Pubdate: Tue, 08 Sep 2015
Source: Alaska Dispatch News (AK)
Copyright: 2015 Alaska Dispatch Publishing
Contact:  http://www.adn.com/
Details: http://www.mapinc.org/media/18
Note: Anchorage Daily News until July '14
Author: Laurel Andrews

STATE SEEKS 'CREATIVE IDEAS' TO HANDLE CASH FROM ALASKA POT BUSINESSES

Struggling with the prospect of handling millions of dollars in cash 
from commercial marijuana businesses, Alaska's Department of Revenue 
is holding three brainstorming sessions to get ideas for how to 
handle the influx of taxes in an industry shut off from basic banking 
practices.

"It's an uncharted territory. ... We don't have any precedent to go 
off of, really," said Claire Lettow, regulations specialist for the 
state Tax Division.

Since marijuana remains illegal federally, Alaska's financial 
institutions so far aren't opening their doors to commercial 
businesses. That means, like other states that have legalized 
recreational marijuana, businesses will be dealing in cash. 
Potentially a lot of cash.

Alaska's Department of Revenue estimates that it will take in between 
$5.1 million and $19.2 million in tax revenue from commercial 
marijuana in 2016.

"If the majority of it is coming in in cash, we're going to have an 
issue with that," Lettow said.

For Alaska's Tax Division, a major influx of cash means security 
risks, and a lot more manpower spent simply counting money.

"We're not in the business of being bankers," Lettow said.

The division is already anticipating hiring an auditor and tax 
technician to handle the new marijuana taxes, but doesn't have much 
wiggle room to invest in other possible necessities, such as armored 
vehicles, Lettow said.

The division is hoping for "creative ideas" from the marijuana 
industry as to how to best manage the cash flow, and what 
alternatives there might be to a cash-only industry, Lettow said.

"It's a brainstorming session," Lettow said. "We want people to throw 
(their ideas) out to us."

Other states that have legalized recreational marijuana are facing 
the same issue. In Colorado, the Fourth Corner Credit Union has filed 
a lawsuit against the Federal Reserve after it rejected an 
application for the credit union to start serving hundreds of 
licensed marijuana businesses.

Colorado has also seen banks open, and then close, accounts belonging 
to marijuana businesses.

"None of it feels very stable," said Alcoholic Beverage and Marijuana 
Control Board director Cynthia Franklin.

The banking issue is "very serious and it's very troubling. ... If I 
could have two seconds with Obama, (to talk about) anything with 
marijuana, I would ask him to fix the banking problem," Franklin said 
last week, referring to President Barack Obama's recent visit to Alaska.

The state of Washington's tax division made some tweaks to help 
manage retail taxes that brought in cash from the new industry, said 
Kim Schmanke, spokesperson for the Washington State Department of Revenue.

"We enhanced our security. ... We made sure to consider what kind of 
safes we would need -- were the safes large enough?" Schmanke said.

The department set up an appointment system, where marijuana 
businesses -- or any business paying taxes in cash -- come in and 
head to a secured room equipped with a cash-counting machine, 
purchased by the department to cut back on the staff time, risk and 
human error of counting cash. That investment has greatly streamlined 
the process, Schmanke said.

Washington has the advantage, however, or having a few financial 
institutions willing to work with marijuana businesses, such as Salal 
Credit Union. Meanwhile other businesses have managed to fly under 
the radar, and have a bank account without being flagged by their 
financial institution. "That isn't the ideal way, though," Schmanke said.

The fact that some businesses can have bank accounts means that, from 
July 2014 to June 2015, only 14.5 percent of marijuana retail taxes 
were paid in cash, Schmanke said.

"We'd ideally like to see the federal banking regulations support 
these legitimate businesses. ... Until that time comes though, we 
have been pleasantly surprised," Schmanke said.

Alaska does not appear poised to have that same blessings from its banks.

"We've been asking all the financial intuitions and basically right 
now, the answer is no," said Kevin Anselm, director of the Alaska 
Division of Banking and Securities.

The issue is federal law, said Dan McCue, senior vice president of 
corporate administration Alaska USA Federal Credit Union. "The 
federal government hasn't recognized marijuana as a legal business, 
so therefore federal institutions ... are prohibited from providing 
services to that business," McCue said.

And while the U.S. Department of the Treasury has given guidance to 
the financial industry on how to work with marijuana businesses, the 
demands are "far beyond what they normally require," Franklin said.

For instance, a financial institution is required to file "Suspicious 
Activity Reports" for all marijuana businesses on a continuing basis, 
as outlined in a 2014 Department of Justice memo.

The question of whether Alaska would consider a state-run bank is 
"not off the table," but also not currently going anywhere, Anselm said.

"Right now, we don't have any good options," Anselm said. "But we are looking."

Workshop dates and locations:

Fairbanks: Tuesday, Sept. 29, 12:00 p.m. to 2:00 p.m.

Legislative Information Office, 1292 Sadler Way, Suite 308

Teleconference: 844-586-9085

Juneau: Thursday, Oct. 1, 11:00 a.m. to 1:00 p.m.

Centennial Hall, 101 Egan Dr.

Teleconference: 1-800-315-6338

Access code: 86539

Anchorage: Wednesday, October 7, 11:00 a.m. to 1:00 p.m.

Atwood Building, 550 W. 7th Ave, Suite 104

Teleconference: 1-800-315-6338

Access code: 86539
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MAP posted-by: Jay Bergstrom