Committee Blog: Is American Cannabis Still the Wild West?

by NCIA’s Risk Management and Insurance Committee
Matthew Johnson, Quadscore Insurance Services

Cannabis is America’s riskiest business.

Cannabis itself is a highly valuable commodity, but cannabis businesses also deal largely in cash – making them a prime target for thieves across the country. Recent headlines have reported a rash of unsolved robberies in the Bay Area and Washington State, not to mention the seizure of cash from Empyreal’s fleet of armored transport vehicles (fortunately, that cash has now been returned by the police).

This is a national problem, which begs the question… What should cannabis businesses do to stay safe during these trying times?

There are many different means of minimizing the risk faced by your modern cannabis business, but we’re going to focus on the big three today – security, technology, and compliance. Through careful consideration of these three tenets, cannabis businesses can take significant steps to mitigate risk and protect their employees. Appropriate investments can yield tenfold savings in the form of fewer stolen assets, lower insurance premiums, peace of mind, and safer employees.

SECURITY

Let’s start with the topic that gets the most attention during a crime spree – security. In cannabis, security means a number of things… video cameras, man traps, motion sensors, hardened glass, ID checks, and more. When building or retrofitting a facility for cannabis operations, it is crucially important to consult with security experts like Sapphire Risk Advisory Group or Cannabis Compliant Security Solutions.

“In many areas, it’s not a question of ‘if’ a cannabis business will be robbed – it’s ‘when,’” cautions Chris Eggers, CEO of Cannabis Compliant Security Solutions. With 13 years of experience as a law enforcement officer in the Bay Area – including several years working as an undercover narcotics officer – Chris is uniquely qualified to address the ongoing issues in Oakland and other areas along the West Coast. “There’s a question of how you navigate and survive an incident, but beyond that, how you ensure that your business will survive too.”

There’s an important distinction between security consultants like CCSS, security integrators, and vendors. To achieve best results, cannabis businesses should work with a security consultant who can identify ways to protect the business – without being tied to commission-based sales contracts or a specific ‘brand’ of security solutions.

TECHNOLOGY

Physical security aside, there are a number of high-tech security tools that can help cannabis business owners protect their operations. For example, let’s take a look at the biggest security company you’ve never heard of – an organization called 3SI Security.

3SI Security began their journey over 50 years ago as the original producer of dye and smoke packs intended to deter bank robbers in the 1970s. Technology has evolved over the years, and so has 3SI’s product offering – now, their GPS tracking tech is ubiquitous throughout banking, pharmaceuticals, luxury retail, and telecommunications.

As VP of Business Development for 3SI, Carlos Casas works to connect cannabis businesses with this tech to protect their assets and employees. “According to a Forbes report from July 2020, an estimated 70% of cannabis businesses are cash-based. This is a staggering statistic which shows the real risk to the industry is on an upward climb.” With the SAFE Banking Act still in the works, savvy business owners have to explore alternative solutions like 3SI’s technology to ensure their business stays safe.

Apart from 3SI, there are a number of technology companies that provide technology to make the cannabis industry a safer place. ADT Security has recently launched a cannabis-focused divison of ADT Commercial to provide critical security technology to cannabis businesses around the country. After spending three years keeping HERBL’s fleet secure on the west coast, Andy Fleet now leads ADT’s efforts to provide security solutions to the cannabis industry.

According to Andy, “Security planning is critical for any cannabis organization. Take the time to evaluate all the risks within your establishment and build a robust plan that ensures all areas of physical safety and security are considered and protected.” Underscoring the points above, Andy continues, “Working with a licensed, experienced consultant will ensure adherence with all relevant regulations and help keep your employees safe while having technology do the heavy lifting for you.”

COMPLIANCE & COVERAGE

Next up, everyone’s favorite topic: compliance. In this sense, we’re not talking about adhering to the myriad regulations imposed on cannabis businesses wherever they operate – but rather, making sure that your operation complies with the protective safeguard requirements in your insurance policy. Non-compliance with or material misrepresentation of your active protective safeguards could result in an uncovered or denied claim – and could even cause problems with your investors. If you’re buying insurance, you want to make sure that your policy will pay out when stuff hits the fan!

Theft Sublimit – Most cannabis insurance policies will only cover theft losses up to a certain ‘sublimit’ depending on the quantity of cash/cannabis being stored, the physical location of the cannabis business, and any relevant losses that the insured business may have sustained due to theft. Make sure that you are comfortable with the sublimit provided and, if you aren’t satisfied, work with your insurance broker to see if you can secure higher limits.

Protective Safeguards – Virtually all cannabis insurance policies carry some warranties around protective safeguards that can impact your coverage in the event of a claim. Make sure to read the Protective Safeguards endorsement and check that all of your security systems are functioning in compliance with these requirements.

Motor Truck Cargo – Similar to the protective safeguards warranty, make sure that you study your policy to ensure that any requisite safeguards are in place. For transportation operations, these safeguards are likely to include vehicular telematics, buddy systems for drivers, GPS tracking, and possibly even an escort vehicle to accompany the transport unit.

Security guards – When hiring security guards, it is recommended to employ a third-party guard service that carries appropriate limits of insurance. Make sure that your business is listed as an additional insured on their insurance policy to ensure coverage in the event of an altercation at your business!

Financing – Lenders and VC firms will often stipulate that the companies accepting their funds will need to adhere to certain requirements, like securing Directors & Officers insurance for the officers and executive board. Beyond insurance, it’s important to make sure you are actually doing what you promised to do in terms of safeguarding the property and not just so that you may be eligible for coverage, but also so that you are not held liable for losses suffered by third parties, such as lenders and investors.

Joseph Cioffi, chair of the Insolvency+Finance practice at the Davis+Gilbert law firm in New York advises, “Operators typically make certain representations to investors, lenders, and other capital providers, and undertake certain activities intended to preserve asset and collateral values. The operator is looking at default if it’s in breach of contract, but worse, the operator and its principals could be sued for misrepresentations made in obtaining funding – and be held liable for losses that flow from those misrepresentations.”

CONCLUSION

Like an onion, there are many layers to a risk management program for cannabis businesses. Through careful implementation of security measures and protective technology, many businesses will be able to prevent damage to their business with proper planning. In case all security measures fail, a comprehensive insurance policy should be able to help make a business whole again after a claim. Make sure to work with the proper insurance, security, and legal experts when building or restructuring a cannabis operation!

Committee Blog: Social Equity Perspectives on Interstate Commerce – Part 3

by Mark Slaugh, iComply LLC
NCIA’s Diversity, Equity, and Inclusion Committee

Previously, in part 1 and part 2 of this series, the DEIC examined the problems inherent in existing social equity programs and the merit for federal social equity in regulating interstate commerce. The DEIC also examined the key components of a proposed framework to address these challenges, how to define social equity federally, and the merit of determining the types and numbers of permits to be issued.

Sadly, as written currently, all proposed federal bills fail to meet the critical objective of creating as much NEW generational wealth for the most number of those disparaged from participating in the legal cannabis industry because of the socioeconomic impacts of more than 80 years of federal marijuana prohibition and due to the barriers to entry created amid state regulatory regimes.

To conclude this policy framework proposal, the DEIC will look at the key considerations for a federal program to ensure it functions as designed and how this framework can create social equity technical assistance, qualification, and a phased approach of implementation to ensure that social equity operators have ample time to qualify, have adequate funded, and are set up for success with an equal starting line in the new interstate commerce industry.

Qualifying Social Equity Operators – Federal Technical Assistance Program

It is imperative that any federal social equity framework helps the industry and their new partners, by ensuring permit holders are qualified in both cannabis and business backgrounds, and by helping them bring financing to the table to start a permitted interstate commerce cannabis business that can be as ready, as quickly as possible, to help import, export, and transport cannabis between the States.

To carry out these provisions in the policy, we recommend that amendments to any federal act include:

Requiring that qualified social equity interstate commerce permit holders:
- Have a path to educational qualification (training and development)
- Can qualify with equivalent experience
- Can pre-qualify for the SBA’s funding once they obtain education or equivalent experience (funds issued upon state licensing approval)
- Obtain the majority of initial permits offered for interstate commerce (95%)

In alignment with how long and at what percentage the current industry has been dominating the ownership of licenses
- Entities should have 51% or more verifiable ownership and control by a social equity qualified applicant.
- Advisory Committee to determine how to verify the 51% social equity ownership

Providing social equity qualified permit holders exclusivity for at least 5 years to ensure the qualifying process takes place equitable to the average time in which the industry developed for adult use without considering social equity.
Mandating laboratory testing as national permitting for interstate commerce to work.
Ensure parity amongst states and tribal nations such that tribe-to-tribe trading and interstate trade routes can be protected.
Avoiding overly limiting interstate commerce permits, but also giving them value by not making them unlimited either.
- DEIC suggests 1,500 permits as a starting point divided among the three primary types as a fair balance initially.

These pillars of federal act amendments will proactively resolve interstate commerce concerns that are inherent in descheduling cannabis. Further, pre-qualifying permit holders based on their experience, education, as well as federal financing for their business (contingent on state licensing), will accomplish two primary concerns:

Incentivizes state governments to create social equity licensing regimes that emulate federal efforts
Reduces “predatory” operating agreements that use “token” social equity applicants who do not participate in the business license, contribute little to no financing, and are thereby diluted by existing operators and investors

We believe the U.S. Small Business Administration (SBA) is best to handle collaboration efforts to define this new “Minority Cannabis Business” (MCB) certification program for both program providers on the educational side and for pre-qualifying federal funding for qualified applicants.

Through this qualification, the Alcohol and Tobacco Tax and Trade Bureau (TTB) and (SBA) would issue an interstate commerce permit to be tied to state licenses, and only then would funding be issued to the applicant by the SBA. All funding issued is contingent on obtaining a state licensed facility or partnership with an existing operator in any given state.

Phased Approach:

We believe it is also important that the amendments clearly lay out a multi-phased approach to the rollout of interstate commerce permitting to ensure those most qualified operators proceed first, and to then qualify others with enough time to do so. Encapsulating the proposed amendments, we envision the following steps to ensure a smooth transition that maximizes the opportunity for social equity applicants to succeed:

Initially, establishing the advisory board for the regulatory agencies and mandates to allow for education providers to apply and be approved to provide the educational qualification to social equity applicants. These education providers may also be prioritized based on social equity and curriculum requirements designed in collaboration with cannabis business experts and diversity, equity, and inclusion advocates in cannabis.
For those who lack the experience in operating an interstate commerce permitted business, but who are impacted by the war on cannabis, approved educational programs are invaluable to overcoming the barriers in not knowing how to operate a regulated cannabis business.
1. Those with experience may qualify, without the need of an educational provider, and each are evaluated for priority licensing according to the following priority:
  1. Applicants with cannabis and business experience (most qualified)
  2. Applicants with legacy experience but limited regulated business experience
  3. Applicants with business experience but limited cannabis experience
  4. Applicants with little cannabis or business experience (least qualified)
2. If qualified in both, the applicant goes first and can qualify for SBA funding fastest.
3. If they have limited experience in cannabis or business, then the applicant can take the coursework to qualify and apply for SBA funding.
During this time, it is also crucial to increase community education efforts so that communities impacted most by the war on cannabis can be made aware of the opportunity to qualify, be trained/educated, and approved, and get access to the information necessary to pursue the opportunity along the above pathways.
Provide an education fund for state and municipal governments to promote the benefits of cannabis social equity, responsibilities, and risks of cannabis.

Access to financing is critical for social equity applicants and must be made available through the qualification process for social equity qualified businesses. Once qualified on education or equivalent experience, the SBA may pre-approve funding for qualified applicants. By achieving these qualifications, applicants have access to *reserved* funding appropriated by the federal act. Pre-approved financing in the form of grants and low-interest business debt instruments that are contingent on successful completion of course requirements and other “qualifying” factors for a Minority Cannabis Business is critical to ensuring success for operators and the federal government.

