In a new series here on our blog, we are going to highlight and feature some of our most trusted partners, friends and associates. These annual features will help to shine a light not only on what these others firms and people can offer, but also what makes them unique in their space and how they can further aid our clients.
First up is a longtime friend of Medbook, Bryan McDonald and his team at CPAMD. Boasting over three decades of experience and offices in Illinois, Montana, California and Massachusetts, CPAMD is a certified public accounting firm that has been built upon long-lasting client relationships and personalized service.
Similar to our mission and clientele, CPAMD has put a focus on aiding cannabis clients over the last decade as state regulations have changed across the country. McDonald’s firm currently works with over 70 cannabis clients nationwide and has put a focus on 280E tax strategies and mitigation as well as overall aid to those working in the quickly growing industry.
McDonald serves as the Client Development Partner and travels across the country meeting with clients as well as attending most National Cannabis Industry Association events to share his experience and knowledge while serving as a fierce advocate for reducing the significant taxation on the field.
CPAMD also aids companies with entity and LLC formation, payroll services, licensing, business valuations, inventory management, peer reviews, audits, multistate returns, mergers and acquisitions and much more. However, as the marijuana space has continued to grow at a meteoric rate, CPAMD has embraced helping those in that industry, even featuring a marijuana leaf in their current logo.
“You know we started this firm 33 years ago so we’ve obviously developed a lot of great relationships with non-cannabis businesses over the years that we’re extremely proud of,” McDonald explained. “We’ve now been in the cannabis space very heavy for almost ten years which is frankly a lifetime in this space.”
McDonald estimates that CPAMD’s clientele is currently comprised of 55% non-cannabis and 45% cannabis. They have cannabis clients in 33 states – every state that has currently legalized marijuana is some capacity.
“We firmly believe that it will be legal in every state eventually. There’s just way too much revenue,” McDonald explained. “This industry tests you, you really have to be on top of your game. But it’s also very refreshing in so many ways because people in this industry just have so much enthusiasm. It is definitely filled with a lot of younger people who are engaged and passionate about the cannabis industry. Cannabis is much more interesting than normal tax preparation for sure but it comes with plenty of challenges.”
One of the main hurdles that McDonald helps cannabis businesses with is the specific tax code that covers their industry, 280E. In 1981 a drug dealer battled the IRS on what he could specifically deduct, including transportation and protection of illicit goods. The case was taken to court and the dealer got the upper hand to deduct his expenses, much to the chagrin of the IRS and federal government. In response, Congress passed sweeping regulation the following year that heavily restricts any business that deals in Schedule I and II narcotics from claiming any expenses on their tax bill.
So, roughly forty years later while marijuana has been legalized in many states it is still deemed a Schedule I narcotic by the federal government. Therefore, a shop selling cannabis products cannot claim and utilize the same benefits and credits that a ‘normal’ business can.
“It’s really bizarre, outdated and ultimately unconstitutional in my opinion,” McDonald said of 280E. It puts weed and something like heroin on a level playing field. It really puts cannabis businesses in a bind. You can have a bakery next door that can claim expenses like marketing, transportation and other overhead but the cannabis shop that operates in a very similar manner cannot use those same things. When they can’t make these same deductions, it can result in nearly a 75% tax bracket where there is simply not a lot left over. If a start-up sees this, why even get into the industry?”
“We understand what we’re doing and are able to find ways to bring that down, sometimes as low to 60%. That 15% savings can be enormous,” McDonald remarked. “We see what comes across our desk and have the know-how to really make a difference. There are other CPAs out there that have no business in this industry and file returns just like any other company. Unfortunately, that can get clients in a lot of trouble and really set them up for failure. Where we shine is our knowledge. This is probably the most complicated and interesting work that I’ve done in my entire career.”
Similar to the motto that we constantly preach at Medbook with our clients, McDonald said his firm is committed to clients and views themselves as a true extension of their team. They utilize a ‘we’re in this together’ approach to every single partnership and stress loyalty and service.
“CPAs are generally not known as the most glamorous people to work with,” McDonald said with a laugh. “But we make sure to return every phone call and always stay in touch. We’re always looking out for our clients. We firmly believe that everyone has a legal right to limit their income tax liabilities as much as possible, not simply try to evade them. We fervently commit to that, especially when you’re facing an unfair rate as high as 75%.”
McDonald is married and lives in Wisconsin. He has five sons, three of whom serve in the military. He enjoys playing the guitar and has completed three IronMan races.
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