Business

Mnuchin details IRS challenges with cash-only marijuana businesses

by Naomi Jagoda - 03/04/20 1:30 PM ET

Treasury Secretary Steven Mnuchin said Wednesday that the cash-only nature of marijuana businesses poses challenges for the IRS.

“This creates significant problems for the IRS,” Mnuchin said at a hearing held by a House Appropriations subcommittee.

Many states have legalized medical or recreational marijuana. However, banks have been hesitant to serve marijuana businesses even in states that have legalized use of the drug because they want to avoid violating federal anti-money laundering and illicit finance laws. That has led to cash-only marijuana businesses.

Lawmakers from both sides of the aisle asked Mnuchin at the hearing about marijuana banking issues.

“I’m hearing from financial institutions large and small alike that they still face uncertainty over whether they can provide financial services to legally operating marijuana businesses,” said Rep. Charlie Crist (D-Fla.).

Rep. David Joyce (R-Ohio) asked Mnuchin if the Treasury Department would keep the Appropriations Committee informed about the challenges it faces on the cannabis banking issue.

“I think it’s important Congress continue to iron out these problems as they are an issue of public safety, transparency and accountability,” Joyce said.

Mnuchin declined to take a policy position but said that cash-only businesses create a concern for the IRS.

“We have to build cash rooms to take in large amounts of cash where people owe us taxes, because we want to collect the taxes, and those entities are not banked,” Mnuchin said. “And I would say that creates risk to our IRS employees and to the people in the community.”

Mnuchin also said that when it comes to bank regulators, Treasury’s Financial Crimes Enforcement Network has issued some guidance but that Treasury has “limited abilities within this guidance to direct this issue.”

In September, the House passed a bipartisan bill aimed at giving banks legal cover to serve the cannabis industry, but Senate Banking Committee Chairman Mike Crapo (R-Idaho) has raised concerns about the measure.

Without taking a stance on how he thinks the federal-state conflict concerning marijuana should be resolved, Mnuchin urged Congress “to deal with this one way or another.”

Rep. Mark Amodei (R-Nev.) — who along with Crist and Joyce voted for the House bill in September — said he thinks it’s an “incredible irony” that because of the conflict between state and federal laws, “the biggest money launderer of marijuana money, if your state’s legalized it, quite frankly are the tax collectors.”