California considers new bank for marijuana cash
With legalized recreational marijuana possibly on the horizon in California, tax board officials signaled their interest Friday in forming a state-run bank that would allow pot-industry operators to transition from what has traditionally been a cash business.
Access to financial institutions is difficult given the federal prohibition on the drug.
Democrat Fiona Ma, of the state Board of Equalization, said that under the state’s nearly two-decade-old medical marijuana program, growers and dispensary operators typically pay their state taxes in cash, creating concerns about public safety.
With state initiatives to legitimize recreational pot aiming for next year’s ballot, and with federal lawmakers taking up legislative solutions, Ma said the time is right for officials here to begin assessing the details of what a state-run bank might look like.
“We’re a big state, and we have very creative minds,” Ma said at a meeting on the topic she called Friday with fellow board member George Runner. “We lead in many first-in-the-nation initiatives, and I believe we could create some sort of state depository that could handle cash deposits and also be available for the industry to make electronic transfers to make their payments.”
Laws designed to combat drug trafficking and money laundering have long restricted bank access. However, Obama administration officials have begun adjusting certain rules to extend banking services to state-approved marijuana companies.
Last week, the U.S. Senate Appropriations Committee passed an amendment allowing banks to serve marijuana sellers in states where the drug is legal. At the same time, the Federal Reserve Board this month denied an application by a Colorado credit union seeking to provide banking for the pot industry.
In California, the lack of access to banking has hampered the state’s ability to collect taxes. A recent study of Ma’s San Francisco-based district that stretches across 23 counties found just 35 percent of the medical marijuana dispensaries paid sales taxes, totaling about $27 million last year.
Board of Equalization Chairman Jerome E. Horton this month said he supports an “Eliot Ness Plan” that enforces collection of taxes on cannabis. A Horton-supported bill by Assemblyman Mike Gipson, D-Carson, would create a state tax amnesty program for pot operators.
Storefront businesses that are paying taxes often carry the money in large sacks to field offices that state officials say are not equipped with money counters or other tools and safety measures associated with banks. Many do not have access to credit and use cash to obtain marijuana, pay employees and make transactions.
Runner said a recent tax delivery to his district office in Sacramento involved about $200,000 in cash.
A conservative Republican and former state senator from the Antelope Valley, Runner said he didn’t envision dedicating so much energy to marijuana. He has traveled to pot-rich Humboldt County to study the issue, and met with officials from the Federal Bureau of Investigation and U.S. Drug Enforcement Administration.
“If a couple of years ago somebody would have told me we would be coming and spending this much time on cannabis ... I’d say ‘you must be smoking something,’” Runner said. But it’s clear “this is an industry that we’ve got to figure out how to deal with; how to make it legitimate, and try to help them in that process.”
Tax board members have yet to commit a plan to writing but say it would likely take the form of state legislation to be introduced in the next session.