The head of the Internal Revenue Service (IRS) told Congress that the agency would “prefer” if state-legal cannabis businesses were able to pay their taxes electronically, as the current cash-based system presents risks to workers.
Last year, then-Treasury Secretary Steve Mnuchin said cash from the cannabis industry creates problems for the IRS and risks for the agency employees. Mnuchin also urged lawmakers to do something to help ease the burden. Representative Dave Joyce, who also serves as a co-chair of the Congressional Cannabis Caucus, also acknowledged that lack of access to banks for cannabis businesses is “inefficient for business and the IRS alike.”
“It’s a security issue for the IRS. It’s a security issue for our employees in our taxpayer assistance centers, [which] is actually where we receive these payments. We created special facilities in the tax to receive the payments. Then we similarly have to transport the payments themselves,” IRS Chief Charles Rettig said.
The IRS released tax guidance last year to industry operators, covering cash payments and estimated payments, as well as Section 280E, an IRS code that “disallows all deductions or credits for any amount paid or incurred in carrying on any trade businesses that consist of illegally trafficking in a Schedule I or II controlled substance within the meaning of the federal Controlled Substances Act.” However, due to other issues including coronavirus relief and guidance related to the 2017 tax reforms, the IRS is pushing back publishing Section 280E.The Secure and Fair Enforcement Banking Act (SAFE Banking Act) was proposed in 2019 as a federal bill that would allow cannabis businesses access to banks. The bill initially passed the House in September 2019, but was met with opposition from the Republican-led Senate at the time.