Member Blog: What Does The SAFE Banking Act Mean for the Cannabis Insurance Landscape?
by Valerie Taylor, Vice President (National Cannabis Practice Leader), The Liberty Company Insurance Brokers
As an insurance professional and broker who worked with more than 70 cannabis clients, I have seen firsthand how the lack of access to traditional banking services has affected cannabis businesses. The cannabis industry has faced many hurdles since its inception, and access to traditional banking services has been one of the biggest obstacles. This has created significant challenges for cannabis businesses, forcing them to operate on a cash-only basis and creating safety concerns.
The SAFE Banking Act is a necessary step toward creating a more supportive regulatory environment for the cannabis industry. The act would provide greater transparency into financial transactions and encourage more insurance companies to enter the market. This would benefit not only the cannabis clients but also the insurance companies by providing greater coverage options.
The current situation has a significant impact on the life of a cannabis business owner/operator. Banking with a cannabis bank can be expensive, driving down profits. Cashless ATMs and payment processing platforms have costs associated with them, which also drive down profits or are pushed onto the consumer. Additionally, accepting cash increases the risk of theft, leading to the need for expensive security measures. What’s more, investing in an adequate safe is required by insurance carriers, which can also be costly and further drive down profits. Due to the cash-intensive nature of the business, insurance companies offer limited coverage on cash.
Passing the SAFE Banking Act could help solve these issues by providing cannabis businesses with greater access to banking services, which would help them manage their finances more efficiently and effectively. This would also provide greater transparency into financial transactions, making it easier for insurance companies to assess risk and provide coverage options.
Moreover, the passage of the SAFE Banking Act would help create a more supportive regulatory environment for the cannabis industry. The current lack of access to traditional banking services has created significant challenges for cannabis businesses, forcing them to operate in a largely unregulated environment. This makes it difficult for them to comply with regulations and puts them at a disadvantage compared to other industries.
The cannabis industry is still in its early stages, and it requires significant capital to operate. Without access to traditional banking services, cannabis businesses struggle to obtain loans or lines of credit, making it difficult for them to grow and expand. Passing the SAFE Banking Act would provide cannabis businesses with greater access to capital, which would help them invest in their businesses and drive growth.
Finally, passing the SAFE Banking Act would benefit insurance companies as well. By providing greater coverage options, insurance companies would be better able to serve the needs of the cannabis industry. Additionally, the act would encourage more insurance companies to enter the market, which would increase competition and drive down costs for cannabis clients.
Overall, passing the SAFE Banking Act is a necessary step toward creating a more supportive regulatory environment for the cannabis industry. It would provide cannabis businesses with greater access to banking services, help them manage their finances more efficiently and effectively, and provide them with greater access to capital. This would benefit both cannabis clients and insurance companies, and I strongly believe that policymakers should take swift action to support this growing industry.
Valerie Taylor, Producer, Vice President and National Cannabis Practice Leader, The Liberty Company Insurance Brokers
Valerie has over 16 years of experience in the insurance industry with specialized niches in cannabis, real estate, and community associations. With experience working for companies such as McDermott Costa Insurance Brokers, AmWINS Group, Inc., Commercial Coverage Ins. Agency, and Colemont Insurance Brokers, Valerie has developed a love of helping clients navigate the world of insurance by creating an understanding of the value behind insuring their business. In addition to her professional work, Valerie serves as the CREW East Bay Chair on the Programs Committee, is a National Cannabis Bar Association member, NCIA member, and volunteers in East Bay communities with Richmond Grows Seed Lending Library to show people how to save vegetable seeds and grow their own food. In 2021, Valerie received the 2021 and 2022 CREW East Bay Connections Award and was a nominee for the Elevate 2021 Industry Impact award.
With a drive and passion for helping people, Valerie has gone back to her long-standing roots in the plant medicine industry and uses her unique lens of growing up surrounded by cultivators and sellers to validate her client’s business needs. Valerie strives to break the mold of how insurance and cannabis has partnered together to give back to the community she grew up in. With a strong insurance background and an in-depth knowledge of the cannabis industry, Valerie has been a trusted advisor for over 70 cannabis clients.
For more information on Liberty’s National Cannabis Practice Group, please reach out to Valerie Taylor, Vice President (National Cannabis Practice Leader), The Liberty Company Insurance Brokers.
