Legislature(2021 - 2022)BARNES 124
04/01/2021 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s): Regulatory Commission of Alaska | |
| HJR14 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HJR 14 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HJR 14-RESOLUTION: FED SAFE BANKING ACT/CANNABIS
9:01:08 AM
CO-CHAIR HANNAN announced that the final order of business would
be HOUSE JOINT RESOLUTION NO. 14, Supporting the passage by the
United States Congress of the SAFE Banking Act of 2019, sec.
110606 of the Heroes Act, or similar legislation relating to
cannabis-related legitimate businesses' access to financial
services.
9:01:43 AM
REPRESENTATIVE RASMUSSEN, Alaska State Legislature, as prime
sponsor, presented HJR 14. About a year ago, she related, her
husband, who is in the mortgage industry, had commented that
owners of cannabis companies cannot qualify for mortgages. She
said that seemed odd, since Alaska, with passage of Ballot
Measure 2 in 2013, had legalized the recreational use of
marijuana. She said she assumed that meant cannabis companies
were legitimate businesses. She said HJR 14 was created with
the idea of creating safety measures and more traditional
financing options. She said, should HJR 14 pass, Alaska would
become the first state in the nation to put forward "a
resolution for safe banking."
9:04:07 AM
MICHAEL BRONSTEIN, President, American Trade Association for
Cannabis and Hemp, expressed that the matter addressed by HJR 14
is urgent and important; it is not [only] about industry
accommodation but about public health and safety and the people
working in the industry. Currently, 40 percent of the
population lives in a state that has legalized adult use of
cannabis, not including medical marijuana use. He said there
are approximately 300,000 employees that work in the industry.
He explained that under federal law, cannabis businesses are not
allowed to bank. Keeping money in banks allows it to be traced,
which is why there is broad and bi-partisan support for "safe
banking," including a letter from Alaska's attorney general to
U.S. Congress.
9:06:39 AM
MR. BRONSTEIN mentioned the "Safe Banking Act," which he said
would "prohibit penalizing or prohibiting a financial
institution from providing services to a legitimately sanctioned
and regulated businesses" or "an associated cannabis business."
He said most concerning is that employees of the cannabis
industry are being denied mortgages and loans, which threatens
"the economic integrity and the individual ability of workers"
in the industry. He said there are ramifications well beyond
the industry in terms of having to do payroll on a cash basis.
He opined that Alaska's leadership on this issue is important
nationally. He said this is a simple issue and is separate from
the issue of whether or not cannabis should be legal. This is
about providing safe banking services. He concluded his
testimony by stating full support for HJR 14.
9:11:36 AM
REPRESENTATIVE MCCARTY said this reminds him of Elliot Ness, who
was with the U.S. Treasury and was focused on the issue of Al
Capone and unaccounted for money during the prohibition. He
suggested the federal government was Al Capone in the current
situation and "we're trying to rectify the situation," and he
asked Mr. Bronstein if that was an accurate summation of the
situation.
MR. BRONSTEIN replied that the [federal] government "has a lot
that they can do on this" and knows that there is "congressional
relief." He said the cannabis industry pays taxes, just like
other businesses, and it wants to be treated like other
businesses. Not having access to banking is not tenable. He
opined that having broad-based statewide support [for HJR 14]
will help point the federal government in the right direction.
In response to Representative McCarty, he explained that HJR 14
would send a strong message to Congress. He agreed that "we
will be waiting on Congress," but expressed his hope that it
would not be much longer.
REPRESENTATIVE MCCARTY noted that he has constituents and
friends in the industry who say they are legally sending money
out of the country to banks to secure the money. He
acknowledged that those employees in the industry are not being
acknowledged for home loans, for example, because there is not a
payroll that is recognized. He said, "I appreciate the efforts
here."
9:16:12 AM
REPRESENTATIVE PRAX surmised that "the nuts of the issue" is
whether legalizing cannabis has been detrimental to society. He
proffered that if so, "I guess we wouldn't want to make
operating the business easier"; if not, then "we're driving the
business back underground if we're not recognizing the income
...." He asked Mr. Bronstein if he had heard of any detrimental
effects resulting from the legalization of cannabis.
9:17:35 AM
The committee took an at-ease from 9:17 a.m. to 9:18 a.m.
9:18:11 AM
REPRESENTATIVE RASMUSSEN said 37 states have legalized medical
and/or recreational use of cannabis, and 53 percent of those who
voted Ballot Measure 2 supported legalizing recreational use in
of cannabis in Alaska. She concluded, "So, this issue is
basically just to address the safety for employees and owners
and, honestly, any support businesses for the industry. People
are dealing with tens of thousands to hundreds of thousands of
dollars in cash." She noted that there are only two drop-off
points in the state where it is possible to "put the money
toward taxes."
