Lost in the rubble left by last week’s noisy collapse of H.R. 2 (the Agriculture and Nutrition Act, commonly known as the Farm Bill) are some significant developments in the United States’ progress towards legalizing the cultivation of industrial hemp. Industrial hemp is the same species as its THC-laden cousin marijuana, Cannabis Sativa L., but is cultivated differently to produce long, fibrous stalks suitable for industrial use, and to minimize the production of the characteristic flowers commonly associated with marijuana. Industrial hemp production is legal in the United States to the extent allowed by Section 7606 of the Agricultural Act of 2014 (the Farm Bill of 2014), which authorizes state departments of agriculture and educational institutions to regulate research and pilot programs to determine the viability of hemp as an industrial crop.

Since 2014, at least 35 states have implemented some kind of legislation regulating the production of industrial hemp. As with state marijuana laws, the result is an inconsistent patchwork of state regulatory systems. In contrast to marijuana, industrial hemp cultivation pursuant to a state’s pilot program has the qualified blessing of the federal government, which would seem to make it a more attractive opportunity than marijuana. Practically speaking, however, the current business climate for industrial hemp production is fraught with uncertainty and lacking basic business services like banking and insurance. This is due to a vague federal mandate combined with state regulatory frameworks that are much less rigorous as compared to those governing marijuana.

Leading up to the 2018 Farm Bill, this state of affairs seemed poised to change. Broad bipartisan support for industrial hemp resulted in a number of proposed amendments that would have:

  • Legalized industrial hemp and made crop insurance available,
  • Explicitly excluded industrial hemp from the Controlled Substances Act, and
  • Opened up banking for pilot program participants.

However, prior to the final vote on the 2018, Republicans on the House Rules Committee led by Pete Sessions (R-TX) (no, the other anti-cannabis Sessions) blocked consideration of these amendments. None of them made it into the final version of H.R. 2, which ended up failing amidst partisan wrangling over the content of the Farm Bill itself as well as some good old-fashioned hostage taking by conservatives over immigration issues.

All is not lost, however, as industrial hemp continues to gather bipartisan supporters, including Mitch McConnell (R-KY) himself, a champion of Kentucky’s early and successful pilot program. As the Senate considers its own version of the Farm Bill, expected to arrive with less controversy in June, look for hemp-focused fixes that may bring some needed clarity to a growing but uncertain industry.

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Photo of Justin E. Hobson Justin E. Hobson

Justin is Co-Chair of Lane Powell’s Cannabis Team. His practice includes all aspects of business taxation. He has particular experience counseling clients on a variety of cross-border tax matters, including global restructuring, cross-border transactions, entity formation, tax treaties, accounting for income taxes, transfer pricing, import and export taxes, customs duties, and value-added taxes.

Photo of Lewis M. Horowitz Lewis M. Horowitz

Lewis is Chair of Lane Powell’s Taxation team and Co-Chair of Lane Powell’s Cannabis Team. He is also a Certified Exit Planning Advisor qualified to assist private companies with their succession planning.

Benjamin Pirie

Ben Pirie counsels cannabis businesses on a wide range of corporate needs. He is passionate about building long-lasting relationships with clients as they reach toward their goals in one of the most dynamic and fraught industries in the world.  Ben brings his experience as in-house counsel to a Fortune 1000 company in Portland to bear on Oregon’s emerging cannabis industry, where he advises clients on business transactions, contracts, entity formation and management, securities compliance, corporate governance, intellectual property, mergers and acquisitions, state and local administrative law, and employment matters.