Member Blog: What Does 280E Mean for the Cannabis Insurance Landscape?
by Valerie Taylor, Vice President (National Cannabis Practice Leader), The Liberty Company Insurance Brokers
The legal cannabis industry is growing at an unprecedented rate, with more and more states legalizing its use for medical and recreational purposes. However, despite this progress, cannabis businesses face a major obstacle: Section 280E of the Internal Revenue Code. This provision is a significant burden on cannabis businesses, limiting their ability to take deductions for basic expenses like rent, utilities, and employee salaries. The result is a higher tax burden and reduced profitability, putting cannabis businesses at a disadvantage compared to other industries.
Section 280E was introduced in the 1980s as a way to prevent drug dealers from taking business deductions on their tax returns. At the time, the provision was aimed primarily at illegal drug dealers. However, when it comes to cannabis businesses, Section 280E has become a significant hurdle. The problem is that while cannabis is legal for medical or recreational use in many states, it remains a Schedule I drug at the federal level. This means that cannabis businesses are still subject to the same limitations as illegal drug dealers when it comes to tax deductions.
The impact of Section 280E on cannabis businesses is significant. Without the ability to deduct basic expenses, cannabis businesses face higher tax burdens and reduced profitability. This makes it difficult for them to reinvest in their operations and grow their businesses. In addition, the provision makes it challenging for cannabis businesses to obtain financing, as many traditional lenders are hesitant to work with them due to the regulatory environment and the industry’s status as a Schedule I drug.
The insurance industry plays a vital role in supporting the cannabis industry. With the help of insurance professionals, cannabis businesses can protect their assets, mitigate risks, and navigate the complex regulatory environment. However, insurance providers also face challenges in the cannabis industry due to the regulatory environment and the industry’s status as a Schedule I drug. For example, some insurance companies are hesitant to provide coverage to cannabis businesses due to concerns about federal prosecution.
Despite these challenges, there are insurance providers that specialize in the cannabis industry and offer tailored solutions to cannabis businesses. By working with these providers, cannabis businesses can protect their assets and minimize risks, while also demonstrating to potential investors and lenders that they are taking the necessary steps to manage their risks.
In addition to the insurance industry, there are other steps that policymakers can take to support the cannabis industry. Revising Section 280E is one of the most critical steps that can be taken. By allowing cannabis businesses to take more deductions on their tax returns, policymakers can help level the playing field and create a more equitable regulatory environment for the industry. This would enable cannabis businesses to reinvest in their operations, grow their businesses, and create jobs.
One could say that 280E could be equally or more importantly about de-scheduling cannabis than about changing a tax code. This a vital step that policymakers can take to remove cannabis from the list of Schedule I drugs. The current classification of cannabis as a Schedule I drug is outdated and based on outdated stereotypes. This is also contributing to a massive roadblock with the potential to destroy many businesses in the legal market, which only helps the illicit market thrive. Removing it from the list of Schedule I drugs would enable researchers to study cannabis more effectively and provide a clearer understanding of its medical benefits and potential risks. It would also allow cannabis businesses to operate more freely and obtain financing from traditional lenders.
Creating a more supportive regulatory environment for the cannabis industry is critical to its success.
With the help of insurance professionals, tailored solutions, and supportive policymakers, the cannabis industry can continue to grow and contribute to the economy. Revising Section 280E and removing cannabis from the list of Schedule I drugs are essential steps that can be taken to support this critical industry.
Valerie Taylor, Producer, Vice President and National Cannabis Practice Leader, The Liberty Company Insurance Brokers
Valerie has over 16 years of experience in the insurance industry with specialized niches in cannabis, real estate, and community associations. With experience working for companies such as McDermott Costa Insurance Brokers, AmWINS Group, Inc., Commercial Coverage Ins. Agency, and Colemont Insurance Brokers, Valerie has developed a love of helping clients navigate the world of insurance by creating an understanding of the value behind insuring their business. In addition to her professional work, Valerie serves as the CREW East Bay Chair on the Programs Committee, is a National Cannabis Bar Association member, NCIA member, and volunteers in East Bay communities with Richmond Grows Seed Lending Library to show people how to save vegetable seeds and grow their own food. In 2021, Valerie received the 2021 and 2022 CREW East Bay Connections Award and was a nominee for the Elevate 2021 Industry Impact award.
With a drive and passion for helping people, Valerie has gone back to her long-standing roots in the plant medicine industry and uses her unique lens of growing up surrounded by cultivators and sellers to validate her client’s business needs. Valerie strives to break the mold of how insurance and cannabis has partnered together to give back to the community she grew up in. With a strong insurance background and an in-depth knowledge of the cannabis industry, Valerie has been a trusted advisor for over 70 cannabis clients.
For more information on Liberty’s National Cannabis Practice Group, please reach out to Valerie Taylor, Vice President (National Cannabis Practice Leader), The Liberty Company Insurance Brokers.
