The smoke slowly clears on marijuana regulations
The voters clearly have spoken, and soon recreational marijuana will be widely sold here in Massachusetts, following a slow and ongoing rollout of medicinal dispensaries. As it has in other states, the budding new industry will come with many regulatory complexities, and along with them, the lingering issue of the federal government standing at odds with state law. CPAs potentially engaging clients in the marijuana industry have more assurances that they are legally safe but should be aware that the ground could suddenly shift.
Already the Massachusetts legislature has greeted the prospect of marijuana legalization with some caution, delaying the full implementation of the law while also considering amending the voter referendum in other ways, including increasing the marijuana excise tax. Thus the law itself remains a work in progress as a legislative committee convenes to propose amendments.
For providers of professional services considering working in the marijuana industry, in Massachusetts or any other state that permits it, caution also is a sensible approach, for the legal conflict still lingers: The Federal Drug Enforcement Administration has stood by its August decision that marijuana is still in the most restrictive category for U.S. law enforcement purposes. And the new administration taking shape in Washington very likely won’t relax the DEA’s stance. Incoming Attorney General Jeff Sessions has been a vocal critic of the legalization of marijuana, although at his confirmation hearing he did not draw a hard line on states’ rights to create and enforce their own marijuana laws. The good news for the legal marijuana industry is that Sessions seemed to acknowledge that resource constraints will require the federal government to look the other way as states continue to decide their own marijuana destinies.
More reassuring is the news that state governing bodies of professional services, including accounting, have moved to clarify that professionals won’t face repercussions for providing services to the marijuana industry. For instance, in Massachusetts, the Board of Public Accountancy in February issued a statement assuring accountants that it wouldn’t take action against individuals and firms that work on legal marijuana clients. It cautioned, however, that firms still risk being at odds with federal law, but the board made an important move by in effect helping to assuage the concerns of the Massachusetts accounting profession.
It’s not clear sailing, however. Many banks remain wary of taking on marijuana business. They have deferred to rules under the Cole Memo, which lays out nine criteria for state-chartered banks to follow that would allow them to accept deposits from marijuana businesses without fear of prosecution. However, with few exceptions, bankers in Massachusetts and elsewhere are awaiting further instructions from the Division of Banks.
All the same, the risk of federal intervention clearly is diminishing as the marijuana industry expands. Marijuana brought in an estimated $6.7 billion in sales last year and 29 states have legalized medical marijuana. Eight states allow recreational use. It would appear the horse is out of the proverbial barn, but with a new president in place eager to flex political muscle, a strong show of federal control on the issue is not beyond imagining.
As the marijuana industry launches in Massachusetts and elsewhere, there no doubt will be an intensive regulatory focus and ongoing hurdles, including hurdles legal and financial, to clear. And there’s no question that a complex industry facing a raft of regulation calls for the depth of experience and professionalism that CPAs bring.