These government loans say how one qualifies and is “pre-approved” so that applicants can negotiate with existing industry license holders as valuable partners and receive federal funding contingent on state licensing approval. The idea is to promote partnership and participation between the existing industry and newly established social equity entrepreneurs while ensuring equal opportunity for social equity operators who do not choose to partner with the industry.

Follow Through

To ensure the program functions as designed and that the advisory committee is provided with as much data as possible to improve upon these suggested amendments, the Diversity Equity and Inclusion Committee (DEIC) recommends a final amendment in the form of a best practices study, along with collected data from participating states, to be instituted and reviewed annually for the first five years and subsequently every three years.

The intention of this study and report is to ensure the enforcement of laws, standards, and programs and to monitor that the activities of social equity operators are in alignment with the intention of the program in benefitting the social equity entrepreneurs permitted, that policies against predatory operating agreements are being enforced, and that policies are truly beneficial to creating social equity in the cannabis industry. The study will provide evidence of the benefits and challenges of the program, as well as possible improvements at federal and state levels.

Conclusion

It seems obvious that unless any social equity partner can “bring more to the table” to balance a “mega player’s” contribution, be educated in all aspects of their chosen field in the industry, recognize predatory agreements, and otherwise be positioned more equally to meaningfully participate in the cannabis industry, social equity programs will continue to fall short of meeting the goal of creating new generational wealth.

History has shown that as long as there’s an opportunity for inequality to be wielded as a weapon for those in power, it will be. No amount of good intention can change that fact.

Social equity requires empowerment opportunities for social equity candidates to bring more to the table as equals with “mega players.” We recognize partnerships can be an ideal path forward when the power dynamics within them are balanced and fair. The DEIC proposes these amendments to any federal act to serve as solutions to the traditional problems of inequality, exclusion, and gatekeeping that once spurred prohibition in the first place and that continue to prevail in the inequity the cannabis industry is still experiencing and to solve the shortcomings of social equity programs thus far.

We recognize that the role for the federal government in these federal act amendments is to even the odds in interstate commerce permitting. Their role is to oversee the fairness in qualifying candidates, to ensure a meaningful value for the permits issued, to give permittees the chance to catch up to the privileged few already in the industry with lockout periods for non-social equity applicants, limited licensing, and to provide access to financing for those traditionally locked out of access to financing or wealth as aa result of systemic oppression caused under prohibition.

Interstate commerce permitting seems like the last true chance for America to atone for 80+ years of marijuana madness and its detriment on our society. It is also the last chance for the industry to search for its soul to balance the impacts prohibition has had on these operators in excluding their participation in legal cannabis initially – born as a result of systemic discrimination overall and colonized on by those with clean records.

In doing so, a more equitable federal act can create the bold ideas and incentive to bring traditional wealth and experience into partnership with underprivileged social equity operators and their expertise/culture to form partnerships that truly represent the intent behind the policies intended for social equity and to create a more diverse, equitable, and inclusive industry for all.

State-Level Insights: Momentum Builds Across Our Nation

By Sadaf Naushad, NCIA Intern

Although the action-packed April must come to an end, the fight for cannabis reform never stops! With U.S. Senators delaying the much-anticipated introduction of the Cannabis Administration and Opportunity Act (CAOA) last month, Congress has a lot of work to do.

In the meantime, a congressional bicameral bipartisan committee is considering the Secure and Fair Enforcement (SAFE) Banking Act as an amendment to the House’s U.S. Innovation and Competition (COMPETES) Act.

Now let’s focus on action occurring within the states. State-level updates help provide us with insights on cannabis reform progress at the federal level. As more state constituents vote in favor of cannabis initiatives, reformation support overall increases within the United States. Efforts to reform cannabis policies at the state level encourage members of Congress at the federal level to enact legislation.

Let’s take a look at this week’s state-level insights:

New York

As the legal cannabis market is set to launch later this year, New York lawmakers intend to ensure that a sufficient supply of marijauna exists. Last month, state regulators voted to allow conditional marijuana cultivation licenses to several hemp businesses. Regulators also established that adults with prior cannabis convictions, along with family members who have previously faced criminalization, would receive the first round of adult-use cannabis retailer licenses – ahead of present medical marijuana businesses. This week, lawmakers recently approved a second round of applications for recreational cannabis cultivators. Additionally, the Cannabis Control Board (CCB) passed amended regulations granting medical marijuana patients to grow their own plants for personal use.

Delaware

A Delaware House Committee approved a bill that would terminate 50 years of cannabis prohibition and criminalization. For the second time in history, Delaware’s District 24 Representative Ed Osienski (D) introduced House Bill 371, legislation legalizing cannabis possession and gifting. The legislation is attached to a companion measure that would build a regulatory framework for the market. Its two-piece model comes after the House defeated a prior measure in March that incorporated both components.

South Carolina

An eight-year attempt to legalize medical marijuana in a largely conservative state abruptly came to an end on the House floor Wednesday. South Carolina’s District 13 Representative and House Leader John McCravy (R) ruled that the Session 124 measure comprises an unconstitutional tax increase, thereby ceasing further consideration of the bill. According to Representative McCravy, since the bill contains a tax on medical cannabis, lawmakers should have introduced the bill in the House under the state constitution’s article for legislation that raises revenue. The bill’s sponsor, U.S. Senator Tom Davis (R), is rapidly seeking other ways to keep the issue active as the session concludes.

Missouri

In preparation for the 2022 midterm elections, a Missouri House Committee approved a GOP-led joint resolution seeking to place cannabis legalization on the November ballot. Missouri’s District 98 Representative Shamed Dogan (R) sponsored an amended version of the legislation, in which The Special Committee on Criminal Justice passed in a 7-2 vote. The amended bill eliminated provisions that would remove the state’s current separate medical marijuana program and set regulations regarding taxation in the legal market. Under the amended resolution, marijuana offenses would be removed from the Missouri criminal statute, permitting adults to possess, use and sell cannabis without facing penalties.

Washington

State officials Lieutenant Governor Denny Heck (D), Attorney General Bob Ferguson (D), Treasurer Mike Pellicciotti (D) and Governor Jay Inslee (D) sent a letter to congressional leaders, outlining the urgency of passing the Secure and Fair Enforcement (SAFE) Banking Act. With Washington being one of the first states to legalize cannabis, lawmakers remain frustrated at the industry’s lack of access to essential financial services stemming from federal prohibition.

New Jersey

Last month the state attorney general’s office released a controversial document detailing how New Jersey’s marijuana laws currently authorize police to use cannabis when not working. This week, New Jersey lawmakers introduced a string of bills designed to encourage employers to penalize workers from consuming cannabis off duty in compliance with state law. Punishable workers specifically include law enforcement officers and first responders. Now, three new bills exist that intend to enforce restrictions on such activity for particular employees. New Jersey’s 6th Legislative District Representative Louis Greenwald (D) aims to amend state statute to contain the following provisions: penalizing police for using cannabis, conducting random drug tests and the right to refuse job applicants due to lawful cannabis use. Although Representative Greenwald’s bill targets police officers, two other measures presently remain that would also impose employment-based restrictions on lawful marijuana use.

Ohio

The Coalition to Regulate Marijuana Like Alcohol (CTRMLA) filed a lawsuit to keep cannabis legalization on Ohio’s November 2022 ballot. In December 2021, CTRMLA turned in petition signatures to Ohio’s secretary of state’s office, but the office deemed the signatures insufficient. To advance the legislative review of their measure, CTRMLA turned in additional petitions on January 13, 2022. According to the state statute, however, a ballot petition must be submitted “no less than ten days prior to the commencement of any session of the general assembly.” The session commenced on January 19, falling outside of that ten-day certification window. As a result, CTRMLA contacted Franklin County Court of Common Pleas, requesting a ruling on a prospective challenge concerning the timing of the group’s initial signature submission to Ohio for the reform proposal.

Stay tuned for more updates on cannabis policy reform. If you are interested in learning more about NCIA’s government relations work and how to get involved please reach out to Madeline@thecannabisindustry.org.

Video: NCIA Today – Thursday, May 5, 2022

¡Happy Cinco De Mayo! NCIA Director of Communications Bethany Moore checks in with what’s going on across the country with the National Cannabis Industry Association’s membership, board, allies, and staff. Join us every other Thursday on Facebook for NCIA Today Live.

NCIA Today is brought to you this week by Senseon Secure Access.

CAOA Delays, House Negotiations, and a Cannabis Festival

By Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations

Hopefully you’ve had a chance to recover after 4/20, but here in Washington, D.C. the work never ends!

Over the last few weeks, there have been developments on the timeline for the Cannabis Administration and Opportunity Act (CAOA), updates on the path forward for SAFE Banking, and a slew of pro-legalization events took place in the D.C. Keep reading for the latest:

More Delays for the Cannabis Administration and Opportunity Act (CAOA)

In February 2021, Senate Majority Leader Chuck Schumer (D-NY) along with Sen. Finance Committee Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ) announced that they would be introducing a comprehensive cannabis bill to deschedule cannabis, enact a regulatory framework for this new industry, and seek to repair some of the harms that the war on drugs has created. In July of that year, the trio released the long-awaited, detailed discussion draft of the Cannabis Administration and Opportunity Act (CAOA) and asked for comments and feedback from stakeholders (you can read NCIA’s here) to be submitted by September 1, 2021. Since then, the Senators have been diligently reviewing and working on the legislation.

The sponsoring offices had hoped to introduce the CAOA in the beginning part of the year, and more specifically April 2022, however, they recently announced that they are continuing their diligent work and will introduce the bill before August recess.

While this announcement can be frustrating at face value, I’m happy that the Senators are being thoughtful, careful, and considerate about crafting this legislation. Precedent matters a lot on Capitol Hill, so getting it right on the first try (or attempting to!) matters.

SAFE Banking & the America COMPETES Act

The House of Representatives has passed the SAFE Banking Act three times this Congress; first in April 2021 as a standalone bill by vote of 321-101 and most recently as an amendment to the House’s version of the America COMPETES Act, which is now being negotiated by a bicameral, bipartisan conference committee.

While many in D.C. had hoped that negotiations would conclude by Memorial Day, lead sponsor Sen. Todd Young (R-IN) recently said that a more realistic timeline for the bill would be the end of summer. This week, the Senate will vote on 28 motions to instruct- these are procedural, non-binding resolutions that guide the conference committee through the negotiation process. After that, the conference committee can begin meeting

National Cannabis Festival and more!

Founded in 2016, the National Cannabis Festival is an annual event held in Washington, D.C. with a focus on cannabis and music, advocacy, education, and activism. Now boasting well over 20,000 attendees, NCIA is proud to have been involved with the event since its inaugural year, and I even sit as an advocacy committee chair!

This year, the festival was back and better than ever with an entire week of events celebrating cannabis advocacy in the nation’s capital, including an incredible Policy Summit featuring members of Congress, advocates, journalists, and more.

Like I said – the work never ends in D.C., and the NCIA team is gearing up for another busy month filled with Evergreen virtual lobby days, Hill meetings, coalition building, and more! Want to get involved? Consider becoming a member today!

Committee Blog: Social Equity Perspectives on Interstate Commerce – Part 2

by Mark Slaugh, iComply LLC
NCIA’s Diversity, Equity, and Inclusion Committee

As the debate heats up on “how” rather than “if” cannabis legalization will happen, social equity and comprehensive reform are at the forefront of the minds of national legislators and advocates. Previously, in part 1 of this series, the DEIC examined the problems inherent in existing social equity programs and the merit of federal social equity in regulating interstate commerce. Sadly, as written currently, all proposed federal bills fail to meet the critical objective of creating as much NEW generational wealth as possible for those harmed by the war on drugs. Now, we examine the key components of a proposed framework to address these challenges, how to define social equity federally, and the merit of determining the types and numbers of permits to be issued.

