Bipartisan congressional lawmakers have filed a bill to provide a safe harbor to insurance companies that work with state-legal marijuana businesses.

The Clarifying Law Around Insurance of Marijuana (CLAIM) Act was filed by Reps. Nydia M. Velázquez (D-NY) and Warren Davidson (R-OH) on Wednesday.

The legislation would protect insurers, brokers and agents from being penalized by federal regulators for providing insurance services to state-licensed marijuana companies.

“Because of the conflict between federal and state law, insurers are still hesitant to write policies for cannabis businesses,” Velázquez said in a press release. “That means thousands of legal small businesses are operating without a safety net. One fire or one storm could wipe out everything an owner has built, with no way to recover. The CLAIM Act fixes this by giving these entrepreneurs access to the same basic insurance protections every other legal business takes for granted.”

Davidson said that “businesses operating legally under state law should be free to purchase insurance, and insurers should be free to serve them.”

“The federal government should not use regulation to interfere with lawful commerce or override decisions made by the states,” he said. “The CLAIM Act removes that federal interference and protects the freedom of insurers and their customers to do business.”

Earlier this year, Sens. Kevin Cramer (R-ND) and Ruben Gallego (D-AZ) filed similar legislation in the Senate.

This is the fourth Congress in a row that the cannabis business insurance measure has been introduced, and the text of the current bill, H.R.10471, remains largely the same as prior versions.

Earlier this year, bipartisan House and Senate lawmakers filed related legislation to provide safeguards for banks that work with the cannabis industry.

As it stands, cannabis firms are limited in their ability to gain property, casualty and title insurance coverage. The CLAIM Act would prohibit federal agencies from penalizing insurance providers for simply covering those businesses, and it would bar insurers from terminating or limiting policies for marijuana companies or ancillary businesses due to the nature of their enterprise.

The legislation also includes a requirement that the Government Accountability Office (GAO) study and issue a report on “barriers to marketplace entry, including in the licensing process, and the access to financial services for potential and existing minority-owned and women-owned cannabis-related legitimate businesses.”

It additionally provides protections for employees of insurers, affirming that they could not be held liable just because they work with a cannabis company.

Supporters of the legislation have argued that providing insurance access to these businesses would mitigate safety risks and prevent the companies from being denied bank financing, which can occur when the businesses lack insurance coverage.

—
Marijuana Moment is tracking hundreds of cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.

Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.
—

Meanwhile, the Trump administration is moving forward with the process of rescheduling marijuana under federal law.

Attorney General Todd Blanche in April issued an order that immediately reclassified state-licensed medical cannabis, as well as marijuana products approved by the Food and Drug Administration (FDA) from Schedule I of the Controlled Substances Act (CSA) to Schedule III.

Under a separate order the attorney general signed, a hearing is considering more comprehensively moving marijuana to Schedule III.

Source link

“Cannabis companies should consider various pitfalls to ensure not only legal compliance, but to maximize potential benefits.”

By Meeren Amin, William Bogot and Douglas W. Charnas, Fox Rothschild LLP

With rescheduling of medicinal marijuana and potential relief coming for recreational use, cannabis companies should be aware of tax benefits available to the industry.

One such incentive for companies not subject to Internal Revenue Code (IRC) § 280E—which blocks tax benefits to entities that sell Schedule I and II substances—is the IRC § 41 R&D (research and development) tax credit. The R&D tax credit provides a dollar-for-dollar reduction of tax owed for qualifying companies. It is not industry specific and can be claimed by a qualifying company in any sector, including cannabis.

The R&D tax credit was enacted in 1981 to incentivize U.S. companies to increase R&D activity. For years the credit was extended temporarily by Congress at the end of each calendar year. However, in 2015, Congress made it permanent. And then in 2025, lawmakers breathed even more life into the credit by eliminating the requirement that R&D expenditures be amortized over a five-year period.

Now, with IRC § 280E on the chopping block as cannabis moves toward Schedule III status, certain companies in the industry can claim the credit that others have taken advantage of for years. Having said that, careful planning is required when considering the R&D tax credit.

Cannabis companies should consider various pitfalls to ensure not only legal compliance, but to maximize potential benefits.

Pitfall #1: Thinking you don’t qualify for the credit because you don’t do research in a laboratory.

The R&D tax credit is not industry specific. Instead, to qualify for the credit, a company must meet each part of a four-part test:

1. A company needs to develop a new or improved product, process, software, technique, formula or invention. Practically, this means that many cannabis companies can qualify by developing a new or improved product.
2. The research needs to eliminate uncertainty about a product’s capability, method or appropriate design. Often, research will qualify by means of having uncertainty as to a product’s ultimate design.
3. The research must involve a process of experimentation. This does not need to be in a laboratory, but instead simply requires evaluating alternatives through system trial and error.
4. The research must be technological in nature, in that it requires the use of principles of hard science.

This formulaic approach to determining qualification for the credit allows companies in many industries—from pharmaceutical companies to architectural firms—to claim the R&D tax credit. Cannabis companies involved in breeding, cultivation, growing, extraction and product development could potentially qualify for the credit if they meet the four-part test and do not fall under any applicable exclusions.

Pitfall #2: Not maintaining proper records of research activities and expenditures.

The Internal Revenue Service (IRS) commonly attacks R&D credit claims for a lack of substantiation. Taxpayers have the burden to prove they are entitled to the credit, so they must adequately substantiate their claims.