9:19:38 AM
REPRESENTATIVE PRAX, in response to Co-Chair Hannan, offered his
understanding that the question of the federal government is
whether cannabis is detrimental to society. He indicated that
since 37 states have said it is not detrimental then there is no
argument; therefore, restricting business by not allowing those
in the cannabis industry into the banking system makes no sense.
9:20:36 AM
CO-CHAIR HANNAN noted that Mr. Bronstein had a previous
commitment and was no longer available for questions.
9:21:16 AM
The committee took an at-ease from 9:21 a.m. to 9:23 a.m.
9:23:12 AM
SCOTT BERGMANN, Staff, Representative Sara Rasmussen, on behalf
of Representative Rasmussen, prime sponsor of HJR 14,
paraphrased the sponsor statement, which read as follows:
Since 1996, 33 states comprising 68 percent of the
nation's population have legalized cannabis for
medical or adult use. Despite this ever-growing voter
preference, current federal law continues to prevent
banks from offering products and services to these
businesses without fear of federal sanctions. Leaving
the cannabis industry without access to banks presents
serious public safety, revenue administration, and
legal compliance concerns.
Access to licensed and reputable financial services is
important for the following reasons:
? A high level of cash handling in the cannabis
industry puts consumers, businesses, and public
authorities at increased risk of contracting the
coronavirus.
? Criminals and unscrupulous individuals are
attracted to cash heavy businesses; access to banking
services would reduce criminal activity in the
industry and deter opportunistic lending and
investment.
? Reduced hours and drive-through only deposit
options (due to COVID-19) at banks create an undue
burden on industry workers who are paid in cash.
? Inspections and audits by regulators, tax
collectors, and state and federal agencies would be
streamlined.
? Service providers that work with the legal
cannabis industry would be protected from being
charged with financial crimes.
House Joint Resolution 14 urges the Federal Government
to pass SAFE Banking Act of 2019, sec. 110606 of the
Heroes Act, or similar legislation that would provide
a safe harbor for depository institutions that provide
financial products or services to legal cannabis-
related businesses or service providers in states that
have implemented laws and regulations legalizing
cannabis for medical or adult use.
9:25:04 AM
REPRESENTATIVE DRUMMOND remarked that alcohol has been more of a
problem in her district than cannabis has. She said the taxes
paid on alcohol in Alaska do not even begin to cover related
social ills and crime. She then talked about a cannabis testing
company in Fairbanks having to move to another city because the
Wells Fargo business in the same building threatened to call its
mortgage.
9:29:50 AM
REPRESENTATIVE MCCABE commented that "the genie's out of the
bottle" as far as the legalization of marijuana in Alaska; now
the legislature needs to fix the banking issue. He noted the
significant cross section of those in support of HJR 14 - not
just political parties, but in age groups - and he encouraged
taking action to address anything that impedes business.
9:31:19 AM
REPRESENTATIVE RASMUSSEN noted that the co-sponsorship is evenly
divided among parties.
9:32:14 AM
LACY WILCOX, President, Alaska Marijuana Industry Association,
testified in support of HJR 14. She said a resolution in
support of the Safe Banking Act sends a message that the Alaska
State Legislature cares about public health and safety. She
said regardless of how members may feel about legalized cannabis
in Alaska, "access to financial services is paramount in
protecting Alaskans from the risks associated with large volumes
of cash" and is a tool for law enforcement, tax collectors,
regulators, and auditors "to identify less-than-honorable
industry participants."
MS. WILCOX reported that currently there are over 400 business
entities in Alaska's cannabis industry; those entities represent
over 500 cannabis licenses, thousands of shareholders,
investors, and about 10,000 employees. Those employees are
finding obstacles when attempting to buy a house or car, take
out a loan to further their education, or apply for most any
other financial service. She pointed out that many ancillary
services, such as general contractors, plumbers, electricians,
utility companies, and supply vendors have found it difficult to
work with the industry because often large payments for buildout
services have to be creatively converted to money orders to not
put in jeopardy the financial situation of those ancillary
services. Mr. Wilcox said some businesses in the industry would
like to expand or offer health benefits and retirement programs
to their staff, but cannot do so without access to financial
services.
MS. WILCOX imparted a message she has heard repeatedly from
those who work in financial services that they would love to
bank the cannabis industry's money and offer merchant services,
"but the risks associated to them personally change what reality
allows." She said the Safe Banking Act would provide assurances
to them and relief from criminal liability. The Act seeks to
provide safe harbor to get cash off the streets and "safely into
the vault."