Key Considerations for a Federal Cannabis Social Equity Program:

Fundamentally, any federal act for cannabis legalization should be a social justice bill that deschedules cannabis federally and that creates the most amount of new generational wealth for those most impacted by prohibition. Expungement for all persons with a past criminal record involving cannabis is the bare minimum these bills should do. However, proposed bills so far fall short of the latest innovative solutions to known problems in social equity programs and should be amended to include these key considerations.

Any proposed act must be amended to include provisions on regulating interstate commerce immediately after descheduling. The NCIA’s Diversity Equity and Inclusion Committee (DEIC) believes any federal act must prioritize social equity ownership of interstate commerce permits issued by the federal government. Learning from the municipal and state social equity programs, this policy paper seeks to propose amendments that meet these objectives, by instituting the following amendments to federal legalization bills:

Defining the regulatory agency for federal interstate commerce regulation and taxation
- Alcohol and Tobacco Tax and Trade Bureau (TTB) and U.S. Small Business Administration (SBA) roles and responsibilities
- Defining number and types of seats for a Federal Cannabis Social Equity advisory board
  - Ensure a diverse and representative Federal Cannabis Social Equity advisory board members, e.g., federal, state, tribal nations, diverse city representation, NCIA, and social equity cannabis owners, and operators.

Defining who qualifies as a social equity interstate commerce permit holder:
- Outlining what states must meet as a minimum standard set by the federal government to participate with equivalent/reciprocal qualification.
- May be determined by advisory board to define social equity qualifications
  - With minimum areas defined such as: income, arrest history, disproportionately impacted area(s), residency or heritage to avoid gentrification issues at large.

Defining permit types (similar to wine wholesale model) such as:
- Importing
  - Privileges to buy from exporters directly and sell to distributors or transporters and licensees into a state system from another state

- Exporting
  - Privileges to buy from operators and sell from a state system to an importer in another state

- Transporting
  - Privileges to sell to or buy from qualified cannabis licensed businesses within a state system and to move product from or to licensees in a state or between importers and exporters interstate

- Testing
  - State labs that meet national standards to ensure consistency with results for other permit types
  - May not be strictly social equity since existing labs are more specialized in converting to federal standards and adding this permit

Defining these basic requirements offers a framework for interstate commerce permitting and establishes the essential agencies required to enact a robust social equity program federally. More importantly, it stalls illegal and gray area activity from taking root under the guise of federal legalization by ensuring interstate commerce activity falls under a specific regulatory agency already well versed in interstate commerce permitting and regulation.

Suggested Social Equity Definition:

To define social equity applicant qualifications, DEIC suggests the TTB and SBA move away from diversity supplier program definitions which are too restrictive for a new industry to qualify. In order to accommodate the cannabis industry, DEIC recommends looking at other state definitions of social equity qualification that have proven to be effective.

Factors like living in a disproportionately impacted area for 5 out of 10 years, being arrested for cannabis or having a family member who was arrested, as well as income below the poverty line, should become qualifying factors.
Additionally, minorities, women, and veterans should be given additional consideration in the definition of who qualifies as a minority cannabis business.
High poverty rate, unemployment rate and participation in federal or state income-based programs, a history of arrests, convictions and other law enforcement practices in a certain geographic area, such as, but not limited to, precincts, zip codes, neighborhoods, census tracts and political subdivisions, reflecting a disparate enforcement of cannabis prohibition during a certain time period (war on drugs started in 1971), when compared to the rest of the state.
Utilize the advisory committee and collaborate with cannabis social equity groups to make sure gentrification and displacement are taken into account. Many areas have drastically changed over the last 5-10 years. Where a person spent their formative, childhood years should also be factored in. Guarding against ‘gerrymandering’ types of map cutouts, where folks who grew up literally surrounded by DIA’s, and who dealt with many of the same issues growing up, are somehow not considered to be disproportionately impacted.

We believe the federal government should leave regulations within each state alone during this multi-year implementation and defer to the TTB and SBA to work in conjunction with any Federal Drug Administration (FDA) regulations with their primary focus pertaining to interstate commerce and taxation as it relates to social equity permit issuance.

Defining How Many Permits to Issue to Social Equity Operators

To address the common shortfalls of state programs, the DEIC realizes that social equity applicants are already a minority stakeholder in existing cannabis licensing. In most states, sadly, constituting less than 5% ownership. This is a huge difference compared to the proportion of individuals in prison for the same activities a licensed business is allowed to conduct.

Accordingly, the DEIC recommends a direct balance in ensuring a lock-out period on issuing new permits and ensuring, during that time, that 95% of the permits go to social equity owners/operators.

While some may consider such a counter-balance to be extreme, more and more states are increasing the committed amount of licenses for social equity to ensure a fair counter-balance. If anything, mega-players should be competing with each other for a select number of limited licenses – not the other way around.

We also realize that, in order to generate investment or value behind interstate commerce permits, there could not be an unlimited number of them initially issued. While the advisory board may issue more in the future, we feel a bold stand to increase the number of valuable permits for initial social equity applicants nationwide is necessary to ensure a balance that reflects the oversight to include social equity business into the industry thus far.

DEIC suggests 1,500 permits as a starting point divided among the three primary types (import, export, transport) as a fair balance initially.

The above policies may seem bold, but they are designed to seek to balance the industry and state’s failure to allow social equity participation. Most cannabis states left out social equity operators by mandating residency and felony-free requirements.

The reality is that interstate commerce means selling the products already owned and produced by non-social equity folks. Further, if it was not for these legacy operators, there would not be a cannabis culture. A culture that has been co-opted from legacy social equity operators by mega operators who kept “undesirables” from the industry at its inception.

These policies seek to balance the needs of traditional cannabis businesses that would most benefit from interstate commerce, with the needs of social equity businesses to create equal opportunity. By limiting the number and availability of interstate commerce permits for at least a 5 lock-out year period, the policy ensures traditional operators partner with social equity permit holders to export, import, and transport their goods between various markets.

The policy helps ensure partnerships that are more equitable for both parties and, in doing so, seeks to avoid “predatory operating agreements” or “social equity colonialism” that dilute social equity operators who are not given the opportunity or resources to bring anything to the table. Therefore, the DEIC stands by lock-out periods and a dedicated high percentage of limited licenses for social equity interstate commerce permitting as a policy to balance existing inequity.

In the next part of this policy paper series, the DEIC will examine how this framework sets up social equity technical assistance, qualification, and a phased approach of implementation to ensure the widest net is cast and that social equity operators have ample time to qualify, are appropriately funded, and set up for success with an equal starting line for interstate commerce.

Read Part 3 of this blog series.

Video: NCIA Today – Thursday, April 7, 2022

NCIA Deputy Director of Communications Bethany Moore checks in with what’s going on across the country with the National Cannabis Industry Association’s membership, board, allies, and staff. Join us every other Thursday on Facebook for NCIA Today Live.

This episode of NCIA Today is brought to you by Senseon Secure Access, offering concealed protection, monitoring, and workflow management for dispensaries. Senseon is ready to provide you with an exceptional customer experience, plus improved efficiency and compliance, not to mention slim and modular aesthetics. Learn more about their security solutions and cost benefits at Senseon.com.

(Another) Historic Week In Congress for Cannabis Reform

By Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations

Usually, progress is slow in Washington, D.C. However, that has not been the case lately! Within the last week, the U.S. House of Representatives has passed both the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act and the Marijuana Research Act! They passed by a vote of 220-204 and 343-75, respectively. Let’s take a look at the bills and what’s next for them:

The MORE Act

Last week, the MORE Act came to the House floor for the second time in history. It was first voted on in December 2020, when it passed by a margin of 228-164.

Revisions from the last session include the removal of a provision that would have allowed federal regulators to deny cannabis business licenses to applicants who have prior felony convictions. Other changes from the introduced text this session include revisions to property requirements, allowing operators to secure those locations after receiving a federal license.

A number of amendments were offered at a Rules Committee hearing to advance the bill, however, only three were ruled in order. The first passed on a roll call vote and was introduced by Rep. Josh Gottheimer (D-NJ), authorizing $10M for the National Highway Traffic Safety Administration to conduct a study on technologies and methods that law enforcement may use to determine whether a driver is impaired by marijuana.

Another amendment, introduced by Rep. Conor Lamb (D-PA) directs the National Institute for Occupational Safety and Health (NIOSH) to conduct a study on the impact of legalization to the workplace, using states that have legalized recreational use of cannabis as a guide, and requires NIOSH to develop best practices for employers as companies transition their policies related to cannabis, prioritizing employers engaged in federal infrastructure projects, transportation, public safety, and national security. Additionally, it directs the Department of Education to conduct a study on the impact of legalization on schools and school-aged children, using states that have legalized recreational use of cannabis as a guide, and requires the Department of Education to develop best practices for educators and administrators to protect children from any negative impacts.” It passed on a roll call vote.

Another amendment, which failed on a roll call vote was offered by Rep. Jamie Raskin (D-MD) would have required federal agencies to review security clearance denials going back to 1971 and retroactively make it so cannabis could not be used “as a reason to deny or rescind a security clearance.”

While there is currently no companion bill in the Senate, Majority Leader Schumer (D-NY) along with Senators Booker (D-NJ) and Wyden (D-OR) is expected to introduce a comprehensive cannabis reform bill over the next month.

Marijuana Research Act

More recently, the House also passed the Marijuana Research Act sponsored by Reps. Earl Blumenauer (D-OR) and Andy Harris (R-MD). This bill would remove barriers for researchers seeking to apply and get approved to study cannabis, set clear deadlines for federal agencies to act on their applications, and also make it easier for scientists to modify their research protocols without having to seek federal approval.

Last month, the Senate also unanimously passed a research bill: the Cannabidiol Marihuana Research Expansion Act, sponsored by Sens. Feinstein (D-CA), Grassley (R-IA), and Schatz (D-HI). It remains to be seen whether the two chambers will be able to negotiate a deal on these research provisions to send to President Joe Biden.

Whether it’s cannabis research or descheduling, the NCIA D.C. team continues to increase momentum for reform. Interested in learning more about our efforts in D.C.? Consider becoming an Evergreen member today!

Member Blog: Cannabis Trends in 2022

by Jennifer Spanos, CannaBusiness ERP

As we approach the end of Q1 2022 and prepare to enter Q2, it’s become clear that this is going to be an important year for the cannabis industry. Cannabis business professionals and investors looking for signs of growth or stagnation in the industry will certainly be interested to see how things unfold. With that in mind, CannaBusiness ERP has put together a list of the top cannabis trends for 2022, and those trends appear to be pointing to more growth. However, it’s clear that difficulties for the cannabis sector are still imminent.

Cannabis Trends for 2022

It almost goes without saying that the cannabis industry is complex and not without its fair share of challenges as the most highly regulated industry on the market. For businesses looking to grow, keeping up with complicated and evolving regulations can be stressful enough on a business in and of itself. Cannabis cultivators, processors, and consultants can look to cannabis industry trends to inform their operational decisions.

Increased legalization in the United States

Support for legalization in the USA continues to rise. In fact, a 2021 Gallup poll found that 68% of Americans are in favor of legalizing cannabis. Not only is this a record number of supporters, but this percentage also reflects a growing sentiment among Americans regarding the use of legal cannabis.

The changing tide towards legalization is clear – more states passed legislation to legalize cannabis either medicinally or recreationally in 2021, with several more introducing legalization bills in 2022. Because states operate independently of each other, every state will have its own policies as well as regulatory and compliance requirements, which can make things very confusing for cannabis businesses, especially multi-state operators (MSOs).

The National Cannabis Industry Association (NCIA) provides a map with state-by-state policies, which is one helpful tool for businesses looking to capitalize on expansion opportunities made possible as more states legalize cannabis. CannaBusiness ERP’s Guide to Expanding Into New Markets is another great resource for MSOs that provides state-by-state information, including Nevada, New York and Pennsylvania, and useful advice to consider when expanding into new cannabis markets.

