Leaders of chambers of commerce, marijuana companies, and other groups that are ineligible for federal coronavirus business relief funds are pleading with Massachusetts legislators for financial assistance, saying their organizations otherwise face imminent failure.
The leaders testified Tuesday at a virtual hearing of the Legislature’s joint committee on community development and small businesses. The committee met to consider a bill by its chairwoman, Senator Diana DiZoglio, that would extend millions of dollars in forgivable loans to state businesses and nonprofits ineligible for the federal Paycheck Protection Program.
The federal program is designed to help small businesses cover payroll, mortgages, utilities, and other expenses while they weather closures or disruptions related to the COVID-19 pandemic. But it excludes marijuana operators, because the drug is illegal under federal law, plus certain nonprofits such as chambers of commerce and trade groups.
“I’ve heard from so many small businesses and nonprofits who tried to apply for federal loans or grants but were denied due to eligibility requirements,” DiZoglio, who represents the North Shore, said following the hearing. “We filed this legislation to try to fill some of those gaps left by the federal program and assist our small business community by creating parity across the board.”
Business leaders testified that trade groups and chambers of commerce are vital institutions whose members are relying on them to help navigate the unprecedented changes brought on by the virus. Allowing them to fail, they argued, will only hold back the state’s eventual economic recovery.
Mark Iannuccillo of the Greater Newburyport Chamber of Commerce told lawmakers the bill could decide the business group’s fate.
“We’ve [only] collected about 10 percent of our dues, all of our events have come to a grinding halt, and the future of our organization remains uncertain," he testified.
Similarly, numerous marijuana entrepreneurs testified that being excluded from federal aid, combined with Governor Charlie Baker’s decision in late March to shutter the recreational pot market as a “nonessential” industry, has been devastating. They also highlighted a depressing irony: Their firms pay far more into government coffers than other companies, yet are ineligible for government payouts.
Retail cannabis in Massachusetts is taxed at 17 percent by the state and 3 percent by municipalities; in addition, most marijuana operators must fork over hundreds of thousands of dollars to their host cities and towns in “community impact” fees. The firms also cannot deduct typical business expenses on their federal returns, meaning some pay effective federal tax rates well above 50 percent.
“We’re legal, but we’re not treated like other legal businesses,” said Chuck Saba, president of marijuana firm BeWell Organic Medicine, who was using an oxygen tube Tuesday after being hospitalized for COVID-19. “This leaves us extremely vulnerable, with no way to offset the impact" of the virus.
While medical marijuana dispensaries and their suppliers remain open, Massachusetts is the only state where marijuana is legal to close its recreational sector, with officials elsewhere instead mandating appointment-only shopping or curbside pickups.
Baker has said the shutdown is necessary to prevent crowds of out-of-state pot shoppers from coming to Massachusetts and spreading the virus. He has also argued that restricting sales only to Massachusetts residents (as suggested by the industry) could be unconstitutional — a contention state Senator Sonia Chang-Diaz on Tuesday dismissed as “purely philosophical."
“I just think it’s bananas that we are not allowing these retailers to open again in a way that’s safe,” Chang-Diaz said during the hearing, noting that Baker’s administration has declined to provide the Legislature with any legal analysis backing its concern. “It’s a self-inflicted wound.”
Baker’s office did not respond to a request for comment.
DiZoglio said she hopes Baker will avoid the need to bail out marijuana firms by instead allowing them to operate with strict social distancing policies in place, as liquor stores have done. A forthcoming legislative analysis of the cost of her proposed state PPP program, which is likely to total many millions, could provide leverage for that cause.
“This bill is a last resort,” DiZoglio said. “My hope is that the administration will come up with a plan to let these businesses start to make sales again with safety measures in place. But if they’re going to be prevented from making any sales for an indefinite amount of time, we have to do something before they go under.”
Last month, a state judge presiding over a lawsuit brought by several marijuana firms ruled that Baker probably has the legal power to close recreational shops. But the judge also said he was convinced the state could easily and safely allow pot sales to resume, and that officials could legally restrict sales to in-state residents.
DiZoglio said it was “heartbreaking” to hear from entrepreneurs who had sunk their life savings into small companies that are now shuttered and excluded from federal relief.
“They’re watching as their businesses slowly deteriorate and they’re wondering what’s going to happen next,” she said. “It doesn’t just impact the owner — it impacts the town budget and all the people they employ locally and their families. Something needs to be done.”