Pubdate: Sun, 22 Sep 2013
Source: Bellingham Herald (WA)
Copyright: 2013 Bellingham Herald
Author: Jordan Schrader


Wanted: A bank for state government. Must offer attentive customer
service. Must be able to handle several deposits a day, with
drop-offs of up to 40 bags at a time. Must allow an account to be
overdrafted during the day by more than $1.2 billion.

Oh, and must accept proceeds from the sale of marijuana.

As Washington shops for a bank, that last demand might not be as hard
to meet as it sounds.

The state's current banker has already agreed to it, according to the
state treasurer, who says despite federal restrictions Washington
shouldn't face reprisals for banking and spending the revenue that is
coming soon from pot taxes and fees.

"I'm not too worried about it," Treasurer Jim McIntire said. "It's
actually one of the advantages of having Bank of America as your
contractor. It's unlikely, I think, that the federal government would
raid them. ... And they're big enough to look out for themselves on

Bank of America's seven-year contract to hold the state's main account
runs through June 30, and the state asked for bids this month in a
request that specifically calls out deposits of marijuana revenue as a

In the meantime, the state expects to start depositing revenue from
Initiative 502, which legalized the recreational use of marijuana. The
Liquor Control Board will receive its first fees in November from
applicants asking the board for licenses to grow and sell the drug,
and the Department of Revenue starts collecting taxes as soon as March
after the first licenses are awarded.

Much of the revenue could arrive in the form of cash, since banks are
reluctant to do business with pot dealers without changes in federal
policy that treats banking of marijuana proceeds as money laundering.

Handling all those bills presents a hurdle for the state Department of
Revenue. But some had suggested a bigger problem would be trying to
store and spend the money.

The uncertainty was reflected in Wednesday's quarterly report from
Washington revenue forecasters, who said they wouldn't count I-502
revenue in their projections until the Liquor Board finishes writing
rules and "an agreement is reached with the federal government with
respect to the legality of depositing cannabis-sourced tax receipts
into state accounts."

As recently as July, Liquor Board member Chris Marr said not a penny
could be deposited without risk of tainting other state money - unless
federal authorities took action. Marr has dialed back his alarms, but
said last week he would still like clarity from the federal government.

Bank of America is confident, the treasurer's office says. After all,
Washington taxpayers may be breaking all sorts of laws, and that
doesn't deter the bank from taking their tax money when state
government deposits it.

Its bankers have "checked this out with their compliance department
and they don't see it as any different than say, medical marijuana or
any other activity," Assistant Treasurer Wolfgang Opitz said. "There
could be other illegal activities going on in this state that happen
to be in the tax base."

Medical-marijuana sellers are not regulated or licensed by the state
and they operate in what some see as a legal gray area. But they are
supposed to pay sales tax and business tax, which goes into the
state's bank account.

The new I-502 businesses are different. They will be licensed by the
state, so revenue collectors can't plead ignorance of the companies'
business practices. Liquor Board Director Rick Garza said he asked
other state officials if the licensing would affect the state's
ability to deposit the revenue. Not necessarily, he was told.
Washington is not the first state to license marijuana businesses, and
the federal government has never cracked down on states' bank
accounts, Garza said.

Garza said he's confident that the state will be able to bank and
spend its revenue. The next problem to resolve is marijuana
businesses' inability to bank. Marr worries about the inefficiency of
collecting cash and hopes for a federal resolution.

"We're really not equipped to accept cash," he said. The Liquor Board
might rely on the revenue department's collection network.

Marr is hopeful that a solution will come now that the U.S. Department
of Justice has decided to allow recreational marijuana sales in
Washington and Colorado to go forward. Banks say their regulators are
in talks with DOJ.

Even if all those questions are answered, it will be hard for
forecasters to say how much revenue the state should expect.

If tax rates don't change, I-502 might bring in between $1.4 billion
and $3.2 billion over a decade, consultants told the Liquor Board - a
wide range.

The revenue depends largely on how much of the existing illegal and
quasi-legal market the new pot stores can capture. The board figures
they will start out with 13 percent of the market and expand to 25
percent in a year.

When will budgeters be confident enough to bank on the

"When we can bank on it," House budget chairman Ross Hunter, D-Medina,
told reporters. "Which means, when we can actually count it."
- ---
MAP posted-by: Matt