Sales will continue to increase in 2022

Leading cannabis business experts are predicting strong sales growth this year due to the growth in legalized markets for cannabis. In fact, legal cannabis sales reached $19.5 billion in 2020, and experts are projecting sales to reach $30 billion in 2022. Washington State alone, which legalized cannabis ten years ago in 2012, is expected to generate $1.5 billion in sales, up from $1.2 billion sales in 2020. But Washington’s projected sales are small when you compare them to California’s projected sales of $7.6 billion. And as more states legalize cannabis, more sales will surely follow.

Another contributing factor to increased cannabis sales is related to increased demand and a growing number of product types. More consumers are learning why cannabis can be beneficial to them, including more restful sleep, lowering stress, lessening pain symptoms, and recreational use. Additionally, with so many products on the market, cannabis consumers have many options to choose from, ranging from edibles to tinctures to topical ointments and more.

Cannabis experts are predicting a growth in cannabis consumption lounges – the cannabis equivalent of a bar or restaurant that allows consumers to use cannabis on-site. According to the Cannabis Industry Journal, the popularity of these lounges is growing because they provide consumers with a legal and safe space to consume cannabis. Just as with alcohol, the lounges are regulated according to laws set by each state.

Increasing sales means cannabis businesses are at a critical junction and need to scale operations to meet the growing demand. One way cannabis growers and processors can capitalize on the demand is by streamlining the business end-to-end with cloud-based cannabis business management software. Otherwise known as Cannabis Cloud ERP, it manages production, cultivation, compliance, inventory, financials and traceability, sales, purchasing, and more, all in one system that lives in the Cloud.

Increased legislative bills and pressure for federalization

Under U.S. Federal Law in the Controlled Substances Act, cannabis is still considered a Schedule I substance. However, as the number of states legalizing cannabis either recreationally, medicinally or both has increased, so too has broader support for federalization in the U.S. government. In fact, there are several bills in the U.S. congressional houses that may positively impact the cannabis industry, especially with banking challenges.

Due to the Schedule I federal classification of cannabis, many banks will not work with cannabis companies, creating tedious banking hurdles that are difficult to solve. The National Law Review writes, “Yet, in comparison to other industries, legitimate licensed cannabis-related businesses remain hobbled by the difficulties they face in accessing traditional banking and financial services – largely due to the fact that ‘marijuana’ is still considered illegal on the federal level under the Controlled Substances Act (“CSA”). Currently, financial institutions (including federally insured banks) are hesitant, and oftentimes unwilling, to work with cannabis-related businesses due to fear of reprisal from federal banking regulators.”

Congressional representatives have introduced a decent amount of bills geared towards making much-needed changes to banking processes for cannabis, such as the SAFE Banking Act of 2021, passed by the U.S. House of Representatives in April 2021. It is currently awaiting action in the U.S. Senate with broad support from both sides of the aisle. If it passes both chambers of Congress, the act will allow cannabis companies to have business-critical access to banking and financial services and would reduce their need to operate as cash-only businesses and remove yearly challenges with tax accounting and reconciliation.

In addition to the SAFE Banking Act, there are other bills like U.S. Senate Majority Leader Chuck Schumer’s Cannabis Administration and Opportunity Act (CAOA), which is a push for federal cannabis legalization as well as an equity play. If passed, it is a measure towards ensuring small businesses and minority-owned businesses have access to financial services.

However, even with the tide of public opinion and legal momentum shifting in the industry’s favor, there remains a challenge with the U.S. tax code. Due to IRS Code Section 280E, if a business is trafficking certain controlled substances, like cannabis, that business is unable to deduct business expenses on their taxes. California has taken steps to address this by signing bills that help cannabis businesses overcome this code, but this is still a prohibitive factor for cannabis companies across the U.S.

Fortunately, cannabis companies that invest in a comprehensive Cannabis Cloud ERP solution with a reputable and experienced industry partner are better able to handle any hurdles that come their way.

Increased Merger and Acquisition (M&A) activity

Merger and Acquisition (M&A) activity has been steady in the industry and 2022 will see even more M&A activity. According to MJBizDaily’s article, “Marijuana M&A sizzled in 2021 and is poised for a hot 2022. Marijuana merger and acquisition activity proceeded at a torrid pace in 2021 – and could accelerate in 2022 – thanks to lower interest costs and pressure on larger companies to expand their footprints and boost revenue.”

Citing prominent cannabis acquisitions in 2021, such as Jazz Pharmaceuticals’ acquisition of GW Pharma (for $7.2 billion) and Trulieve’s acquisition of Harvest Health (for $2.1 billion), it is apparent that M&A is not going to slow down. According to Business of Cannabis, several deals are already taking place in 2022. Massachusetts-based Curaleaf acquired Arizona-based Bloom Dispensaries for $211 million, adding a total of 13 Arizona dispensaries and 121 dispensaries nationwide to Curaleaf’s portfolio.

For cannabis companies dealing in M&As and becoming Multi-state Operators (MSOs), it is essential to have a comprehensive, full-suite Cannabis Cloud ERP system that can run all the companies in one system. It is a crucial ingredient to manage their M&A transactions and handle their financial statements, compliance, business transactions, and more.

Most important of all, cannabis companies need to choose the right cannabis ERP.

Jennifer Spanos is the VP of Product and Vertical Strategy at CannaBusiness ERP. She has 14+ years of experience in cannabis and food manufacturing software and operations, working to maximize the efficiency and profitability of customers’ businesses.

CannaBusiness ERP: The Right Cannabis Business Management Software. Cannabis companies can grow their business with an ERP solution designed for the cannabis industry and for MSOs expanding into new markets. Learn how CannaBusiness ERP can set businesses on the right path. Manage financials, operations, quality, compliance, traceability, customers and more.

CannaBusiness ERP is cannabis business management software that is built-in Sage X3 and configured by NexTec industry experts to deliver a complete cannabis business solution. Our specialization in developing solutions for the cannabis cultivation and processing industry has resulted in some of the most respected companies around the world managing their day-to-day operation using CannaBusiness ERP.

To learn more about the fast-paced movement in cannabis legalization and how Cannabis Cloud ERP software can help your company keep pace, reach out to us. We’d love to show you what CannaBusiness ERP can do for your business.

Video: NCIA Today – Thursday, March 24, 2022

Continuing Conversations on Capitol Hill

by Madeline Grant, NCIA’s Government Relations Manager

The National Cannabis Industry Association (NCIA) held its very first Virtual Mini Lobby Days with NCIA’s Evergreen Roundtable members. Before the pandemic and closure of our Nation’s Capital, the Government Relations team planned an in-person annual fly-in every spring, the Annual Cannabis Industry Lobby Days, for all NCIA members. For our first Virtual Mini Lobby Days, it was important to facilitate conversations between our Roundtable and Capitol Hill offices. The Evergreen membership tier is for leading businesses looking to make a meaningful investment in shaping policy for the cannabis industry. Evergreen members receive exclusive access to private briefings from members of Congress, inside information from NCIA’s government relations team, and many more opportunities to participate in the national conversation around cannabis policy.

Now more than ever we’ve seen more comprehensive legislation being introduced at the federal level, on both sides of the aisle, so we wanted to focus on meetings with our cannabis champions but also educate all congressional offices on Capitol Hill. We were able to meet with representatives, senators, committee staff, office staff, and much more. Evergreen members were able to share information, stories, and data to Hill offices.

The NCIA team, Monica Gray with Nice Guys Delivery, Khurshid Khoja with Greenbridge Corporate Counsel, and Christina Hollenback with The People’s Ecosystem meeting with Congressman Dave Joyce (OH-14), a co-chair of the Congressional Cannabis Caucus.

As we hopped on our zoom calls, our main focus was education. The Evergreen Roundtable was able to share stories from their personal experiences in the cannabis industry and directly relate these experiences to the importance of cannabis policy reform. The dichotomy around incremental versus comprehensive cannabis policy reform was a central focus in discussion. As around thirty meetings took place throughout the week, the Government Relations team and Evergreen Roundtable caught up with friends, gained valuable insight, and continued to educate Congress. We took this opportunity to show our support and gratitude for all the representatives and senators who constantly support cannabis policy reform. Furthermore, we educated congressional offices with data, testimonials, and research to highlight the necessity for cannabis policy reform at the federal level. There is no doubt that reform is needed for the cannabis community and NCIA will continue to be a resource to all congressional offices.

NCIA’s 9th Annual Cannabis Industry Lobby Days in 2019 May 21-23 2019.

As we monitor the full opening of Capitol Hill, stay tuned for updates regarding NCIA Lobby Days. The Government Relations team is looking forward to our next Mini Lobby Days later this year for all Evergreen members. If you’re interested in learning more or getting involved in our policy work please feel free to reach out to Madeline@TheCannabisIndustry.org.

Video: NCIA Evergreen Members Lobby Congress Virtually

Due to ongoing COVID-19 and Capitol security restrictions, efforts to lobby Congress on cannabis policy issues have been challenging. Though logistics prevent us from hosting our traditional annual fly-in event in D.C., with hundreds of cannabis industry professionals navigating the halls of Congress, members of Congress themselves are still able to hear from their constituents through virtual means. Recently, NCIA’s Government Relations team worked with our Evergreen Members to guide them through the process of meeting with members of Congress to continue to tell our stories and share our concerns for our industry.

Hear more about their experiences in this video with insights into how those meetings went.

NCIA’s Evergreen membership is for leading businesses looking to make a meaningful investment in shaping policy for the cannabis industry. This premium membership plan provides your company with a seat on NCIA’s Evergreen Member Roundtable, with exclusive access to private briefings from members of Congress, access to NCIA’s lobbying team, invitations to political events, special membership concierge service, and more.

To learn more about NCIA’s premier policy-focused Evergreen Membership, please reach out to our team to schedule a call.

Member Blog: Tax Rules for Cannabis Companies

by Kaveh Newmen of Edlin Gallagher Huie + Blum

The cannabis industry has grown exponentially as an increasing number of states have relaxed state law prohibitions on the use of cannabis for medical and recreational purposes. However, under federal law, cannabis remains classified as a Schedule I controlled substance under the Controlled Substances Act (CSA). This means that the production, distribution, and possession of cannabis remains illegal on the federal level.

Schedule 1 Status of Marijuana: State-Legal Cannabis Businesses and Application of Internal Revenue Code Section 280E

Cannabis businesses are treated differently from many other businesses for tax purposes. Under Internal Revenue Code (IRC) §280E (“280E”), which applies to a federal income tax filing, denies deductions and credits for amounts paid or incurred in carrying on the trade or business of cannabis. Cost of goods sold is allowable because it is not considered a deduction, rather it is a reduction of gross receipts (revenue) to arrive at gross profit.

A report published in March 2020 by the U.S. Treasury Inspector General for Tax Administration examined California and found that over 50% of marijuana companies had likely underpaid the IRS under IRC§ 280E. The report confirms the IRS is preparing to increase marijuana industry audits nationwide in response.

Currently, the method by which cost of goods sold may be deducted for producers is to use IRC §471(a). This provision discusses how to clearly reflect income by using an inventory method. Therefore, cannabis producers have less of a 280E problem than retailers and distributors.

After the passage of the Tax Cuts and Jobs Act (TCJA), effective for tax years beginning January 1, 2018, a provision was passed in the IRC §471(c). There are various opinions with advisors in the industry on whether this code section and method can be used for retailers and distributors. The idea behind IRC 471(c) is that “certain small businesses” can meet the gross receipts test of this subsection for any taxable year in which the corporation’s or partnership’s average annual gross receipts do not exceed $25,000,000 for the 3-taxable-year period ending with the taxable year that precedes such taxable year. Pursuant to IRC §448(c)(1), this type of small business may be able to use a “books and records” method for deducting all costs – rather than being limited to cost of goods sold only. In other words, if one uses 471(c)(1)(B) as an accounting method, in theory, they may also be able to deduct selling expenses and all other costs that were previously not allowed as deductions.

