The California Society of Certified Public Accountants held the California Cannabis Industry Symposium on Aug. 10 at the Sheraton Universal Hotel in Universal City. The day-long event aimed to provide banking, tax and regulatory tips to accountants representing cannabis businesses in California.
With the legalization of recreational marijuana in the state, accountants at the event agreed the emerging cannabis market – which could be worth $3.7 billion this year, according to industry research firm BDS Analytics – offers a promising new business opportunity.
Ani Galyan, a certified public accountant and tax attorney in Sherman Oaks who specializes in representing cannabis businesses, told the Business Journal that since Californians voted to legalize commercial marijuana in 2016, she’s noticed a surge in interest among accountants in working with cannabis growers, retailers and manufacturers.
“It was only until recently that we saw CPAs openly talking about taking cannabis clients,” she said. “It was kind of a hush-hush situation.”
Professional accountants began seriously representing the cannabis industry after the U.S. Justice Department issued a memorandum in 2014 instructing federal prosecutors not to go after marijuana businesses in compliance with state law. Attorney General Jeff Sessions rescinded the memo this year, a move that has so far been mostly symbolic, Galyan said.
“Since then we have not seen any prosecutions,” she said. “It’s my impression is that if you are operating legally, the feds are going to leave you alone.”
Still, accountants representing cannabis businesses need to be equipped to handle certain regulatory and financial challenges unique to the industry.
For example, since the federal government considers marijuana an illicit controlled substance, many larger banks and financial services providers will not work with cannabis companies out of fear of being charged with money laundering. That makes the marijuana industry a largely cash-only business.
“The accountant needs to be comfortable accepting large amounts of cash and make sure the bank is comfortable taking cash as well, even if it smells of marijuana,” said Galyan.
Agoura Hills-based CPA David Flamer added that cannabis accountants must closely follow state and federal laws for tax deductions and declaring cash deposits to ensure they don’t become audit targets by the IRS.
Another issue is that the California Board of Accountancy, which licenses accountants in the state, hasn’t guaranteed that it won’t revoke an accountant’s license for working with marijuana businesses. “Other states (such as Washington and Colorado) have provided some limited comfort,” said Flamer.
In Los Angeles, just 158 businesses currently have approval to sell marijuana, according to the city’s Department of Cannabis Regulation. As a result, accountants also need to be wary about representing a client still seeking a license from the city, so as not to be charged with aiding and abetting a criminal enterprise. The Department of Cannabis hasn’t begun accepting applications for new commercial marijuana licenses from the general public.
Flamer, who works with six cannabis companies, said he would represent a business that doesn’t yet have approval.
“As long as they show that they are a stand-up operator and person, then I would be willing to take them on,” he said. “They also have to have the financial horsepower to get through the approval process.”
The Bank of Southern California, based in San Diego, has completed its previously announced acquisition of Americas United Bank in Glendale.
The transaction was closed July 31, according to a statement by Bank of Southern California. The four locations of Americas United Bank – in Commerce, Glendale, Lancaster and Santa Fe Springs – began operating as Bank of Southern California branches on Aug. 1.
Bank of Southern California’s assets after the merger are now worth $720 million. Americas United Bank had about $231 million in assets as of June 30.
Adriana Boeka, former chief executive at Americas United Bank, was appointed non-executive director of Bank of Southern California as part of the deal.
Merchant services provider PaymentCloud Inc. will move its headquarters in Sherman Oaks to a nearby 6,000-square-foot office. The company said the new building will accommodate its recent growth and make it easier for employees to commute.
“This is an exciting time for PaymentCloud Inc. and marks a huge milestone for the company, its employees, and customers, who will all benefit from the opportunities this expansion presents,” Chief Executive Shawn Silver said in a statement. “PaymentCloud Inc.’s new office is an open, collaborative space allowing for a better work environment.”
PaymentCloud provides credit card processing to companies that may be deemed too “high risk” for approval by other providers.
Staff Reporter Ethan Varian can be reached at (818) 316-3130 or firstname.lastname@example.org.