Connecticut’s Social Equity Council had second thoughts on tax returns on May 3, when it reversed its own ruling from a month ago, stripping the requirement for backers of license applicants to submit three years of tax returns.
“After talking to a whole lot of people over the last couple of weeks, I do believe we have measures in place to make sure there are no nefarious activities going on. I am personally satisfied with the due diligence that’s been done behind the scenes,” said Avery Gaddis, who was appointed to the Council by the Senate Minority Leader, Kevin Kelly.
The Social Equity Council previously upheld the requirement for tax returns for social equity backers, but after an April 21 meeting, many members decided that they had been convinced that social equity backers should not have to recluse their tax return information.
“The SEC is not determining whether one applicant is more likely to succeed in a cannabis enterprise than another applicant based on their financial circumstance,” said Gaddis. “The criteria we are considering is residency, income and ownership and control.”
Komla Matrevi, general counsel for the Social Equity Council, argued that verifying the income of backers through tax returns was beyond the authority of the council.
“Those criteria do not require that the Council verify the total income of the backer, because the backer is simply someone who has 5% or more interest in the business,” he said. “Knowing how the backer makes their money does not provide the Social Equity Council with the information that’s needed to determine whether or not the social equity applicant has control of their business structure.”
Other members who were once reluctant to support lifting the tax requirement changed their tunes following the April 21 meeting.
“I think it is a reflection of the earnestness on the part of this Council that we wanted to be careful when this vote was first presented,” said Council member Christine Shaw. “We didn’t want to take any action which would be perceived as moving away from the transparency that I think we all advocated for.”
The reintroduction of the rule lifting tax return reporting requirements faced opposition from the public.
“I’m here to question the morality and the legality of what you’re doing by not requiring social equity backers to disclose their tax info. Honestly I find that this leads to a lot of things that we’re really not fans of, like organized crime, money laundering, trafficking , real problems that have tormented our community for a very long time,” said Devin Schleidt.
Medical patient activist Lou Rinaldi challenged the Social Equity Council’s ruling to forgo tax return information for backers for social equity applicants,
“It’s market restrictions that get every market in trouble,” he said. “Michigan requires tax returns so I wonder which markets [Andrea] Comer is referring to when she says that tax returns are not a standard requirement.”
