AB FinWright’s World Of Cannabis Update

National: SAFE Banking Act

Launched in the U.S. House of Representatives in 2019, the Secure and Fair Enforcement Act proposed to eliminate penalties against banks that provided services to cannabis companies, thereby allowing the marijuana industry to bank safely and with reasonable costs, Raising equity and debt would become much easier as well. The bill had bi-partisan support and was expanded to protect members of the insurance industry that supported cannabis businesses. However, when Congress released its 1.7 trillion-dollar spending package on December 23, 2022, SAFE was not included.

We recently attended a presentation by cannabis industry leaders called Opportunities and Challenges in the 2023 Cannabis Market. Several knowledgeable individuals commented that the mood around SAFE has swung from positive to pessimistic. Kevin McLaughlin, Managing Director of Centri Business Consulting noted that he was no longer optimistic that SAFE banking would be achieved in 2023 or even 2024. Attorney Zachary Kobrin (Partner, Akerman LLP) and others concurred. The consensus among those industry leaders is that the cannabis industry will have to struggle a while longer in the financial services realm.[1]

California: Emergency Cannabis Regulations Enacted

The California Department of Tax and Fee Administration proposes to adopt Regulations 3703, Excess Cannabis Tax, 3800, Cannabis Excise Tax and Cannabis Retailer Excise Tax Permit, 3805, Cannabis Excise Tax Credit, and 3810, Vendor Compensation, and amend Regulation 3700, Cannabis Excise and Cultivation Taxes, as emergency regulations. The emergency regulations implement, interpret, and make specific the excess cannabis tax, cannabis tax permit, cannabis excise tax credit, and vendor compensation provisions in the Cannabis Tax Law.

Similar action was taken by the state several months ago in October 2022 and dealt with other aspects of California’s Excess Cannabis Tax, Cannabis Excise Tax Credit, and Vendor Compensation. In both cases, the CDTFA chose this adoption route in order to place the regs in service “as soon as possible.”

Colorado: Auction A Sign of the Times?

In another sign that the cannabis industry is in a state of upheaval, under siege by high taxes, illegal operations, and an unfriendly federal government, New Mill Capital, a national asset disposition firm that has conducted auctions for Fortune 500 corporations like Nestle, General Mills, and Coca-Cola, is holding their first auction of cannabis assets in Pueblo, Colorado next month. On February 8 and 9, 2023, New Mill will be selling a full-scale plant’s worth of equipment including cannabis development, grow, harvesting, processing, soft gel & packaging, lab, etc.[2] To avoid unnecessary controversy, New Mill Capital is describing its auction as a “Full Spectrum CBD Plant.”[3]

[1] https://www.cdtfa.ca.gov/taxes-and-fees/Reg3700-EmergencyText-2023.pdf

[2] https://www.bidspotter.com/en-us/auction-catalogues/search-filter?clientid=New+Mill+Capital&countystate=Colorado&categoryCode=SAL

[3] https://www.newmillcapital.com/asset_sales/1200-lot-broad-and-full-spectrum-cbd-plant