For further discussion on this topic see the following articles: Bloomberg Tax – Cannabis Taxpayers Find Flaws in New Accounting Method Rules and The Tax Cuts and Jobs Act: A Comparison for Businesses

Assembly Bill 37, codified in §17209 of the California Revenue and Taxation Code

Each state in the U.S. is autonomous in that it has the authority to decide whether its income tax laws conform to §280E or not. On October 12, 2019, Governor Newsom signed into law AB 37, which overrides §280E through the following provision:

For each taxable year beginning on or after January 1, 2020, and before January 1, 2025, Section 280E of the Internal Revenue Code, relating to expenditures in connection with the illegal sale of drugs, shall not apply to the carrying on of any trade or business that is commercial cannabis activity by a licensee. – (CAL. REV. & TAX CODE § 17209 (2020). CAL. REV. & TAX CODE § 17209 (2020).

However, AB 37 only applies to state filings with the Franchise Tax Board and is currently only available until January 1, 2025. AB 37 has no impact on federal tax filings, which is where a majority of cannabis entities pay their income taxes with effective tax rates as high as 25% for corporate taxes and up to 37% for individuals.

The IRS Lacks Guidance for Cannabis Tax Payers

The IRS has not published nationwide guidance to taxpayers and tax professionals in the cannabis industry. In addition, cash-intensive business issues unique to the cannabis industry such as IRS §280E and banking limitations will remain unresolved unless and until there is uniformity through federal legalization. As a result, compliance-related issues continue to grow and negatively affect cannabis business owners who operate legally under individual state law.

Kaveh Newmen is an associate at Edlin Gallagher Huie + Blum who handles cannabis law general litigation, and trucking and transportation matters. Kaveh was admitted to practice law by the State Bar of California in 2021. Kaveh earned his J.D. from the University of San Diego School of Law in 2020, where he was a board member of the Criminal Law Society, the Immigration Law Society, the Middle Eastern Law Student Association, and served as an intern at the school’s Immigration Clinic. He is a first-generation Iranian-American and speaks Farsi.

SAFE Banking, Hemp, and SCOTUS Update

by Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations

Since I last provided an update from Washington, D.C., not much has changed in terms of cannabis reform. That being said, there are still a few short developments that we’ve been keeping an eye on that we want to bring to your attention! Keep reading to learn the latest:

SAFE Banking

SAFE Banking passed the House for the sixth time in February as part of the America COMPETES Act. More recently, a stakeholder meeting was held with lead champion Congressman Perlmutter that NCIA was proud to have participated in.

During this stakeholder meeting, Rep. Perlmutter reviewed where the bill is at, the hurdles it must clear in order to pass, and reiterated his commitment to passing the bill before this session is over. Congressman Perlmutter also talked extensively about a recent hearing that the House Financial Services Subcommittee on Consumer Protection and Financial Institutions held titled “Small Businesses, Big Impact: Ensuring Small and Minority-Owned Businesses Share in the Economic Recovery.” Chaired by Rep. Perlmutter himself, the subcommittee heard testimony from the Minority Cannabis Business Association’s (MCBA) Executive Director, Amber Litteljohn, on the economic barriers federal policy has created within the burgeoning cannabis market.

Hemp

A few weeks ago, the United States Department of Agriculture’s (USDA) National Agricultural Statistics Service (NASS) released the results of the 2021 Hemp Acreage and Production Survey in its National Hemp Report. This is a massive, first-ever survey of its kind to be done at the national level, and is set to provide a “benchmark” analysis of the economic impact of the burgeoning newly legal market.

The survey collected data for hemp grown in the open and hemp under protection. Planted area for industrial hemp grown in the open for all utilizations in the United States totaled 54,152 acres. Area harvested for all utilizations totaled 33,480 acres. The value of U.S. hemp production in the open totaled $712 million. The value of production for hemp that was grown under protection in the United States totaled $112 million. Area under protection totaled 15.6 million square feet.

SCOTUS

The Supreme Court has officially asked the highest lawyer in the land, the solicitor general, to weigh in on cannabis.

Justices were asked whether or not employees seeking workers’ compensation for medical cannabis after being hurt on the job should receive the assistance, but before they do, they want the broader government to comment. They have requested that the solicitor general submit a brief on the topic. For more details, check out this great piece our friends at Marijuana Moment published.

While this week’s update was another “hodge-podge”, NCIA’s government relations team continues to work hard at passing reform this Congress. We continue to meet with offices to elevate the need for SAFE Banking – primarily for small and minority-owned businesses, discuss the decimation that 280E is wreaking, and highlight opportunities for restorative justice. Interested in becoming more involved with lobbying and our government relations efforts? Contact Stefan at stefan@thecannabisindustry.org to talk about becoming an Evergreen Member today!

Video: Voices of NCIA’s DEI Scholarship Recipients

Laws and regulations need to be designed and implemented with equity and fairness in mind. NCIA’s Diversity, Equity, Inclusion Committee is focused on recommendations that will create access to opportunity for those most adversely affected by cannabis prohibition.

A more diverse cannabis industry means a more prosperous one. We aim to foster a more equitable industry where participation and success are possible regardless of the numerous factors that have historically held many people, businesses, and communities back.

At the core of NCIA’s Diversity, Equity, and Inclusion Program is our Equity Scholarship Program, which provides our Equity Members one year of complimentary membership to NCIA. Hear from some of the business owners who became a part of NCIA’s DEI Scholarship Program in this video.

If you share our vision for a more inclusive and equitable cannabis industry, please support NCIA’s DEI program through sponsorship. DEI program sponsors not only help us continue to provide complimentary memberships to equity operators, but it also comes with benefits! Click here to learn more about the program.

Video: NCIA Today – Thursday, February 10, 2022

February Hodgepodge: An Update from D.C.

by Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations

It may only be February, but the NCIA government relations team has been busy at work this year advocating for you and your business! Just over the last month, the SAFE Banking Act passed the House for the sixth time, we held our first mini-virtual lobby days, and Majority Leader Schumer provided an updated timeline for the Cannabis Administration and Opportunity Act (CAOA). Keep reading to learn the latest:

SAFE Banking

Last week, Congressman Perlmutter (D-CO) followed through on his promise to attach SAFE Banking to any viable legislative package when he filed it as an amendment to the America COMPETES Act, which is a large manufacturing bill. Now, the bill is headed to a “conference committee” – a term for when House and Senate leadership, as well as committee chairs and other members of Congress get together to negotiate differences in the two chambers’ bills.

Congressman Perlmutter and the other lead offices of SAFE Banking are currently talking with leadership about the importance of enacting the provision, however, Leader Schumer and Senator Booker have been clear about their opposition to passing SAFE without broader equity provisions. During early February, keep your eyes on the news to see if SAFE Banking makes it into the final, enacted language!

Virtual Lobby Days

Due to NCIA’s Evergreen members’ investment in shaping policy for the cannabis industry, we have been able to take our Government Relations work virtual by hosting our first ever Mini-Lobby Days! As we continue to represent a value-driven, responsible industry, our main goal is to educate congressional offices on all aspects of cannabis policy reform, including social equity, banking, 280E, scientific data, and much more.

During the first week of February, NCIA’s Evergreen Roundtable members participated in more than 30 virtual congressional meetings, including time with Sen. Cory Booker (D-NJ), Sen. Jeff Merkley (D-OR), and Rep. Dave Joyce (R-OH). Members also met with relevant committee staff and communicated the importance of holding hearings and markups on cannabis policy issues, as well as enacting reform while Democrats hold the majority in both chambers.

Sound interesting? Get in touch with Maddy Grant (Madeline@TheCannabisIndustry.org) to learn more about becoming an Evergreen member today!

Latest on CAOA

Back in September, NCIA and other stakeholders submitted responses to the Cannabis Administration and Opportunity Act (CAOA) discussion draft, led by Leader Schumer (D-NY, and Sens. Booker (D-NJ) and Wyden (D-OR). Since then, the Senate’s focus has been primarily on passing President Biden’s Build Back Better Act, which has significantly slowed progress on the CAOA. While the bill hasn’t been formally introduced yet, the sponsoring offices have slowly continued to have conversations with committees of jurisdiction to tee things up behind the scenes.

In a recent press conference in New York, Leader Schumer announced plans to introduce the CAOA in April. Can anyone say 4/20?

This update just represents a small snapshot of all that NCIA’s government relations team has been working on in D.C. – make sure to keep an eye on the blog, find us on NCIA Connect, and follow us on our social media channels to learn the latest!

U.S. Cannabis Business Conditions Survey Report Reveals Critical Concerns for the Cannabis Industry in 2022

by Beau Whitney, NCIA’s Chief Economist

As the largest national trade association of the cannabis industry, NCIA works to advocate for and advance the interests of hundreds of member businesses. The recent publication of the Whitney Economics U.S. Cannabis Business Conditions Survey Report offers a granular look at how respondents are feeling, and what they are worried about.

Survey description

There were a total of 396 respondents to the Whitney Economics U.S. Cannabis Business Conditions Survey. Respondents were either licensed cannabis businesses or ancillary businesses to the cannabis industry, and were from 20 states across the country. According to the report, the objective of the survey was to “establish a baseline of data, and identify the successes and the challenges that operators in the industry are facing.”

The survey examined policy, regulatory issues, industry successes, and overall industry sentiment using questions around demographics, questions intended to definitively answer a specific question, and questions with the opportunity to offer multiple responses or comments. We are pleased that NCIA members participated in the survey. Because this survey is intended to be conducted on a quarterly basis moving forward, we expect that a growing number of the NCIA membership will want to participate.

Key Takeaways From the Survey

Only 42% of respondents are turning a profit. Further, in terms of profitability, female respondents and non-white respondents are faring much worse than white, male respondents.
- While 58% of businesses overall are not making a profit (either breaking even or losing money), 62.5% of female-run businesses are not turning a profit and 67.8% of BIPOC businesses are not turning a profit.
Lack of banking, market volatility, and state & federal taxation are the key issues facing cannabis operators.
- 72% of respondents stated that access to banking and other financial services was the top issue facing them.
- Smaller operators are struggling by being pulled in two different directions. On one side is the competition from the illicit market that competes for the same customers as the smaller operators and the other side is the ever presence of big businesses looking to consolidate the market.
- Taxation is an issue that impacts all businesses regardless of size. Cannabis operators run the risk of being taxed out of business. State policymakers are focused on state issues without considering the impact of federal policy and federal policymakers are not considering the state policy. This lack of a unified tax policy is creating strain on business operators.
The concerns of the industry are weighing heavier on the minds of operators than are the successes, and this is impacting industry sentiment.
- Business owners are quite proud of their accomplishments over the past year, from increasing opportunities for women and minorities, to doing more for their workers and educating an ever-increasing clientele.
- Despite this success though, cannabis operators’ concerns far outweigh their feeling of success and this is impacting the overall sentiment.
- The word cloud on the successes tells a compelling story.

We are very excited that we have now established a baseline of new data that reflects operator sentiment and business conditions. This can help support the narratives with data when having policy discussions at the state and federal levels and to help shape strategy for operators in this space.

“We are delighted on how this initial survey turned out and look forward to surveying the cannabis landscape regularly in the future. We really appreciate the support we received from leading national cannabis organizations such as NCIA.” – Beau Whitney

2022 and Beyond: Lobbying Congress with NCIA Evergreen Members

by Madeline Grant, NCIA’s Government Relations Manager

Founded in 2010, the National Cannabis Industry Association is the oldest and largest trade association representing legal cannabis businesses. Our membership consists of hundreds of forward-thinking businesses and tens-of-thousands of cannabis professionals from coast to coast. That being said, our work and effectiveness in cannabis policy reform continues to be one of the most important duties at NCIA. During the pandemic, NCIA’s government relations team continued to work to support congressional offices through education and conversation. As we continue to be effective on Capitol Hill, our lobbyists work closely with NCIA’s Evergreen roundtable to effectively shape policy reform.

