Legislative Update – July 4, 2018

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Upcoming at the State Capitol

Senate Floor Schedule

The Senate will be in session on July 5, at noon. The Senate goes on Summer recess July 6 and will return on Monday, August 6.

Assembly Floor Schedule

The Assembly will be in session on July 5, at noon. The Senate goes on Summer recess July 6 and will return on Monday, August 6.

Committee Hearings

Fiscal and policy committee hearings will resume after the Summer recess.

Other Events

Happy Independence Day!

On Tuesday, July 10, the National Cannabis Industry Association (NCIA) will hold their third Northern California Quarterly Cannabis Caucus in San Francisco, CA.

On Thursday, July 12, the NCIA will head down south and hold their Southern California Quarterly Cannabis Caucus in sunny San Diego, CA.


Week in Review: July 1st Packaging and Testing Requirement Deadline Leaves Dispensary Shelves Bare

On July 1, the temporary grace period for cannabis dispensaries to offer untested cannabis products ended, forcing an estimated $90 million+ worth of products to be destroyed. The new rules require all cannabis products be tested and meet all regulatory and statutory packaging standards before it can be offered by a retailer.

Prior to the implementation of the permanent rules, a group of cannabis businesses and trade associations made a last minute plea to Governor Jerry Brown to extend the temporary grace period. Chief among their concerns was the limited availability of state licensed testing facilities; creating a bottleneck that would force legal operators to destroy a significant part of their inventory. Once the legal untested supply was destroyed, the group argued, consumers would turn to the illicit market to meet their cannabis needs. Several online pictures and videos emerged of cannabis retailers with empty shelves on July 1. The fallout of the transition should become clearer over the next few months.

The Mercury News: “California pot shops struggle to keep shelves stocked as new state rules roll out”

Marijuana Business Daily: “Last-minute California cannabis industry ‘Hail Mary’ to delay July 1 transition”

California Bureau of Cannabis Control: Transition Fact Sheet

California Department of Public Health: Packaging Requirements Fact Sheet


Week Ahead: The Legislature Goes on Recess for Some R&R and the Industry Prepares for the Final Leg of the 2018 Legislative Session

With legislators are out on recess, many in the industry will use this time to catch up on their own rest while also shoring up support for any remaining bills that are still alive. Among the top bills that are moving through the legislative process include:

SB 829 (Wiener), would exempt qualifying compassion care programs from the cultivation and excise tax enacted by Proposition 64. Supporters argue that the new taxes have forced compassionate use programs to close their doors because they can no longer afford to donate the cannabis and cover the tax liability. The bill is currently in the Assembly Appropriations Committee and will be heard in mid-August as a part of the final Suspense File hearing.

SB 930 (Hertzberg), would establish a state-chartered banking system to allow financial institutions to offer basic banking services. The bill has passed several significant legislative hurdles and may be facing its toughest challenge yet. The bill will be heard in the Assembly Appropriations Committee mid-August as a part of the final Suspense File hearing.

SB 1294 (Bradford), would require the Bureau of Cannabis Control to create a statewide cannabis equity program taskforce, and offer assistance to state and local cannabis entities that have been disproportionately impacted by the War on Drugs. Many in the industry believed that Proposition 64 would create new opportunities for all Californians to engage in the cannabis industry; including those that been marginalized or criminalized under previous state marijuana laws. However, since January 1, entities with significant financial resources have dominated the cannabis industry leaving many of the disadvantaged individuals without resources or an opportunity to enter the market. The bill will be heard in the Assembly Appropriations Committee mid-August as a part of the final Suspense File hearing.

AB 2020 (Quirk), would expand where cannabis events could be held, as long as the local governing entity approves. Current law limits cannabis events to the state’s 23 county fairgrounds or 52 active district agricultural associations, and many in the industry argue that these limits have stifled economic opportunities for both cannabis businesses and the local governments that support commercial cannabis activities in their communities.The bill will be heard in the Senate Appropriations Committee mid-August as a part of the final Suspense File hearing.

AB 2641 (Wood), similar to AB 2020, would also allow the Bureau of Cannabis Control to issue a temporary retailer license for cultivators and manufacturers to sell their products at events. The bill will be heard in the Senate Appropriations Committee mid-August as a part of the final Suspense File hearing.


Questions about any of the bills or events mentioned above? Contact us at info@thecannabisfile.com or here.

Legislative Alert – Results from the Assembly and Senate Appropriations Suspense File Hearing – May 25, 2018

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Photo by John Jennings on Unsplash

Today, the California Assembly and Senate Appropriations Committees decided the fate of hundreds of bills in the current legislative cycle. The Appropriations Committee in general is considered a significant hurdle in the legislative process, and bills that are passed from these Committees live to fight another day. The bills that are held on the Suspense File are, for most intents and purposes, dead for the remainder of the legislative session. While there is a process to reintroduce a proposal that is held in the Appropriations Committee (called a “gut and amend”), this process is rarely used and usually comes at great political cost to the organization or interest group that uses this option.

Here’s an update on the most commonly tracked bills in the industry that were heard in Committee today:

AB 1793 (Bonta) which seeks to streamline the judicial process of expunging or reducing criminal convictions and sentences due to Proposition 64 passed out of Committee and now heads to the Assembly Floor.

