Legislation to Include Cannabis Businesses in Federal Stimulus Programs

April 30, 2020

Categories : Coronavirus

Types : Alerts

On April 23, 2020, Congressman Earl Blumenauer (D-OR) filed a bill that would provide small marijuana businesses access to federal coronavirus relief funds. Currently, the federal Small Business Association (“SBA”) specifically prevents marijuana businesses from receiving COVID-19 relief funds due to the federal prohibition of marijuana under the Controlled Substances Act. Essentially, this bill would permit marijuana businesses to take advantage of the SBA relief programs and tax credits that are currently available to other small businesses during this pandemic.

This legislation – titled the Emergency Cannabis Small Business Health and Safety Act – would allow cannabis-related businesses and service providers to become eligible for the Paycheck Protection Program (“PPP”), Economic Injury Disaster Loans (“EIDL”), and Economic Injury Disaster Loans Emergency Grants and provides immunity to the SBA and its employees for providing loans that may be inconsistent with federal law. Specifically, the bill applies to “cannabis-related legitimate businesses,” which includes any business that is involved in the handling of cannabis or cannabis products, including cultivating, producing, manufacturing, selling, transporting, displaying, dispensing, distributing, or purchasing cannabis or cannabis products in accordance with state laws. The bill also applies to “service providers” who sell goods or services to a cannabis-related business such as real estate or legal services. Based on the current state of federal law, PPP and EIDL lenders are requiring borrowers to expressly represent and warrant that they are not a cannabis-related business or a service provider to a cannabis-related business.

Congressman Blumenauer’s bill highlights the conflict that exists between federal and state law in the cannabis industry. As Congress moves to provide hundreds of billions of dollars in economic relief to small businesses across the country, cannabis businesses have been excluded despite operating lawfully at the state level and employing nearly a quarter of a million Americans. Indeed, many of the 33 states that have legalized medical or recreational cannabis have also declared cannabis businesses “essential” operations that can stay open amid coronavirus-related forced closures and stay-at-home mandates. However, cannabis is still illegal at the federal level. Therefore, cannabis businesses continue to face a number of challenges and this is just another example of legislators trying to provide an equal footing for cannabis businesses. Currently, the bill has 16 co-sponsors and awaits a vote in the House Small Business Committee. Notably, due to the high number of PPP and EIDL applicants, and the limited amount of funding for each SBA program, the potential for cannabis businesses to benefit from these relief efforts is diminished significantly as each day passes without a vote.

Montgomery McCracken’s attorneys are available to readily advise and assist clients. Visit the firm’s Coronavirus (COVID-19) Resource Center for more information and updates on this constantly evolving situation.


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