Due to Evergreen members’ investment in shaping policy for the cannabis industry, we are able to take our Government Relations work to the next level. This month, we will be hosting our first ever Virtual Mini-Lobby Days, taking place the week of January 31. As we continue to represent a value-driven, responsible industry, our main goal is to educate congressional offices on all aspects of cannabis policy reform; social equity, banking, 280E, scientific data, and much more. I want to thank our Evergreen members for supporting our policy agenda.

Let’s take a look at some policy goals in 2022:

You’ll remember that during the 116th Congress, the SAFE Banking Act became the first cannabis-related bill to be passed by a chamber of Congress. It also became the first piece of cannabis legislation to pass the 117th Congress in April of 2021 by a vote of 321-101. Since last spring, the bill has languished in the Senate due to disagreement over enacting comprehensive versus incremental reform.

This year, expect pressure on the passage of SAFE to increase. While efforts to enact comprehensive reform continues, the votes are simply not there as of now. If you’re interested in learning more about this conundrum, take a look at this piece that the Brookings Institute recently posted.

NCIA is continuing to build support for the SAFE Banking Act in the Senate, but some big news was announced recently that will certainly impact the legislation in the future: longtime champion and lead sponsor, Rep. Ed Perlmutter (D-CO), just announced that he will not be running for re-election next session. Rep. Perlmutter spoke to Colorado Public Radio this month about his decision not to run for reelection this November and his disappointment that, while the House has approved the Secure and Fair Enforcement (SAFE) Banking Act five times now in some form, the Senate has failed to advance it under both Republican and democratic leadership. The congressman says that he’s going to work to pass his marijuana banking bill before his time on Capitol Hill comes to an end.

There are numerous bills that have received much attention in terms of descheduling cannabis – among them the MORE Act (H.R. 3617), the States Reform Act (H.R. 5977), and the discussion draft (not formally introduced) of the Cannabis Administration and Opportunity Act (CAOA). Please read my colleague’s blog HERE for more detail.

As we continue to discuss comprehensive legislation with Capitol Hill offices, our main focus is to continue to be a resource when these offices have questions or concerns. It is imperative that NCIA remains in conversations as language is analyzed and discussed. As we work with NCIA members and our Evergreen roundtable, we continue to relay the burden of federal prohibition and how it impacts our businesses and communities.

How can you do more as an NCIA member?

There are ways for you to be more active as an NCIA member. For example, you can consider applying to be on one of NCIA’s committees this summer. As a committee member you’ll work alongside other cannabis professionals as thought leaders to develop industry standards. Some of our committees include: Education committee, Retail committee, Hemp committee, State Regulations committee, Diversity, Equity & Inclusion committee, and many more.

If you are a larger company looking to make a meaningful investment in NCIA’s government affairs work, there is the opportunity to join our Evergreen Roundtable. For more information or a consultation feel free to email Madeline@TheCannabisIndustry.org. Stay tuned for policy updates from our Government Relations team.

Video: NCIA Today – January 13, 2022

2022: A New Year In Cannabis – What To Watch

by Michelle Rutter Friberg, Deputy Director of Government Relations

With the start of 2022 also comes the final year of the 117th Congress. Last year was marked with some small victories, although meaningful cannabis reform has yet to be enacted on the federal level this session. While it’s a midterm election year, I have no doubt that we’ll see some significant movement over the coming months. Keep reading to see my answers to some of your FAQ’s for the new Congress:

What’s going on with the SAFE Banking Act?

This year, expect pressure on the passage of SAFE to increase. While efforts to enact comprehensive reform continues, the votes are simply not there as of now. If you’re interested in learning more about this conundrum, take a look at this piece that the Brookings Institute recently posted.

NCIA is continuing to build support for the SAFE Banking Act in the Senate, but some big news was announced this week that will certainly impact the legislation in the future: longtime champion and lead sponsor, Rep. Ed Perlmutter (D-CO), just announced that he will not be running for re-election next session.

What’s next for comprehensive cannabis reform? Is legalization on the horizon?

Back in the 116th Congress, the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act became the first piece of comprehensive legislation to pass the House of Representatives by a vote of 228-164. More recently, the MORE Act passed out of the House Judiciary Committee in September 2021 by a vote of 26-15. While this is certainly news to be celebrated, the bill has been referred to another eight committees of jurisdiction and faces a more conservative chamber overall than last session for full passage.

The States Reform Act is a newer piece of legislation that was introduced in the House by freshman Congresswoman Nancy Mace (R-SC). The bill deschedules cannabis, regulates it through ATF/TTB for cannabis products and FDA for medical use, and institutes a 3% federal excise tax on products to fund law enforcement, small business, and veterans mental health initiatives. Many have lauded the pro-business elements of the bill, however, additional provisions must be added to address equity and restorative justice. It’s unlikely that the bill will move this Congress for partisan reasons – particularly during an election year.

As for the Senate-led CAOA – there are too many unknown elements to make any real predictions! Senate Majority Leader Schumer (D-NY), Finance Committee Chairman Wyden (D-OR), and Sen. Cory Booker (D-NJ) outlined their plans for the CAOA in February 2021, unveiled the text in July 2021, with comments due by September 1 (make sure you check out NCIA’s response!). Due to the sheer magnitude of input received, the never-ending pandemic, and other legislative priorities, official language still has not yet been introduced. NCIA continues to work with the sponsoring offices on the CAOA and anticipates introduction in the spring.

What’s going to happen at the committee level?

If you’re following cannabis policy at the federal level, definitely keep your eyes on what’s happening in various congressional committees. Given that there were few cannabis-related hearings and markups in 2021, I’m hopeful that there will be more this year. I’ll specifically be keeping my eye on both chambers’ appropriations, financial services, tax, and judiciary committees.

Midterm elections will be here before we know it, but NCIA is continuing to keep the pressure on our elected officials to reform our outdated cannabis laws. Want to learn more about what’s possible? Make sure your company is an active member of NCIA and register for our next webinar, check out our podcast, and hop on over to NCIA Connect to chat with us and learn more about what we’re working on in D.C.!

Equity Member Spotlight: Better Days Delivery Service

This month, NCIA’s editorial department continues the monthly Member Spotlight series by highlighting our Social Equity Scholarship Recipients as part of our Diversity, Equity, and Inclusion Program. Participants are gaining first-hand access to regulators in key markets to get insight on the industry, tips for raising capital, and advice on how to access and utilize data to ensure success in their businesses, along with all the other benefits available to NCIA members.

Tell us a bit about you, your background, and why you launched your company.

I grew up in Colorado Springs in a single-parent home, overcame poverty, violence, houselessness, and a felony for marijuana possession to get to the place that I am in today. I’ll never forget the immediately depressing feeling of knowing that I’d lost opportunities, let my mom, my family, and my community down when initially being charged with a felony for marijuana distribution. Thankfully my people reminded me that I am much more than this scarlet letter F represents. I did my time, paid my restitution, and kept on grinding. Now a father of two beautiful babies, their presence is a constant reminder that I can’t give up. Left out of the weed industry, I focused on community and education as a 5th grade teacher. I decided to leave the classroom to start this business because I wasn’t happy due to the politics and wasn’t feeling valued in my career. I have worked hard to break out of the cages/boxes that I was placed in. I have been turned down for housing, employment, and have had doors closed because of this felony but I keep the belief that when one door closes another opens and because of that I’m determined to succeed. The weed industry seems much more of a fit for me, I chose delivery because it was the easiest point of entry however I dream of one day being vertically integrated.

What unique value does your company offer to the cannabis industry?

Our company, Better Days Delivery Service, offers a community aspect that is sorely missing in the industry. In my opinion, most of the industry hasn’t done their due diligence to truly serve and build relationships with patients. We have partnered with the nurse network so that they are able to give true medical advice while we work on the discreet, quick, personable service that we have become known for. Safe, affordable, discreet service is mandatory, we offer luxury and frequent flyer convenience as well. By focusing on the customers that are often overlooked, I am confident that we can provide a service that will revolutionize all of the industry. We want to deliver weed with the personable service that existed before the industry existed, I want to remind people that it’s still possible. Who wouldn’t love a delivery company that reminds our customers that our worst days are behind us? “Better Days Are On The Way.”

What is your goal for the greater good of cannabis?

In the words of 2Pac, “better days got me thinkin’ ’bout better days!” My goal for the greater good of cannabis is to remind people of the healing aspects of the plant. I want to help free everyone that has been incarcerated or charged for anything to do with the plant. I want to contribute to scientific research that will help heal and help people live despite their ailments. I would love to see it totally decriminalized and if I am able to pay my bills and make it better for my family in the process even better!

What kind of challenges do you face in the industry and what solutions would you like to see?

Michael Diaz-Rivera

The biggest challenge that I have is a lack of capital both financially and socially. It is not cheap to get into the industry and I have been bootstrapping and using my savings thus far. Having access to all of the money that I would need to reach my dreams and create generational wealth would be perfect. I’ve also noticed that in this industry, it pays to know people as a social equity licensee. I feel like the majority of the industry looks at us as if we’re begging for scraps. Because of that, I’ve worked to build relationships with powerful people who have a true commitment to equity and support for those who have less.

I’ve also begun the steps to make my business a social enterprise. The true challenge in being a business that works for social good will be to find a balance between profit, sustainability, and social impact. I aim to do exactly that!

Why did you join NCIA? What’s the best or most important part about being a member of the Social Equity Scholarship Program?

It was important for me to build a network and NCIA is just the trade organization to help me do that. NCIA has been a platform that helps me get into the doors that I usually wouldn’t be able to access. I am able to ask important questions about the development of my business to those with answers. The social equity program allows me to chat with those from similar upbringings while sharing the tools and resources to help us all succeed. The most valuable part has been the sounding board and emotional support that the group continues to provide.

As a nation, we have to be accountable for the “war on drugs” as everyone turns their eyes toward federal legalization. Without accounting for the harm that continues we’ll never get to the “better days” that the people deserve.

NDAA Blues, But HOPE On The Horizon

by Morgan Fox, NCIA’s Director of Media Relations

The last week or so has been an interesting one in Congress when it comes to cannabis policy reform, and carried with it the usual mix of positive and unfortunate developments.

First, in yet another installment in the long and ongoing saga that is the SAFE Banking Act’s path toward becoming law, a minor setback. Champion and lead sponsor Rep. Ed Permutter had been working for weeks to get SAFE Banking language included in the NDAA, or National Defense Authorization Act. This spending package is typically focused on security and military matters, and is considered “must-pass” legislation by both chambers. Now, you may be asking what allowing banks to more easily work with legal cannabis businesses has to do with national security, and the answer – oddly enough – is a lot. Beyond the obvious public safety benefits of no longer forcing most cannabis businesses to operate entirely in cash and making them targets for crime, allowing access to banking would dramatically increase financial transparency in the industry. This would give law enforcement additional tools to help prevent the admittedly rare occurrences of criminals extorting legal businesses or using them to launder money, which is certainly a security concern. Perhaps even more relevant, being able to use the financial services that are available to other legal industries would help remove significant barriers to entry into the legal market and allow small cannabis businesses to be more competitive with unregulated operators, some of whom have ties to international drug trafficking organizations that present an ongoing threat to global security.

Unfortunately, Rep. Perlmutter decided not to add the banking language to the NDAA at the urging of Speaker Pelosi in order to ensure the spending package would pass without issue. Despite this compromise, however, Rep. Perlmutter has vowed to attempt to add it to every available legislative vehicle going forward. Given the fact that the Senate is currently stalling on the SAFE Banking Act as a standalone bill, this may be the most viable strategy of getting cannabis banking reform through both chambers before the end of the current Congress.

