CannaBusiness Advisory

  • Navigating the SPAC Trend in the Cannabis and Hemp/CBD MarketOctober 14, 2020

    Special Purpose Acquisition Companies (SPACS) have had increased activity in the cannabis and hemp/CBD industries over the past year. Presently, these “blank check companies” have raised more than $3 billion. Investors and operators interested in partaking in these vehicles and participating in the public market should be aware of which SPACs will be looking to acquire participants in the cannabis and hemp/CBD industries and the tools they will need to navigate these somewhat rocky waters.

    Understanding SPACs and the Cannabis Industry

    While SPACs are not new to the public market, they have recently taken on some novelty by targeting businesses in the cannabis and hemp/CBD industries, and ancillary businesses to those industries.

    Given the nature of these corporate vehicles, there is often limited information on the SPACs’ targeting businesses, as by design these types of companies do not have a firm business purpose.

    SPACs typically have 18-to-24 months to purchase private companies or return money back to their investors. To the extent a hemp/CBD- specific SPAC or a SPAC that has expressed intentions of acquiring a cannabis operator, but has not yet combined with one, the SPAC may register on a U.S. exchange – and many of them have … Keep reading

  • Colorado Executive Order Pardons Thousands Convicted of Marijuana PossessionOctober 01, 2020

    As marijuana reform happens across the country, Colorado continues to lead the way. On October 1st, Governor Jared Polis signed an executive order that pardoned almost 3,000 Coloradans who were convicted by the State of possession of one ounce or less of marijuana, thereby restoring all rights of citizenship without condition. In doing so, Gov. Polis stated that Colorado was “…finally cleaning up some of the inequalities of the past…” that were created by former anti-marijuana policies. The power to issue the pardons was included in a bipartisan bill signed into law in June that included provisions promoting social equity in Colorado’s legal marijuana market.

    HB20-1424, titled Social Equity Licensees in Regulated Marijuana, changed the term “accelerator licensee” to “social equity licensee” in the Colorado Marijuana Code, as well as, amended those who qualified for such licensees. The accelerator licensing program pairs established marijuana business owners with disadvantaged applicants who may not have the necessary skills or access to traditional funding sources to enter the space. Under the new bill, social equity applicants can now apply for these licenses if the applicant is a Colorado resident and has not been the owner of a revoked cannabis license, … Keep reading

  • There’s Always Certainty in Taxes: IRS Issues Tax Guidance for the Marijuana IndustrySeptember 23, 2020

    During these unpredictable times, there is certainty in taxes. This month the Internal Revenue Service (“IRS”) posted a dedicated marijuana-industry specific webpage providing general tax guidance and FAQs for the predominantly cash-based industry.  The guidance does not signify a change to the existing law but rather reminds marijuana business owners of their responsibility to pay federal taxes.

    This IRS guidance is on the heels of a report from earlier this year by the Treasurer Inspector General for Tax Administration (“TIGTA”), aptly titled “The Growth of the Marijuana Industry Warrants Tax Compliance Efforts and Additional Guidance.” In the report, TIGTA recommended that the IRS develop educational guidance to assist marijuana businesses in understanding their tax obligations.

    In the recent tax guidance, the IRS confirms that marijuana businesses are subject to the limitations of Section 280E of the Internal Revenue Code. Section 280E explicitly disallows tax deductions or credits for businesses that traffic a Schedule 1 or controlled substance. Although marijuana may be state-legal, on the federal level it is still considered a controlled substance classified as a Schedule 1.  Section 280E greatly impacts the profitability of marijuana businesses, because they are not able to make the same tax deductions or … Keep reading

  • Changes to the Accredited Investor DefinitionSeptember 09, 2020

    Marijuana-related businesses (“MRBs”) planning to raise money in private offerings should be aware of recent changes to the “accredited investor” definition under the Securities Act of 1933, as amended (“Securities Act”). The U.S. Securities and Exchange Commission (“SEC”) recently adopted a final rule (the “Final Rule”) amending Rule 501(a) of Regulation D promulgated under the Securities Act, which expands the definition of “accredited investor.”

    Topline conclusion: These changes establish additional investor eligibility qualifications, thereby increasing the available pool of potential investors who may participate in private securities offerings. This is good news for MRBs hoping to raise money, particularly under Rule 506(b) or Rule 506(c).

    When will these changes become effective?  The Final Rule will become effective sixty (60) days following its publication in the Federal Register. It is anticipated that the effective date will be sometime in early November 2020.

    Will the Final Rule change the income and net worth standards required for individuals?  No. The income and net worth thresholds for individuals remain the same.  That is, individuals must still have an annual income of at least $200,000 (or $300,000, together with his/her spouse) or a net worth of more than $1 million (excluding the … Keep reading

  • Let’s Talk Cannabis: Data and Corporate Intelligence in BankingAugust 28, 2020

    Burns & Levinson attorneys Scott Moskol and Katrina Skinner join Steven Kemmerling, Founder & CEO of CRB Monitor, for a discussion on industry trends and insights into corporate intelligence for cannabis banking compliance.

    Click here to watch the full webinar.… Keep reading

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