AB 1863 (Jones-Sawyer) which would allow cannabis businesses to deduct businesses expenses passed out of Committee and now heads to the Assembly Floor.

AB 2058 (Chau) which requires law enforcement agencies to submit annual reports with the number of cannabis-related DUI arrests to the Department of Motor Vehicles passed out of Committee and is now headed to the Assembly Floor.

AB 2069 (Bonta) which would have prohibit employers from discriminating against employees who are treating a known physical or mental disability or medical condition with medical cannabis and has a medical marijuana ID card was held in the Appropriations Committee.

AB 2520 (Cooper) which would have created the California Illegal Cannabis Task Force to review and analyze existing statutes to determine if they adequately address illegal cannabis cultivation, manufacturing, distribution, sales, and diversion of cannabis to other states was held in Committee.

AB 2525 (Wood) which required the Department of Fish and Wildlife and Department of Parks and Recreation to survey public lands and surface water sources during outdoor cannabis cultivation season to find unlawful cultivation activity was held in Committee.

AB 2641 (Wood) which would allow the Bureau of Cannabis Control to issue a temporary retailer license for cultivators and manufacturers to sell their products at events was passed out of the Committee with amendments and is now headed to the Assembly Floor.

AB 3157 (Lackey) which would have temporarily suspend the cultivation tax and lower the cannabis excise tax from 15% to 11% until 2021 was held in Committee.

SB 930 (Hertzberg) which would create a statewide-chartered banking system to allow California banks to offer basic services to cannabis businesses was passed out of Committee and now heads to the Senate Floor.

SB 1409 (Wilk) which would delete the requirement that industrial hemp seed cultivars be certified on or before January 1, 2013, in order to be included on the list of approved hemp seed cultivars and would also remove the definition “industrial hemp” from the California Uniform Controlled Substances Act passed out of Committee and now heads to the Senate Floor.


Questions about any of the bills mentioned above? Contact us at info@thecannabisfile.com or here.

The Top 5 Cannabis Related Bills Currently in the California Legislature

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In the 2018 California Legislative Session, at least 40 bills have been introduced that are cannabis related. Here are the top five bills that are currently being tracked by the industry.

Temporary Events

AB 2020 (Quirk) expands where cannabis events could be held, as long as the local governing entity approves. Current law limits cannabis events to the state’s 23 county fairgrounds or 52 active district agricultural associations, and many in the industry argue that these limits have stifled economic opportunities for both cannabis businesses and the local governments that support commercial cannabis activities in their communities. A Similar bill, AB 2641 (Wood) would also allow the Bureau of Cannabis Control to issue a temporary retailer license for cultivators and manufacturers to sell their products at events. Both bills were heard and passed out of their first policy committee and are now awaiting a hearing in the Assembly Appropriations Committee.

Workplace Protections

AB 2069 (Bonta) would prohibit employers from discriminating against employees who are treating a known physical or mental disability or medical condition with medical cannabis and has a medical marijuana ID card. The bill does not prevent employers from disciplining or even firing employees that are under the influence while at work, but does provide a level of protection for employees that use marijuana outside of work and test positive for cannabis. The bill faces significant opposition from employers, including the California Chamber of Commerce. Their argument is that the bill will place additional burdens on the employer and hinder their ability to effectively manage the workplace. The bill passed out of the first policy committee and is currently awaiting a hearing in the Assembly Appropriations Committee.

Temporary Tax Reduction

AB 3157 (Lackey) would temporarily suspend the cultivation tax and lower the cannabis excise tax from 15% to 11% until 2021. In March, we covered the potential impacts of what a reduction would mean for local enforcement and oversight and the industry. The bill passed its first legislative hurdle on a unanimous 8 – 0 bi-partisan vote. The bill now heads to its second policy committee and will be heard on May 8, 2018, at 9:30a.m. in the Assembly Business and Professions Committee.

Statewide Banking Solution

SB 930 (Hertzberg) would create a statewide-chartered banking system to allow California banks to offer basic services to cannabis businesses. This bill, sponsored by Board of Equalization Board Member and State Treasurer candidate, Fiona Ma has received significant support early in the legislative process and passed from both the Senate Banking and Financial Institutions and the Senate Governance and Finance on a 7 – 0 and 6 – 1 vote, respectively. The bill now heads to the Senate Appropriations Committee where it will most likely be heard in May.

Local Deliveries

SB 1302 (Lara) would prohibit cities and counties, including chartered cities from banning cannabis deliveries in their jurisdiction. This bill is an attempt to enforce the intent of Proposition 64 which was to create a statewide legal adult-use system. However, in the first few months since legalization, at least 75% of the state’s cities and counties ban the deliver of both medical and recreational cannabis in their area. The bill has strong support from the industry, and faces stiff opposition from cities and counties. The bill faces its first legislative test on May 2, 2018, at 9:30a.m. in the Senate Governance and Finance Committee.


Do you have questions about legislation in California? Please contact us at info@thecannabisfile.com or here.

