Don’t forget to pay your illegal taxes

September 28, 2021 at 10:01 am Leave a comment

Time’s running a little short for yours truly today, but I couldn’t resist posting a blog about this column from De Jon Harris, Commissioner of the Small Business/Self Employed Examination of the IRS (that’s one heck of a title).  He reminds aspiring marijuana entrepreneurs that even businesses violating federal law must pay taxes.  Apparently the IRS is going to leave no stone unturned in its effort to help the Biden Administration gather $3.5 trillion for all its spending plans. 

Now, don’t get me wrong.  Everyone knows that it was his failure to pay taxes that landed Al Capone in Sing Sing.  But there is something truly bizarre about the IRS going all in on providing tax advice for an industry it openly concedes is illegal and as a result cannot take advantage of any of the traditional tax exemptions available to other small businesses.  The guidance is another example of how we are well past the time when the federal government should allow marijuana businesses to enter the mainstream.  As the Commissioner himself notes, “. . .these businesses are often cash intensive since many can’t use traditional banks to deposit their earnings. [the federal/state dichotomy] creates unique challenges for the IRS on how to support these new business owners and still promote tax compliance.”

Aside from its Alice in Wonderland aspects, the column has some practical utility.  For example, those credit unions considering taking the marijuana banking leap should assess the business’s tax compliance as part of its due diligence.  Credit unions should pay particularly close attention to beneficial owners.  As the Commissioner notes, a silent partner whose interest is not properly disclosed can bring down an otherwise legal marijuana business.  In addition, because these businesses are so cash intensive, proper CTR filing will always be an issue.

On that note, I hope to see some of you in cyberspace this morning as we kick off the first day of this year’s Legal and Compliance Conference.

Entry filed under: Federal Legislation. Tags: , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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