The Florida Board of Accountancy recently joined a small group of states in issuing guidance on whether providing accounting services to a marijuana related business violates an accountant's ethical requirements. The Board issued a declaratory statement advising that the provision of accounting services to a marijuana related business in a state where such businesses have been legalized by the state does not, in and of itself, constitute a lack of good moral character.
The rapidly changing legal status of marijuana in various states has created challenges for businesses and financial institutions wanting to provide services to marijuana related businesses. In the past three years, recreational Marijuana possession and use has been legalized in Washington, Oregon, Colorado and Alaska. In addition, Medical marijuana use is legal in 25 states. On the federal level, Marijuana is still classified as a Schedule I controlled substance and criminalized by the Controlled Substances Act. While the federal government in recent years has not made it a priority to fully enforce federal marijuana laws in states that have legalized recreational use, instead focusing on select priorities, U.S. Dep. of Justice, Guidance Regarding Marijuana Enforcement. Cole, James M. Available at http://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf, and further advised that the same priorities will be focused on when determining whether to prosecute marijuana related financial crimes. U.S. Dep. of Justice, Guidance Regarding Marijuana Enforcement. Cole, James M. Available at http://www.justice.gov/sites/default/files/usao-wdwa/legacy/2014/02/14/DAG%20Memo%20-%20Guidance%20Regarding%20Marijuana%20Related%20Financial%20Crimes%202%2014%2014%20(2).pdf. However, the current enforcement position is discretionary, and not codified, so there is no guarantee that future administrations will continue on such a path. See e.g. http://www.politico.com/story/2015/07/chris-christie-enforce-marijuana-illegal-2016-120769.
In advising accounting professionals on the interaction of state ethical requirements with the murky legal status, the few state Boards of Accountancy have taken the position that the provision of accounting services to marijuana related businesses, which do not violate state law, does not violate state ethical requirements. However, Connecticut and Florida have left the door open to impose discipline for a criminal conviction arising out of the provision for those services. The Washington and Oregon State Boards of Accountancy did not include a similar carve out.
Both the Washington and Oregon State Boards of Accountancy have taken the position that the provision of accounting services to the marijuana industry would not result in disciplinary action. In 2014, the Washington Board of Accountancy advised that under the current federal enforcement policy, offering or performing professional services to businesses licensed by the state of Washington to produce, process, or sell recreational marijuana was not prohibited by Washington's accounting laws or rules. In early 2015, the Oregon Board of Accountancy issued similar guidance stating that accountants will not face board disciplinary action for providing services to the marijuana industry legalized in any state in which the licensee practices. Oregon Board of Accountancy, Guidance for Licensees Providing Services to the Marijuana Industry. March 19, 2015. Available at http://www.oregon.gov/boa/docs/Guidance%20Marijuana_2015.pdf. Notably, Oregon's guidelines offered advice on providing services in any state, whereas the Washington State Board of Accountancy limited its advice to services to business specifically licensed by the state.
In 2015, the Florida Board of Accountancy addressed the issue of a CPA providing accounting services to a marijuana related business in states where such businesses are legal. A Florida CPA firm petitioned the Florida Board of Accountancy for a declaratory statement on whether providing accounting services to a former client licensed to cultivate medical marijuana under Oregon law violated the good moral character requirement of the Florida Statutes. This provision is found in Florida Statute Section 473.323(1) Titled - Disciplinary proceedings - which provides: The following acts constitute grounds for which the disciplinary actions in subsection (3) may be taken:
(l) Failing to maintain a good moral character as provided in s. 473.308 while applying for licensure, or while licensed in this state or using practice privileges pursuant to s. 473.3141.
In its final order, the Florida Board held that "the provision of public accounting services, as defined in Florida Statute Section 473.302(8) to marijuana-related businesses in states where marijuana-related businesses have been legalized, in the absence of a criminal conviction of the certified public accountant for the provision of those services, in and of itself does not constitute a lack of good moral character." The opinion did not differentiate between businesses that provide medical and recreational marijuana, but it did leave the door open for Board action in the event a criminal conviction arises out of, or as a result of, the provision of the accounting services.
The Connecticut State Board of Accountancy is the most recent state board to provide guidance on the issue and their position largely mirrors that of the Florida Board. Connecticut differs from the other states in that Marijuana has not been legalized, but recreational use has been decriminalized. The board's position statement stated that it is "exclusively the jurisdiction of state and federal courts to determine if and when drug laws are violated" and that the board would not independently pursue disciplinary action absent a criminal determination. The board also noted that while possession of small amounts of recreational marijuana has been decriminalized in Connecticut, but not legalized, Connecticut law enforcement could still take legal action against Connecticut based CPAs providing services to marijuana businesses in states where such businesses are legal. Therefore, the position statement offers little comfort to accountants, as it merely states that accountants remain subject to criminal legal action for providing accounting services to marijuana businesses, and does not state whether such a criminal legal determination would result in disciplinary action.
Notably, while the other states that have addressed this issue have either legalized or decriminalized recreational marijuana, Florida still criminalizes both recreational and medicinal marijuana use. In both Colorado and Alaska, where recreational use is legalized, the respective boards of accountancy have yet to weigh in on the issue. The New Mexico Board of Accountancy declined to weigh in on the issue, stating that issuing an opinion would be outside of its scope. AICPA. An Issue Brief on State Marijuana Laws and the CPA Profession. p. 10. January 5, 2015. The American Institute of CPAs issued an updated Issue Brief on State Marijuana Laws and the CPA Profession in the beginning of 2015, which offers CPAs an overview of the legal status of marijuana and facts to take into consideration when determining whether to provide services to the marijuana industry.
Even though a growing number of state accountancy boards have issued guidance on disciplinary action arising out of providing accounting services to marijuana related businesses, which largely states that providing such services does not violate ethical rules, federal and state law enforcement play an important role. Whether the federal government continues to largely allow the marijuana industry to exist and supporting industries to provide services to it, is a political issue that should only become more pressing as more states consider marijuana legalization in the upcoming years. However, as long as the marijuana industry remains legal and expanding in some states while illegal elsewhere, questions regarding the provision of needed accounting services will continue to arise.