Investors" THE ONES here just want t believe pie in the sky posts. Laws? Costs? Where is the money coming from? That Federal laws prohibit banks from knowingly dealing with MJ? That stuff is only minor details!
In short, federal law says any entity that holds deposits from another person, transfers funds between parties as in checks, debit cards, wire transfers, or otherwise is connected to the payments system -- the movement of money from one financial entity to another party -- must abide by federal law," Don Childears, the president and CEO of the Colorado Bankers Association, told the Denver Post.
And along these same lines, it's why many of the ordinary and necessary business expenses incurred by a retail dispensary aren't deductible from federal income taxes.
Under section 280E of the Internal Revenue Code, businesses are precluded from deducting expenses related to the "trafficking of controlled substances ... which is prohibited by federal law." This has been interpreted by at least one federal tax court to capture all deductions for expenses related to retail establishments that derive the majority of revenue from marijuana sales.
"There's simply no question that the banking ban and uncertainty around taxes are the two biggest issues facing the industry today," the owner of the second-largest dispensary in Southern Colorado told me.
One of the most interesting, albeit unintended, consequences of the conflict between federal and state marijuana laws is that it's carved out a protected haven, if you will, around a small subset of businesses in the industry -- namely, those with access to private in-state capital.
Under Colorado's rules governing the sale of both medical and recreational cannabis, current industry participants are heavily insulated from competing against well-financed, out-of-state entities with large shareholder bases -- think publicly traded companies like Altria, the domestic distributor of Marlboro cigarettes, or Lorillard, the proprietor of Newport cigarettes, among others.
This follows from the requirement that every application for a medical or recreational license must contain "the names, mailing addresses and owner's background applications of all persons owning any of the outstanding or issued capital stock"
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