California bill seeks to legalize banking for cannabis businesses

California’s fast-rising cannabis industry, which has been forced by federal law to conduct almost all its business in cash, got a boost Thursday when legislation was introduced to allow banks to open accounts for people involved in the field.

State Sen. Robert Hertzberg, D-Van Nuys, introduced a bill that would allow California-chartered banks, credit unions and other financial institutions to open checking and savings accounts and issue checks for marijuana retailers.

The proposed law, known as SB930, is an attempt to deal with U.S. Drug Enforcement Administration rules that still classify cannabis as a Schedule I drug, and therefore put banks opening accounts for marijuana businesses in a precarious position.

California and eight other states have legalized adult recreational use of marijuana, but the laws don’t trump federal rules that make banks that accept deposits from such businesses liable for penalties. It means cannabis merchants must pay their taxes and employees with huge wads of cash — putting them in the crosshairs of robbers and thieves.

“These businesses handle significant economic activity, yet they are forced to operate under the table and with little government oversight, as if they’re a black-market operation,” Hertzberg said. His bill “will integrate these businesses into the fabric of the California economy.”

Fiona Ma, a member of the California State Board of Equalization, said the bill would authorize privately insured financial firms to open accounts, issue checks and take deposits. It would allow marijuana merchants to pay employees with checks and make electronic and wire payments. Employers could thereby more easily withhold and remit taxes.

Ma said there will probably be a special license and colored checks.

The cannabis industry “is the biggest underground economy we have, so we’re trying to bring them into the light, and having some kind of banking is important,” Ma said. “Paying your taxes with duffel bags full of cash isn’t safe or efficient for anyone involved.”

Offices of the California Department of Taxes and Fee Administration, which oversees tax collection, make an exception to take tax payments in cash from marijuana businesses, requiring additional security.

Ma acknowledged there will be some opposition to the bill but that it would ultimately be good for the government because it would “provide a paper trail so the government can make sure everybody is paying their fair share of taxes.”