Speaking of other vehicles for reform, the ongoing appropriations process continues to hold hope for passing a number of cannabis-related items in the near future. Lawmakers recently approved a continuing resolution to fund the government through February and avoid a shutdown. This means that there will be no changes to the previous budget until then, but it does give us more garner support for the provisions that we want to make sure are part of that spending package. That includes preventing the Department of Justice from targeting state-legal adult-use cannabis businesses and programs, SAFE Banking, improving access for veterans, expanding research, and more.

In better news, Reps. David Joyce (R-OH) and Alexandria Ocasio-Cortez (D-NY) partnered up to introduce a bill that would provide federal support for state-level expungement efforts. The Harnessing Opportunities by Pursuing Expungement (HOPE) Act would allocate $20million for a grant program to help reimburse states for the costs associated with expunging non-violent cannabis convictions. This is incredibly important because most of the federal expungement conversation has focused around federal convictions, yet the vast majority of arrests and convictions occur under state laws. Most states lack the resources and infrastructure to effectively address this issue at a large enough scale and in a manner that is affordable to the victims of prohibition who are just trying to clear their records of convictions for behavior that is now legal for a majority of Americans. It is wonderful to see bipartisan support for this important legislation, and we look forward to working with lawmakers to push it through as soon as possible.

That’s all for now, but stay tuned for further updates from Capitol Hill. And don’t forget to register for NCIA’s Cannabis Business Summit in San Francisco next week!

Bringing the Beltway to the Bay at Cannabis Business Summit & Expo

by Madeline Grant, NCIA’s Government Relations Manager

There is no doubt that we’ve missed the in-person, one on one interactions in the cannabis industry. For anyone that attended the Midwest Cannabis Business Conference in Detroit in September, it was refreshing to connect with friends and meet new friends in the cannabis industry. Fortunately, we have the chance to meet in person again at the 7th Annual Cannabis Business Summit and Expo (CannaBizSummit) in San Francisco, California. From networking with California-based cannabis companies to meeting new companies in the industry, there is no lack of connections to make at CannaBizSummit.

Pictured Right: NCIA member Sonny Antonio with Sunshine Design and I at MJBizCon at NCIA’s booth.

The National Cannabis Industry Association (NCIA) has been hard at work in Washington, D.C. With the introduction of the Cannabis Administration and Opportunity Act draft legislation, there had been an undeniable excitement to support momentum towards cannabis policy reform. The Government Relations team submitted comments to the sponsoring offices on behalf of NCIA’s members and will continue to work to support members’ best interests. We appreciate your support of NCIA and the missions we continually work to achieve.

At #CannaBizSummit there will be opportunities for educational panels on federal cannabis policy and opportunities to connect with cannabis professionals in all sectors of the cannabis industry. Below are just a few of the education panels and “Lightning Lessons” that will be taking place throughout the conference:

You can find more information and details on the agenda and sessions HERE.

NCIA is honored to welcome our 2021 #CannaBizSummit Keynote Speaker, Troy Datcher, CEO of The Parent Company. Leading a new generation of c-suite innovators, Chief Executive Officer Troy Datcher, together with Chief Visionary Officer Shawn “JAY-Z” Carter, helms a cannabis business for the post-prohibition era The Parent Company. Combining best-in-class operations with leading voices in popular culture and social impact, the company focuses on building brands that will pave a new path forward for a legacy rooted in equity, access, and justice.

Beyond the panels and educational resources, attendees will be able to meet others from around the country. From cannabis cultivators to cannabis retail owners, there is no shortage of potential to network. At NCIA, we continue to support our members’ best interests by providing a continued understanding of the political landscape of cannabis policy reform. It’s our goal to support value-driven reform and support a responsible cannabis industry. Remember, if you are an NCIA Blooming or Evergreen member, you have a number of complimentary tickets to our trade shows.

If you have any questions regarding your membership or the CannaBizSummit please reach out to me via email, Madeline@TheCannabisIndustry.org. There is a lot to be excited about this year and I hope to see you out in San Francisco this December!

Member Blog: Cautionary Tales of Cannabis Compliance

by Alexa Rivera, Assistant Marketer at PeopleGuru

As a member of the NCIA, you probably already know how difficult so many of the aspects of business are due to the nature of the industry. Unfortunately, sometimes it seems like the laws and regulations are never-ending, and frankly, it can cause quite the impact on the way operations are handled.

As much as we hate to be the bearer of bad news, it is likely a good idea to be wary of these things, especially regarding compliance regulations.

Cannabis Compliance Regulations

While numerous states have legalized cannabis, it remains federally illegal under Schedule I of the Federal Controlled Substances Act. While the hope is that cannabis will soon be federally legalized and decriminalized, we haven’t quite gotten there yet.

Because of the state of our society and often the stigma associated with cannabis, not to mention the astronomical fines associated with being involved in the legal industry incorrectly, many financial institutions refuse to touch cannabis businesses. Yes, even when a client does everything correctly.

As you can imagine, this creates a lot of problems involving transactions and payroll. In fact, as of June 30th, only 706 banks and credit unions were actively providing banking services to marijuana-related businesses. These banking issues lead many business owners to conduct mainly cash transactions, making things even more challenging to monitor. Around 40% of Colorado cannabis businesses lack bank accounts altogether.

How are Canna Business owners coping?

Cannabis companies constantly have to get creative with how they handle revenue –– which is enough to make any business owner pretty uneasy. Without banks, stores are often forced to take payment in cash and invest in ATMs for their shops while they’re at it. Holding so much cash means armored vehicles to collect the money and tremendous crime risk. Yikes, talk about a debacle.

In an attempt to make things easier, some companies have opted to funnel cash through shell companies, but as you can imagine, that puts a big target on their backs. “It can start to look a lot like money laundering,” says businessman Tim Cullen. Despite complaints from states that collecting hundreds of thousands of dollars in cash for taxes is troublesome (to say the least), little has been done to rectify the problem.

A Cautionary Tale

A Massachusetts company running three cannabis dispensaries has found itself in quite the mess despite believing they were following protocol properly. After an eight-month investigation, the company has been ordered to pay $300,000 in restitution and penalties.

This situation has resulted from unintentionally neglecting a state law requiring businesses to pay 1.2 times the regular hourly wage on Sundays and Holidays. The company has admitted that these errors have stemmed from difficulty in hiring a traditional payroll service provider.

Avoiding Compliance Related Repercussions

One way many owners are attempting to get around payroll and tax issues is to misclassify their employees as 1099 contractors to avoid many of the tedious payroll-associated hurdles. Sounds too good to be true? It is! The Department of Labor does not take this kind of infraction lightly, and if you think $300,000 for missing Sundays and a few holidays is a steep fine, buckle up, and fast. If the DOL suspects the misclassification was intentional, you can expect up to $1,000 in criminal penalties per employee and even jail time. So for some legal options……

A Promising IRS Initiative

The IRS has recently launched a program titled “Cannabis/Marijuana Initiative” with the hopes of implementing a strategy to increase voluntary compliance. This is fantastic news for the industry because, as was the case for the dispensary above, often, the breeches are simply a result of misinformation. Hopefully, with an initiative such as this one put in place, small business owners can grasp tax regulations before any compliance issues arise with the guidance of the IRS on the industry’s side.

A Helpful Hand

Another great option is investing in a software solution that supports the cannabis industry and won’t leave you hanging. With payroll support and full-service banking, HCM software can prevent issues that may arise by automating the systems that cannabis businesses spend a great deal of time on in avoiding any missteps. You must find a company that won’t leave you hanging with an unreliable banking service.

Conclusion

While more and more of America seems to be coming around to the idea of legal cannabis businesses being a legitimate industry, we still have some ways to go. In the meantime, covering all your bases and ensuring compliance is the best bet to ensure you don’t end up between a rock and a hard place — and as a result, spending a small fortune in fines and fees. Be sure to keep up with changing laws and consider your options for the best shot at easy and secure payroll and tax keeping.

PeopleGuru develops and supports cloud-based Human Capital Management (HCM) software to help mid-market organizations in the Cannabis Industry attract, retain, and recognize their people and streamline back-office HR and Payroll functions.

PeopleGuru HCM is a highly configurable, true single solution residing on one database that efficiently manages every stage of the employee lifecycle. Behind PeopleGuru’s best-in-class technology, is a team of Gurus who are passionate about helping clients meet their desired business goals by ensuring that they always have the tools and support they need to deliver on their strategic HR objectives, maintain tax & legislative compliance, and boost people productivity.

Alexa is the Assistant Marketer at PeopleGuru. With a B.A. in Advertising and currently pursuing an M.A. in digital strategy, Alexa has a passion for writing, content creation and branding strategy. Specializing in copywriting and unique niche positioning, the world of HCM Software is her latest and greatest challenge.

Find me on: LinkedIn

A Full Plate For Congress – Status Update for SAFE Banking, MORE Act, CAOA, and Veterans

by Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations

I’m not sure if you’ve seen the news, but Congress has had a lot on its plate recently: negotiations over infrastructure, the budget, the debt ceiling, reconciliation, not to mention the ongoing COVID-19 pandemic! And while the path to cannabis reform has been slightly overshadowed by some of these larger issues, for the time being, the NCIA team is continuing to work tirelessly and incessantly on your behalf to enact legislation that would help you and your business. Let’s take a look at some of the more recent developments from Washington, D.C:

SAFE Banking:

Last month, the House passed the language of the SAFE Banking Act for the fifth time via the must-pass National Defense Authorization Act (NDAA). NCIA and our allies on Capitol Hill are always trying to be creative and come up with new, different avenues to advance our policy priorities, and the NDAA was a great opportunity that we were able to take advantage of! NCIA will continue to work with members of the Senate Armed Services Committee and other stakeholders to push for the SAFE Banking Act to be included in the final bill language. Stay tuned as the NDAA process unfolds throughout the remainder of autumn.

The MORE Act:

Also last month, the House Judiciary Committee passed the MORE Act out of committee by a vote of 26-15 but the bill still has a long journey ahead of it. It’s unlikely that committees like Ways and Means and Energy and Commerce will waive their jurisdiction again, and it’s critical to remember that the chamber actually became slightly more conservative following the 2020 election. Committee schedules are jam-packed right now, however, we continue to meet with those with jurisdiction over the MORE Act and encourage them to take up this important piece of legislation.

CAOA:

The discussion draft of the Cannabis Administration and Opportunity Act (CAOA) was unveiled back in July by Senate Majority Leader Schumer (D-NY), Finance Committee Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ). In the following month, NCIA worked diligently with our Evergreen Roundtable, board, committees, social equity scholarship members, and others to provide detailed feedback on various topics as requested by the Senators. NCIA continues to be a resource for the Sponsoring Offices and committees of jurisdiction, however, official bill introduction likely won’t happen until early-2022.

Veterans:

Last week, the House Veterans Affairs Committee: Subcommittee on Health held a hearing on a number of bills; among them H.R. 2916, the VA Cannabis Research Act of 2021. While this bill is not a piece of NCIA priority legislation, we applaud the committee, longtime sponsor and ally Congressman Correa (D-CA), and their teams for discussing this important topic. Of note is testimony from Dr. David Carroll, Executive Director at the Office of Mental Health and Suicide Prevention at the Department of Veterans Affairs (VA). His testimony is only about a page long, but the gist is that the VA does not support this bill. I’d also like to highlight the statement Rep. Correa submitted for the record, which you can find here.

Even though Capitol Hill’s bandwidth is stretched, NCIA will continue our work in Washington, D.C. to get these (and other) cannabis provisions enacted into law. Have questions or thoughts? Find me over on NCIA Connect!

