Cannabis industry faces significant tax and banking hurdles

A report from the U.S. Government Accountability Office (GAO) highlights significant financial and regulatory obstacles facing the cannabis industry. Due to cannabis being classified as a Schedule I or II controlled substance, businesses are unable to deduct business expenses for federal tax purposes under current IRS code.

Financial institutions remain hesitant to partner with cannabis-related businesses (CRBs) due to potential legal and regulatory sanctions. This hesitation often results in CRBs facing bank account closures, high service fees, and elevated interest rates on business loans. Major payment processors, including Visa, Mastercard, American Express, and Discover, currently prohibit transactions related to the industry.

While the Financial Crimes Enforcement Network requires banks to comply with the Banking Secrecy Act by filing suspicious activity reports on certain cannabis-related transactions, federal banking regulators stated they have not taken enforcement actions against institutions solely for serving these businesses.