Would a Local Supermajority Vote Requirement For Fees and Taxes Hurt the Promise of California’s Statewide Legal Cannabis System?

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Photo by Thought Catalog

A proposed November ballot initiative currently in the signature gathering phase could push many local governments further towards the prohibition of cannabis business activities in their area.

The Tax Fairness, Transparency and Accountability Act of 2018 would require all local fees and taxes to be approved by a two-thirds vote.

The initiative, sponsored by the California Business Roundtable argues that one of the main purposes of the measure is to overturn the “loophole” created by Cannabis Coalition v. City of Upland.

The case involved a 2014 initiative in Upland, CA that would repeal the city’s prohibition on medical marijuana dispensaries, create regulations permitting medical dispensaries, and would imposed a $75,000 annual licensing and inspection fee to cover Upland’s administrative costs.

The proponents of the initiative requested that the measure be considered at a special election, but the City of Upland believed that the annual licensing and inspection fee was actually a tax and therefore, belonged on the general election ballot as required by Proposition 218 passed in 1996.

The coalition challenged the City and initially the lower court sided with Upland. The California Appeals Court reversed the lower court’s decision and the California Supreme Court upheld the Appeal Court’s reversal.

In the majority’s opinion, the Supreme Court ruled that nothing in the State’s Constitution prohibited or restricted citizens’ to place a measure on the ballot to approve fees or taxes. What was left uncertain in the opinion, however was whether or not citizens’ initiatives are subject to the Prop. 218 two-thirds vote threshold required for local government sponsored initiatives. And that’s where the currently proposed initiative comes into play.

The sponsors of the current initiative, the California Business Roundtable, made of some of the state’s largest companies including Wells Fargo, Albertsons, KB Home, Blackstone Group, Chevron and others, argues that the proposed ballot initiative will close this loophole by ensuring all fee and tax proposals meet the high two-thirds threshold.

This measure, however, could have much broader impacts that stated or anticipated. Since the passage of Proposition 64 in 2016, one of the main sticking points in many local jurisdictions has centered around the ability of local governments to collect an fair and appropriate amount of fees and taxes to support local law enforcement and programs with cannabis generated tax revenue. Recently, the O.C. Register released a database that showed that fewer than one in three California cities allows any cannabis business activity in their area.

If a two-thirds vote requirement is required to implement local cannabis-related fees and taxes to cover enforcement and oversight administration, where’s the incentive for local governments to adopt cannabis friendly business policies? The “carrot” included in Prop. 64, was the ability for cities and counties to raise revenues to fund local priorities. With a higher-vote threshold, it’s not hard to imagine many of the local jurisdictions that are still on the fence will decide to sit on their hands and not approve cannabis business activity in their area. Without easy access to licensed retailers statewide, consumers will continue to be forced into to buy their products from the illicit market.

As of this article, the proposed initiative had gathered 25% of the signatures needed to qualify for the November ballot. The coalition has until July 25, 2018, to gather all 585,407 valid signatures to qualify.


Questions about the initiative process? Contact us here or at info@thecannabisfile.com.

How Has California’s Legal Cannabis Market Performed in the First Quarter of 2018?

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Photo by Carlos Muza

On Tuesday, the Sacramento Bee reported that in the first few months of legalized adult-use, gross retail sales of cannabis is about 13% or $44 million lower than original state estimates. While this may seem disconcerting to some, there are several key caveats to the data.

First, licensing agencies are currently in the process of reviewing and approving temporary and annual licenses for businesses across the supply chain. In the 2017-18 California State Budget, the Legislature approved several million dollars and hundreds of positions to staff the three main licensing agencies and various support departments. Despite this influx of resources, the state is currently in the process of hiring the necessary staff to process the thousands of applications received since January 1. As the state hires additional staff, the industry can expect to see more licenses approved and a potential increase in overall amount of retail sales.

Second, many in the industry cite the high regulatory fees and tax rates as a serious impediment for businesses that seek to enter into the legal market. As we covered here, several California legislators have called for an immediate and temporary reduction in the cultivation and excise tax rate with the intent of leveling the playing field for business in the legal market. The California Growers Association estimates that with tax rates averaging between 40% – 60%, legal retailers find it extremely difficult to compete with the illicit market. AB 3157, which attempts to provide some relief by suspending the cultivation tax and lowering the excise tax from 15% to 11% for three years, is up for its first committee hearing April 23, in the Assembly Revenue and Taxation Committee.

Finally, the refusal of local governments in many parts of the state to allow cannabis businesses to operate has created what some have called a “pot desert.” On Tuesday, the OC Register unveiled a database that showed that nearly one in seven California cities had approved the retail sale of cannabis within their boundaries. The data also showed that in certain parts of the state, consumers are required to travel fifty miles or more to purchase from a licensed or recreational retailer. This inability for consumers to purchase cannabis products from licensed retailers close to home frustrates efforts to create a truly statewide legal adult-use system.

Despite the seemingly lower than expected economic activity in the newly legal cannabis market, there is reason to be optimistic for the foreseeable future. Stayed tuned for future updates on the status of the California’s cannabis industry.


Questions about any of the topics covered in this post? Contact us here or at info@thecannabisfile.com.