Take A Survey: U.S. Cannabis Industry Sentiment and Business Conditions

NCIA chief economist and his cannabis economics firm, Whitney Economics, are collaborating with NCIA to conduct a national survey of businesses and stakeholders in the U.S. cannabis industry. Below, please find a link to the Survey of U.S. Cannabis Industry Sentiment and Business Conditions. It examines the key issues facing the industry including what you are experiencing when doing business in the industry. The survey seeks to investigate what is working and what can be improved from the perspective of businesses and stakeholders in the cannabis industry.

The goal of the survey is to tabulate ancillary business and cannabis operator opinions on the state of the U.S. cannabis market. Responses are confidential and will be kept anonymous.

Your participation and insights will help policymakers understand the issues that face the industry from your perspective. The survey takes between 4–5 minutes to complete. Please complete the survey by Sunday, October 31.

TAKE THE SURVEY

The initial analysis will be made available to all participants later this fall.

If you have any questions regarding the survey, please contact Beau Whitney from Whitney Economics at Beau@whitneyeconomics.com

Thank you for supporting this survey.

Video: NCIA Today – October 1, 2021

House Floor Debates, Markups, and Beyond for SAFE Banking and MORE Act

By Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations

Usually, things are somewhat slow when it comes to cannabis policy reform in Washington, D.C., but the last week has been quite the whirlwind! In the span of one week, the SAFE Banking Act was included in (and passed via) the must-pass National Defense Authorization Act (NDAA) and the House Judiciary Committee marked up and subsequently passed the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act!

Last week, the House passed the language of the SAFE Banking Act for the fifth time via the must-pass NDAA. NCIA and our allies on Capitol Hill are always trying to be creative and come up with new, different avenues to advance our policy priorities, and the NDAA was a great opportunity that we were able to take advantage of! At first, there were some concerns that the language (proposed as an amendment to the larger package) would not be ruled germane, however, we were able to clear that hurdle in the House Rules Committee, allowing the provision to move forward for Floor debate and a vote.

The amendment was then debated for a short period of time on the House floor and for the first time ever, passed via voice vote! This is incredibly exciting and reinforces the strong, bipartisan support that this legislation has.

SAFE’s inclusion in the Senate’s version of the bill is a bit more uncertain. Currently, the Chair and Ranking Member of the Senate Armed Services Committee (which has jurisdiction over the NDAA) have circulated their draft of the package that differs in many ways from the House’s bill. Here at NCIA, we will be working with Senate allies to determine what’s next for the NDAA in that chamber and collaborating with other stakeholders to ensure that the SAFE Banking language is included and passed into law. I’ll be the first to admit that I am not (nor have I ever been) a defense lobbyist, however, I’m definitely getting a crash course now!

Then, less than 24 hours later, the House Judiciary Committee announced that they would be holding a markup on the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act. You’ll recall that the MORE Act was marked up in that committee in November 2019 (during the last Congress), and passed by a vote of 24-10. Then, after all of the other relevant committees waived their jurisdiction, the MORE Act was brought to the House Floor in December 2020 and passed 228-164.

While the MORE Act passed out of the Judiciary Committee this session by a vote of 26-15, the bill still has a long journey ahead of it. It’s unlikely that committees like Ways and Means and Energy and Commerce will waive their jurisdiction again, and it’s critical to remember that the chamber actually became slightly more conservative following the 2020 election. Additionally, there is no companion legislation in the Senate as of publication.

As always, NCIA will continue to work with our allies and stakeholders on and off Capitol Hill to get these policies enacted into law. Have questions? Find me on NCIA Connect. Want to become more involved with policy at NCIA? Learn more about our new Evergreen Roundtable here.

Member Blog: How to Avoid Compliance Issues with Your Cannabis Business

By Jo-Anne and LaKia, Greenspace Accounting

All businesses must adhere to tax rules and regulatory compliance, but for cannabis companies, the laws are significantly more challenging to navigate. The cannabis industry has specific tax rules that differ from other sectors, and failing to follow them can result in severe financial and legal implications.

At Green Space Accounting, we know that managing your finances as a cannabis company can be much more complicated than the average start-up. Keeping a compliant financial system in place is not always easy with constantly changing state laws and regulations.

Here are a few tips on how to avoid compliance issues with your budding cannabis business.

Have Your Business Documentation in Order

One of the first steps to staying compliant is to have all the appropriate financial information and licensing for your business on hand.

Always be prepared with copies of your cannabis license, information from your seed-to-sale tracking system, and your point of sale software records. Having this paperwork, along with legal documents like operating agreements, Articles of Incorporation or Organization, and EINs will ensure that you have a fully compliant relationship with your bank, as well as local and state government.

It’s also a good idea to have detailed records on all sales transactions within your business, especially ones dealing with cash. Cash is used more frequently in cannabis dispensaries than in other retail industries. Having proper cash-handling procedures in place can save you from theft and keep you ready for any unexpected auditing.

Stay up to Date with State and Local Regulations

It’s important to remember that regulations surrounding cannabis change over time, so monitoring your state legislature and all applicable state and local agencies is crucial to keeping your business compliant. By making yourself aware of the rules for the cultivation, manufacturing, and distribution of cannabis, you can avoid the risk of fines or legal action and build a better relationship with your local government, law enforcement, and, most importantly, customers.

One way to stay up to date with regulatory compliance laws is to consume state and industry news surrounding cannabis daily. Not only do these publications keep you informed on business and consumer trends, but they also avoid complicated legal jargon, speaking directly to business owners in a way that’s easy for them to understand.

Here are a few recommended industry news sources:

Another great way to stay on top of state and local cannabis laws is to network and build relationships with your local regulators. While maintaining compliance internally is the biggest goal, creating an ongoing relationship with the regulators in your area can help you better understand the changes within the industry and the steps you can make to conduct business more transparently.

Develop SOPs, Training, and Reporting Systems

Think of these SOPs as a set of rules that all employees need to abide by to keep your company’s production, sales, and accounting processes consistent and safe. Having a set of standard operating procedures can help you recognize potential compliance issues and fix them before they occur. These procedures can include an employee handbook on proper handling and storage of cannabis consumables to installing a seed-to-sale tracking system for inventory management purposes.

The best way to stay on top of your SOPs is to create reports, checkbooks, and logs in all aspects of your operations to show regulators that you are a transparent business that has a complete understanding of your state’s compliance laws. Frequent compliance training sessions are also an effective way to educate your entire team on the legal and tax regulations associated with your business.

Cannabis Payroll

To avoid issues concerning payroll, installing time tracking software for employees is also a great way to keep your staff organized and stay on top of the 280E tax code. The 280E law denies cannabis businesses federal income tax deduction for operating business expenses, which means that the wages for some employees may be deductible, and some may not be. By introducing software where employees can specify the tasks they’re doing and track the salaries they’re receiving, you’ll stay compliant with the tax code and better understand the productivity your team is generating.

Frequently Audit your Business

Hiring an outsourced accounting team to audit your cannabis business is a great way to avoid any potential risks regarding compliance. Auditors serve as an additional, unbiased set of eyes that will examine all areas of your organization and identity aspects that might need improvement.

If you are looking to stay on top of the legal and tax regulations for your cannabis business on a tight budget, self-auditing your company is a great way to check whether or not your training, bookkeeping, and SOPs are being appropriately implemented.

Entrepreneurs who belong to the National Cannabis Industry Association can receive discounted access to an acclaimed compliance management platform created by Simplifiya, which gives licensed operators a self-audit checklist that helps them identify, track, and mitigate potential issues before it’s too late. The platform also provides templates for creating SOPs customized for each license type and tied directly to your state regulations.

The Bottom Line

Whether you are a start-up, a growing business, or a multi-state operator, complying with federal and state compliance laws is essential. By following the above tips and staying transparent with your employees, partners, and investors, you’ll be ready for any audit that comes your way.

Whether you’re looking for cash flow management, business planning, or internal controls, our team is dedicated to helping you achieve peace of mind when it comes to your company’s finances and compliance. We understand that the financial side of your business can be daunting, complicated, time-consuming, and most of all: stressful. You don’t need to go through it alone. Our team is prepared to help you achieve your financial goals. Whether you’re looking to earn more revenue, scale your business or achieve a little peace of mind, you can trust Green Space Accounting to guide you.

Committee Blog: Is American Cannabis Still the Wild West?

SECURITY

TECHNOLOGY

COMPLIANCE & COVERAGE

CONCLUSION

Committee Blog: Social Equity Perspectives on Interstate Commerce – Part 3

Qualifying Social Equity Operators – Federal Technical Assistance Program

To carry out these provisions in the policy, we recommend that amendments to any federal act include:

Phased Approach:

Follow Through

Conclusion

State-Level Insights: Momentum Builds Across Our Nation

Let’s take a look at this week’s state-level insights:

New York

Delaware

South Carolina

Missouri

Washington

New Jersey

Ohio

Video: NCIA Today – Thursday, May 5, 2022

CAOA Delays, House Negotiations, and a Cannabis Festival

More Delays for the Cannabis Administration and Opportunity Act (CAOA)

SAFE Banking & the America COMPETES Act

National Cannabis Festival and more!

Committee Blog: Social Equity Perspectives on Interstate Commerce – Part 2

Key Considerations for a Federal Cannabis Social Equity Program:

Defining the regulatory agency for federal interstate commerce regulation and taxation

Defining who qualifies as a social equity interstate commerce permit holder:

Defining permit types (similar to wine wholesale model) such as:

Suggested Social Equity Definition:

Defining How Many Permits to Issue to Social Equity Operators

Accordingly, the DEIC recommends a direct balance in ensuring a lock-out period on issuing new permits and ensuring, during that time, that 95% of the permits go to social equity owners/operators.

Read Part 3 of this blog series.

Video: NCIA Today – Thursday, April 7, 2022

(Another) Historic Week In Congress for Cannabis Reform

The MORE Act

Marijuana Research Act

Member Blog: Cannabis Trends in 2022

Cannabis Trends for 2022

Increased legalization in the United States

Sales will continue to increase in 2022

Increased legislative bills and pressure for federalization

Increased Merger and Acquisition (M&A) activity

Video: NCIA Today – Thursday, March 24, 2022

Continuing Conversations on Capitol Hill

Video: NCIA Evergreen Members Lobby Congress Virtually

To learn more about NCIA’s premier policy-focused Evergreen Membership, please reach out to our team to schedule a call.

Member Blog: Tax Rules for Cannabis Companies

Schedule 1 Status of Marijuana: State-Legal Cannabis Businesses and Application of Internal Revenue Code Section 280E

Assembly Bill 37, codified in §17209 of the California Revenue and Taxation Code

The IRS Lacks Guidance for Cannabis Tax Payers

SAFE Banking, Hemp, and SCOTUS Update

SAFE Banking

Hemp

SCOTUS

Video: Voices of NCIA’s DEI Scholarship Recipients

Video: NCIA Today – Thursday, February 10, 2022

February Hodgepodge: An Update from D.C.

SAFE Banking

Virtual Lobby Days

Latest on CAOA

U.S. Cannabis Business Conditions Survey Report Reveals Critical Concerns for the Cannabis Industry in 2022

Survey description

Key Takeaways From the Survey

2022 and Beyond: Lobbying Congress with NCIA Evergreen Members

Let’s take a look at some policy goals in 2022:

How can you do more as an NCIA member?

Video: NCIA Today – January 13, 2022

2022: A New Year In Cannabis – What To Watch

What’s going on with the SAFE Banking Act?

What’s next for comprehensive cannabis reform? Is legalization on the horizon?

What’s going to happen at the committee level?

Equity Member Spotlight: Better Days Delivery Service

Tell us a bit about you, your background, and why you launched your company.

What unique value does your company offer to the cannabis industry?

What is your goal for the greater good of cannabis?

What kind of challenges do you face in the industry and what solutions would you like to see?

Why did you join NCIA? What’s the best or most important part about being a member of the Social Equity Scholarship Program?

NDAA Blues, But HOPE On The Horizon