Control, Regulate and Tax Adult Use of Marijuana Act: Executive Summary
– The Control, Regulate and Tax Adult Use of Marijuana Act (Adult Use of Marijuana Act) is designed to allow nonmedical marijuana for responsible adult use, and establish a strict regulatory system, modeled after the medical marijuana legislation passed with bipartisan support and signed into state law in 2015, to facilitate the transition to a legal market.
– The Adult Use of Marijuana Act proposes the toughest regulations of any adult-use marijuana proposal submitted to date — in the interests of protecting children and preventing diversion to the illegal market.
– The Adult Use of Marijuana Act addresses five main components: adult use of nonmedical marijuana, medical marijuana, regulation of nonmedical marijuana, taxation, and criminal penalties. Revenue raised from levies on marijuana will be dedicated to three sources: Youth Substance Abuse Education, Prevention and Treatment; State and Local Law Enforcement; and Environmental Restoration and Water Protection.
Adult Use Provisions:
– Allows adults age 21+ to possess, transport, purchase, consume and share up to one ounce of nonmedical marijuana and eight grams of nonmedical marijuana concentrates.
– Adults can also grow up to six plants at their household for nonmedical use, but plants must be out of public view and secure from children. Local governments may ban outdoor home cultivation.
– Using marijuana in public remains illegal.
– Driving while impaired by marijuana remains illegal.
– Manufacturing concentrated cannabis using volatile solvents such as butane remains illegal without a license.
– Employers are given broad latitude to ban nonmedical marijuana use by employees.
Medical Marijuana Provisions:
– Maintains and strengthens the recent bipartisan legislation which put in place comprehensive regulation of medical marijuana.
– Strengthens the system to ensure that only legitimate patients can get medical marijuana, by mandating that all patients obtain medical marijuana based on doctor’s recommendations that meet the standards of the recently signed legislation.
– Counties are required to develop compliant protocols by January 1, 2018.
– Caps fees for voluntary ID cards at $100. Medi-Cal beneficiaries receive a 50% fee reduction and the fee is waived entirely for medically indigent adults who participate in the California Medical Services Program.
– Exempts patients with ID cards from the state sales tax when purchasing marijuana.
– Protects patient privacy by requiring counties to identify patients using unique identifiers instead of names, and subjects any databases to the privacy protections of the Confidentiality of Medical Information Act (state equivalent of federal HIPPA). Neither the state nor any county health department may disclose, or be ordered by a state court to disclose, patient information sooner than 10 days after providing the patient with notice of the request to disclose their information unless the patient consents.
– In the event the federal government legalizes marijuana use for medical purposes, authorizes the Legislature to align California’s medical marijuana laws with federal law.
– In all other respects, maintains existing privileges for medical marijuana patients.
– Designates the Department of Consumer Affairs (DCA) to serve as the lead regulatory agency for all marijuana, both nonmedical and medical.
– Renames the Bureau of Medical Marijuana Regulation, established in DCA by the recent medical legislation, as the Bureau of Marijuana Control (the Bureau), and assigns it the regulation of nonmedical adult-use marijuana as well as medical.
– Designates the Department of Public Health (DPH) to oversee testing and manufacturing for all marijuana, while the Department of Food & Agriculture (DFA) will oversee cultivation, again mirroring the medical legislation.
– Requires DCA, DPH and DFA to develop and issue licenses for marijuana cultivators, manufacturers, testers, retailers, distributors, and microbusinesses, and to begin issuing nonmedical marijuana business licenses by January 1, 2018. As with existing law governing medical marijuana, DPH handles manufacturing and testing licenses, DFA handles cultivation licenses, and DCA handles all other license types.
– Requires the Bureau to convene an advisory committee of experts to determine best practices for regulation. The committee will include representatives from the Department of Alcoholic Beverage Control, for their expertise in regulating commercial activity of adult-use intoxicants. The committee will produce annual reports, which will be made available to the public.
– Creates the Marijuana Control Appeals Panel, with three members appointed by the Governor and confirmed by the Senate. This panel reviews any appeals by licensees to the decisions of the regulatory agencies.
– Establishes a number of license types, with small, medium and large-scale licenses for cultivation.
– Delays issuance of large cultivation licenses, which permit a licensee to cultivation 22,000 square feet or greater, for the first five years that AUMA is in effect, allowing smaller growers to establish themselves in the market.
– Large cultivation licenses may be issued at the discretion of state regulators after Jan. 1, 2023. If issued, however, large-scale cultivators will be subject to similar restrictions on vertical integration as contained in the medical marijuana legislation, meaning large-scale cultivators cannot also be distributors of marijuana.
– Requires DCA, DPH, and DFA to follow criteria established in the Adult Use of Marijuana Act when determining whether to issue a nonmedical marijuana business license. Explicitly empowers state regulators to deny a license or license renewal to prevent “creation or maintenance of unlawful monopoly power.” Also prohibits licensees from engaging in anti-competitive behavior and provides that violators will be subject to monetary penalties. Businesses will need to apply for each license separately. However, holders of a microbusinesses license, who are limited to producing nonmedical marijuana on 10,000 square feet, may engage in all business activities, including distribution and sale, if they obtain the proper licenses. Holders of a large cultivation license will not be permitted to hold a distribution license.
