank cannabis businesses to comply with the federal reporting,” the text of the bill reads.
Cannabis remains illegal at the federal level, making financial institutions like banks, and to a lesser extent credit unions, hesitant to work directly with cannabis businesses. And while the Secure and Fair Enforcement Act, also known as the SAFE Banking Act, has gained modest traction several times in 2022 and would fix these banking hurdles at a federal level, the Act hasn’t passed both chambers of Congress.
Legislation in the budget bill, which Cooney sponsored, amends state tax law to address another major cannabis issue: business-related deductions. Now, the Internal Revenue Service tax code that blocks cannabis businesses from making typical deductions – because cannabis is federally illegal – “shall not apply” to cannabis license holders.
A broader fix for banking issues is likely to take on renewed urgency when New York’s adult use cannabis industry goes live, expected later this year. New York Gov. Kathy Hochul’s budget estimates that cannabis tax revenue and fees will top $1.25 billion over the next six years.
“Access to financial services is not just an economic issue, it also impacts public safety. Cash businesses are more readily exploited for money laundering and other nefarious purposes, which undermines the public policy goal of creating safe, legal and regulated markets. Additionally, it creates personal safety risks for the cannabis workers handling the large amounts of cash,” the bill text reads.
Across the country, state lawmakers and regulators are increasingly sounding the alarm on cannabis banking issues Washington State lawmakers were joined by regulators and the state treasurer for a roundtable discussion last month on the link between the cash-heavy nature of cannabis businesses, and an uptick in violent robberies.
“It is beyond any measure of anything that makes sense,” State Treasurer Mike Pellicciotti said, that the cannabis retailers are forced to operate cash-heavy businesses. “We all recognize it is a major contributing factor for a lot of the violence that we’re seeing,” Pellicciotti said.
The New York bill’s text also notes that the legislation “furthers the social equity goals set” by the Marihuana Regulation & Taxation Act (MRTA), by “removing some of the financial and systemic barriers that can prevent individuals from actually participating in the market safely.”
While the MRTA laid out the ambitious goal of allocating 50% of all licenses to equity applicants, a lack of access to capital is often one of the most referenced hurdles to launching a cannabis business, especially for these applicants.
S8758 has been referred to the Committee on Investigations and Government Operations.