Cannabis companies that qualify can claim the tax credit on qualified wages or supply costs. However, companies must have evidence of wages and supply costs to claim the R&D tax credit.

Evidence of supply costs includes receipts of goods and logs showing how supplies are used in the research process. Since supplies that are later sold to customers would not qualify for the credit, cannabis companies need to track how research supplies are used.

Evidence of wages usually requires detailed activity logs. Most small and mid-sized operators do not require employees to keep a log of activities, but to be able to withstand IRS scrutiny, companies should require employees involved in research to track their time using a consistent methodology.

Maintaining detailed records or R&D activities is difficult for rapidly growing businesses. While granular level records may not be necessary, it is important for cannabis companies to consult with their tax advisors on the level of detail needed and how to implement tracking systems.

Pitfall #3: Relying on unscrupulous or shady promoters of R&D tax credits.

The R&D tax credit is complicated and can be overwhelming. There are a number of reliable firms that can determine qualification, draft a study and calculate the credit. Unfortunately, there are a large number of firms that do not perform the necessary due diligence and are not credible. These firms sometimes charge large contingency fees and make guarantees about eligibility. Their calculations are often greatly overstated for the purpose of generating high fees. These firms may seem credible but can be overly aggressive in their approach.

With the emergence of the cannabis companies as potential new credit claimants, these companies will likely be aggressive in their pitch. However, poor work on the front end can lead to adverse determinations by the IRS.

Cannabis companies need to properly vet the firms they hire to conduct R&D studies and then have those studies reviewed by a third party. Credit experts can analyze the work done by firms to help strengthen the front-end studies. Companies that are not careful face the risk of losing the credit, while also owing promoters huge fees.

Pitfall #4: Not separating non-IRC § 280E and IRC § 280E activities.

As of now, only state-licensed medical marijuana is not subject to IRC § 280E and thus eligible for the R&D tax credit. That means research related to recreational use marijuana is not eligible for the R&D tax credit.

This makes it difficult for most eligible companies who are involved in both medicinal and recreational uses, as they need to separate their research activities relating to the two. This may be almost impossible for vertically integrated companies. But other companies can use entity structuring to help allocate costs and ensure segregation of qualifying and non-qualifying research activities.

The R&D tax credit is a very powerful incentive that certain cannabis companies can now claim. However, it is a major area of focus for the IRS due to the complexity of the credit and the aggressive positions pushed by certain promoters. While this may cause concern to companies seeking to claim the credit, careful due diligence and reliance on advisors can help businesses ensure that their credit claims are well supported.

Meeren Amin is a partner in the Taxation & Wealth Planning Department at Fox Rothschild. William Bogot is co-chair of the Cannabis Law Practice at Fox Rothschild. Douglas W. Charnas is counsel in the Taxation & Wealth Planning Department at Fox Rothschild.

Photo courtesy of National Institute of Standards and Technology.

Source link

“Cannabis lobbying groups are arming prohibitionists by demonizing hemp—helping those who have been at war with cannabis for decades… I’ve rarely seen a more self-defeating campaign.”

By Aaron Edelheit, Mindset Capital

Are cannabis organizations working to advance reform? Or are they arming the very prohibitionists who want to stop all THC commerce?

Some regulated cannabis companies and cannabis lobbying groups are hard at work fighting hemp, which they see as unfairly competing with more regulated state-cannabis companies. They celebrated last November when Sen. Mitch McConnell (R-KY) snuck a ban into a government funding bill. But knowingly or not, these same organizations are now working side by side with prohibitionists whose cult-like coalition includes politicians and interest groups who want to keep all cannabinoids illegal.

In my opinion, cannabis lobbying groups are arming prohibitionists by demonizing hemp—helping those who have been at war with cannabis for decades. Today’s prohibitionist movement runs on funding from those who hate THC. Every win against their hated enemy, THC, brings prohibitionists more donations, more influence, more media coverage.

The prohibitionists will do anything to win. Beyond misleading and using scare tactics, they have employed canvassers for the Massachusetts ballot initiative who misled signatories about what they were signing. This is more than just politics or business: people are being incarcerated and having their lives ruined, and families are being torn apart because of a plant that should be regulated, not banned.

The hemp ban gave them momentum: sustained energy, paid media, influencer campaigns, political muscle. Now Massachusetts faces the first ballot initiative to roll back a state-legal market, bought and paid for by prohibitionists. The op-eds and influencer campaigns are in full swing, timed perfectly ahead of a federal rescheduling decision.

What the regulated cannabis industry may not understand, is that by aligning themselves with the prohibitionists they are now fighting the president of the United States. President Donald Trump wants the ban delayed so that there is time for common-sense regulation, and it has been reported that he is personally lobbying senators to give Congress time to get it right.

I’ve rarely seen a more self-defeating campaign. The cannabis industry is waiting on rescheduling, tax relief and eventually banking access, while actively opposing the one person who controls all three.

So, here’s my plea to cannabis companies fighting hemp: stop pushing for a total ban. Don’t fight the first president to deliver real cannabis reform. If you want a fight, fight for smart regulation, not alongside the prohibitionists.

Aaron Edelheit is the CEO of Mindset Capital, a private investment firm with investments in cannabis and hemp beverage companies.

Photo courtesy of Philip Steffan.

Source link