Enrolled agents can now represent cannabis businesses February 2021 Tax News

At the end of 2020, Governor Newsom signed Assembly Bill (AB) 1525 into law. AB 1525, which added Section 26260 to the Business and Professions Code, specifies that the following institutions won’t be in violation of California state laws by providing their services to licensed cannabis businesses:

  • Banks
  • Credit unions
  • Savings associations
  • Other financial institutions

Under subdivision (d) of Section 26260 an individual or firm that practices public accounting does not commit a crime under California law solely for providing professional accounting services to persons licensed to engage in commercial cannabis activity. Public accounting, which is defined by Business and Professions Code section 5051, includes preparing or signing tax returns for clients as the tax preparer.

This applies to California Board of Accountancy (CPAs), but a question has arisen as to if the law also protects IRS enrolled agents (EAs), registered tax preparers, and California Tax Education Council (CTEC) registered tax preparers, if they have licensed cannabis businesses as clients.

Because a tax preparer who prepares or signs tax returns for clients is engaged in the practice of public accountancy AND because the new law states that persons or firms engaged in the practice of public accountancy do not violate California law for providing services to a licensed cannabis business, preparing a tax return for them does not violate California law.

Therefore, if an EA, CPA or CTEC prepares or signs a licensed cannabis business’ tax return, he or she is not in violation of California law.