Law360 (April 13, 2020, 9:47 PM EDT) -- An organization of marijuana attorneys on Monday asked congressional leaders to take action to ensure that professionals who service the state-legal cannabis industry are able to access the economic relief offered to small businesses by the recent $2 trillion coronavirus rescue package.
In a letter Monday, Christopher Davis, president of the International Cannabis Bar Association, called the Small Business Administration's decision to designate service providers who work with the cannabis industry ineligible for loans under the Coronavirus Aid, Relief, and Economic Security, or CARES, Act on the grounds that they are "indirect marijuana businesses" untenably vague and an example of administrative overreach.
"The number of businesses in this so-called 'Indirect' economy is many times over the size of the 'Direct' cannabis market, and this guidance will undoubtedly cause substantial and lasting economic harm to the small business communities across the country and frustrate the stated purpose of the CARES Act," the letter said.
The letter asks both parties' leaders in the House and Senate to take action to ensure that lawyers, accountants and other professionals are not excluded from the $2 trillion relief act simply because they have done some work with state-legal cannabis entities.
Davis told Law360 on Monday that the letter was spurred by a "ton of confusion" surrounding the SBA's advisory, which he said had no basis in the language of the bill.
"Our opinion is, in this situation, the SBA is an executive agency taking on quasi-legislative powers when it engages these standard operating procedures," Davis said. "Congress did not plan to exclude vast swaths of Americans from the legislative relief. We believe it's an overreach by SBA."
Davis also noted that the SBA's notice does not include a de minimis standard, and so could be read to apply to any attorney who did as little as an hour's work for a cannabis company.
"If you're a lawyer and you reviewed a lease for a company vehicle for one of these quote-unquote 'direct marijuana businesses' over the past year … you could be prevented from receiving any federal assistance," he said.
The SBA's position is also at odds with the fact that multiple governors have designated state-legal cannabis businesses "essential" and allowed them to operate amid sweeping statewide shutdowns, according to the letter.
"The SBA has unilaterally prevented law firms and countless other professionals, which would otherwise qualify for financial assistance under the Economic Injury Disaster Loan (EIDL) and Paycheck Protection Loan (PPP) programs, from accessing much-needed financial assistance intended to save the very types of jobs we are now losing," the letter said.
The letter asks lawmakers to either direct the SBA to rescind the language excluding "indirect marijuana businesses" from its procedures or include language in the next funding bill clarifying that professional service providers with cannabis clients are not ineligible for relief.
The SBA's definition of "indirect marijuana businesses" was codified in eligibility requirements issued by the agency that became effective in April 2019.
In addition to identifying providers of specialized equipment, such as hydroponics and grow lights, the definition includes "businesses that advise or counsel Direct Marijuana Businesses on the specific legal, financial/accounting, policy, regulatory or other issues associated with establishing, promoting, or operating a Direct Marijuana Business."
The SBA also renders ineligible any "direct marijuana business," such as a grower, manufacturer or retailer, regardless of whether they operate in a legal adult-use or medical market.
--Editing by Alanna Weissman.
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