9:35:31 AM
REPRESENTATIVE DRUMMOND asked Ms. Wilcox if she is aware of any
criminal activity resulting from the presence of large amounts
of cash.
MS. WILCOX answered yes, several people in the industry have
been held up while on the way to the tax office or to their
cars. She said luckily camera surveillance is required, so it
makes it easier to prosecute; however, she said it should not
happen in the first place. In response to a follow-up question,
she said originally Juneau was planning to offer a cash drop-off
point but reconsidered because of safety concerns. She offered
her understanding that a cash depository in an Anchorage parking
garage is the only one of which she is aware. In response to
another question, she offered more details about getting money
orders to send via certified mail. A person may do that from
his/her personal account, but many have had their personal
accounts closed by the bank.
9:40:36 AM
MICHAEL MARTIN, President, Alaska Bankers Association, stated
that he is also the chief operating officer and general counsel
for Northrim Bank. He said the Alaska Bankers Association (ABA)
represents seven banks with operations in Alaska. He said the
seven banks include four state banks and three national banks
that are chartered by the federal Office of the Comptroller of
the Currency. He said ABA and all its member banks support HJR
14, urging the federal government to adopt the Safe Banking Act
to provide a safe harbor for depository institutions that
provide financial products and services to legal cannabis-
related businesses. He noted that ABA does not and has never
taken a position on the legalization of cannabis; however, all
the banks are committed to serve the financial needs of
consumers, businesses, and communities of Alaska.
MR. MARTIN said all banks are subject to federal law, and
cannabis remains illegal under federal law. Currently banks
face substantial risk if they offer services and products to
cannabis-related businesses, including extreme federal
regulatory scrutiny under the current regime, loss to access of
critical payment systems, and the loss of charters from federal
regulators, which affects the banks' abilities to conduct
business with the rest of their customers. He said the Safe
Banking Act is "a bank-specific solution that enables banks to
serve cannabis-related businesses." He stated, "The Alaska
Bankers Association and I definitely appreciate your leadership
in bringing forward a resolution."
9:43:31 AM
MR. MARTIN noted that cannabis-related businesses cannot: open
and maintain deposit accounts; engage in electronic transactions
with banks, including tax payments; and cannot obtain loans. A
cannabis-related business cannot be in the same property as a
financial institution. He said that is what causes
"substantially regulated businesses" to deal in cash and find
money orders to operate outside the traditional banking system.
He further noted that the American Banking Association supports
the Safe Banking Act and submitted a letter to Congress on March
17, 2021, signed by the president of the association.
9:46:24 AM
JANA WELGZIN, Owner, JDW Counsel, said her law firm represents
over 200 licensed cannabis businesses. She said the industry
has generated over 7,000 jobs in Alaska and is 100 percent
Alaska-owned. She hears about her clients keeping large amounts
of money in their homes, which concerns her. She echoed the
comments about people in the industry having to pay everything
in cash. She said these businesses create a lot of revenue in
Alaska. She said Alaska needs to show the federal government
that it supports safe banking and give the tools needed to do
it.
9:50:31 AM
RYAN TUNSETH, Owner, East Rip Dispensary, stated that it is okay
to admit when a mistake has been made, and he related that idea
to the war on drugs and ideology surrounding cannabis. He said
a detrimental effect of the industry has been that only those
with enough money could get into it. He said while he has been
able to figure out loopholes, there is a need for visibility of
money rather than having it under people's mattresses. He
talked about safety and the ability to audit, for people to have
the ability to get credit and grow their businesses.
9:55:33 AM
PAUL V. DISDIER, General Manager, The Fireweed Factory, stated
that one of the most worrisome issues is the accountability of
the money. He said even with a good accountant it is still not
possible to keep accurate accounting like is possible with a
bank account. He emphasized the danger of carrying large
amounts of money. He said all four members of his family have
had their bank accounts closed; his employees must be cautious
about how they use their bank accounts for fear they will lose
them. Mr. Disdier said he cannot get loans from banks, and
employees in the industry oftentimes do not have the ability to
get loans. He expressed the difficulty in getting a location
for a business. Most warehouses require a mortgage. He stated
that the Internal Revenue Service "electronically required 941
employee withholding," and he said that "everyone in this
business has to figure some workaround about that."
9:59:55 AM
REPRESENTATIVE RASMUSSEN expressed appreciation that most of the
committee members had signed on to HJR 14 as cosponsors.
[HJR 14 was held over.]