A Pennsylvania House committee on Wednesday approved a Senate-passed bill to protect banks and insurers that work with medical marijuana businesses against being penalized by state regulators.
The House Commerce Committee advanced the legislation from Sens. John DiSanto (R) and Sharif Street (D), with two amendments, in a 22-1 vote. This action comes about two months after the full Senate passed the measure.
Chairman Brad Roae (R) filed both amendments. One clarifies that banking protections only apply to state-legal medical cannabis businesses and not to any broader recreational marijuana businesses that may become legal in the state in the future. The other, more technical change, removes a specific mention of the federal Securities and Exchange Commission (SEC) and replaces that with a broader reference to a “federal financial regulatory agency.”
While one member described the first amendment “redundant,” it was still adopted, as was the other revision. Because the bill has now been changed from its Senate-passed form, it will have to return to that chamber for concurrence if it passes on the House floor.
Minority Chairman John Galloway (D) hinted at additional amendments that could come before the full House, saying that there are “certain things the district attorneys and the Attorney General pointed out—they seem to be technical in nature, but they’re important.”
“But we’ve got to move this bill along. We’re running out of time, and it’s a good bill,” he said. “So I’m going to support it and look forward to working this bill over the finish line.”
The Pennsylvania legislation is another example of how states are working to provide protections to financial institutions that are willing to service the cannabis market as Congress continues to stall on a federal fix.
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The bill would not immunize banks and insurers from potential federal repercussions—but it’s an interim step meant to signal to the financial sector that they at least won’t face penalties under state law.
DiSanto and Street previously circulated a co-sponsorship memo to colleagues ahead of the banking bill’s introduction that addressed the public safety problems posed to marijuana businesses without access to traditional financial services, forcing many to operate with large volumes of cash that make them targets of crime.
The House introduced its own version of the marijuana banking bill in April that also included tax relief provisions for the industry that were removed from the Senate measure prior to passage.
The move to provide state-level protections could add pressure on congressional lawmakers to enact a federal change, such as the bipartisan Secure and Fair Enforcement (SAFE) Banking Act that has passed the House in some form six times at this point, only to stall in the Senate.
There are currently efforts underway to include the federal banking reform in a large-scale manufacturing bill known as the America COMPETES Act that’s in bicameral conference, but its prospects are uncertain. Separately, SAFE Banking could be a component of a package of incremental marijuana proposals that are being considered in high-level bicameral talks.
Additionally, congressional leaders are proposing a number of marijuana policy changes in recently released spending legislation, including a provision to provide banking protections to give the cannabis industry access to the banking system.
The text of the Pennsylvania legislation states that a “financial institution authorized to engage in business in this Commonwealth may provide financial services to or for the benefit of a legitimate cannabis-related business and the business associates of a legitimate cannabis-related business.” The same protections would also be codified for insurers.
However, it specifies that the bill would not require banks or insurers to provide services to medical marijuana businesses.
The legislation says that state government agencies cannot “prohibit, penalize or otherwise discourage a financial institution or insurer from providing financial or insurance services to a legitimate cannabis-related business or the business associates of a legitimate cannabis-related business.”
It also says agencies cannot “recommend, incentivize or encourage a financial institution or insurer” to not provide services just because a business is associated with marijuana.
Further, state agencies could “not take adverse or corrective supervisory action on a loan made to a legitimate cannabis-related business,” the text says.
Meanwhile, a panel of Pennsylvania lawmakers approved an amendment earlier this month that seeks to make it so medical marijuana businesses can receive state tax deductions for expenses they’re currently prohibited from claiming under federal tax law.
The amendment from Rep. Aaron Kaufer (R) was attached to a broader tax code reform bill that advanced through the House Finance Committee.
The legislation would only apply to medical marijuana businesses’ state taxes, meaning those firms would still have to grapple with an Internal Revenue Service (IRS) code known as 280E that precludes businesses that work with federally controlled substances from making key tax deductions in their federal filings. But under the amended legislation, they could see some relief from the state.
Outside of Pennsylvania, New York’s governor recently signed a budget proposal that similarly includes provisions to let marijuana businesses take state tax deductions that are available to other industries despite an ongoing federal ban on cannabis.
These are the types of policies that advocates and stakeholders have been pushing Congress to enact at the federal level, but it remains to be seen when that might happen.
Rodney Hood, a board member and former chairman of the National Credit Union Administration (NCUA), has repeatedly emphasized the urgent need for a federal resolution to the marijuana banking problem. He recently applauded efforts by lawmakers in states like Pennsylvania to address the issue within their jurisdictions, but he said it’s not enough.
An organization representing mayors from across the U.S. recently adopted a resolution imploring Congress to pass a bill to safeguard banks that work with state-legal marijuana businesses from federal penalties.
Separately, an association that represents state financial regulators from across the U.S. is also putting pressure on Congress to pass the SAFE Banking Act as part of America COMPETES.
A coalition of cannabis regulators representing 40 U.S. states and territories recently explained to congressional lawmakers just what the current lack of access to traditional financial services means—not just for the businesses and the programs they oversee, but for the regulators navigating this federal-state conflict themselves.
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