– Prohibits the retail sale of marijuana by businesses that sell alcohol or tobacco.
– Permits licensed businesses, subject to local approval, to sell nonmedical marijuana for the purposes of on-site consumption by adults. Those businesses may not sell or permit the consumption of alcohol and tobacco.
– To help get the market up and running, existing medical marijuana businesses will get priority for the new licenses.
– Mirrors the rules from the medical marijuana legislation governing who is eligible to hold a marijuana business license, including the criteria for the Bureau to determine that an applicant with prior convictions for drug-related offenses has been rehabilitated and may therefore be eligible. However, prior drug felonies are not presumptively disqualifying unless they involved drug trafficking or involved a minor. A license may be permanently revoked and a person denied future licenses, should he or she ever be convicted of a sale or possession for sale of any controlled substance.
– Requires the Bureau to establish appellations of origin for marijuana grown or cultivated in a particular California county.
– Permits licensed retailers to deliver nonmedical marijuana to adult customers, except where a local jurisdiction chooses to ban that activity.
– Imposes the strictest regulations governing labeling, packaging and testing of nonmedical marijuana products in the nation. These are designed to protect children from accessing nonmedical marijuana, and to convey warnings to help adults consume marijuana safely, including warnings regarding the use of marijuana while pregnant or breast-feeding. The labels on marijuana edibles will be as detailed as any food product – including a warning if nuts of other known allergens are used, and edibles must be sold in safe and standardized “portion” sizes. Packaging must be resealable, child resistant, and not made to be attractive to children. All nonmedical marijuana will be tested by an independent testing service to comply with state standards for consumer safety prior to being sold.
– Requires delineation of marijuana products into serving sizes which are clearly labeled on packaging.
– Prohibits advertising and/or marketing nonmedical marijuana in a manner aimed at minors, as well as near schools.
– Prohibits licensees from giving away marijuana, marijuana products or marijuana accessories as part of a business promotion.
– Requires nonmedical marijuana businesses to check IDs to ensure they only sell to adults 21 and over or medical marijuana patients. Similar to alcohol, law enforcement can send agents to verify compliance.
– Subjects nonmedical marijuana businesses to all existing law governing worker protections, and directs the state to study and implement any unique protections needed for those working in the nonmedical marijuana industry. Includes safety standards for drivers and vehicles used in the distribution of marijuana. Explicitly permits the Legislature to enact new worker protections in the industry. Carries over the labor peace requirement from the medical legislation.
– Subjects businesses that operate without a license to penalties including civil penalties up to three times the amount of the license fee, and a court may order the destruction of any marijuana involved in the violations.
– Establishes a unique identifier program to track marijuana from ‘seed to sale’, to ensure it is not being illegally diverted. Allows for the use of third party vendors’ services to abide by this law.
– Requires the agencies to set licensing fees, which may not exceed reasonable regulatory costs. Requires that the scale of fees be based on the size of the nonmedical marijuana business, so small and medium sized businesses will pay lower license fees than larger businesses.
– Requires the State Auditor to conduct annual audits of the Bureau beginning in 2019.
– Expands the scope of a task force of environmental agencies to respond to environmental damage caused by cultivation of both medical and nonmedical marijuana, with a focus on protecting scarce water resources.
– Requires an advance of up to $30 million dollars from the General Fund into a Marijuana Control Fund for the establishment and support of regulation. The exact amount is determined by the Department of Finance. Earmarks an additional $5 million to conduct a public information campaign regarding the new law and responsible adult use of marijuana in the year preceding the commencement of non-medical marijuana sales.
Local Control Provisions:
– Aligns with the bipartisan medical marijuana legislation to provide complete local control over nonmedical marijuana businesses within their jurisdiction, including the authority to ban commercial marijuana activity by ordinance.
– Allows local government to regulate nonmedical marijuana businesses through zoning and other local laws, including requiring that the businesses obtain local permits or licenses in addition to state licenses.
– Allows local government to enact and enforce reasonable restrictions on home cultivation of marijuana and allows a local government to ban outdoor home cultivation. All local bans on personal growth are voided if the federal government legalizes marijuana nationally.
– Empowers local government to enforce state regulations in their jurisdictions when authorized by the relevant state agency. Enforcement would be done by local authorities, but pursuant to state standards and protocols.
– Empowers local government to establish their own taxes on medical and nonmedical marijuana consistent with existing state law. Explicit authority to do so is granted to counties.
Taxation and Revenue Allocation Provisions:
– Imposes a 15% excise tax on all retail sales of marijuana, both nonmedical and medical. However, medical marijuana purchased by patients with ID cards will be exempted from regular sales taxes.
– Imposes a tax on licensed marijuana growers, based on the weight of the plants grown. The rates are $9.25 per ounce of marijuana flowers and $2.75 per ounce of marijuana leaves.
– The state taxes become effective January 1, 2018.
– The Legislature will be allowed to adjust the tax rates with a 2/3 vote to encourage compliance and discourage use by minors, but at the same time raise sufficient revenues.
– These taxes along with state and local sales taxes are expected to raise over $1 billion annually once the new system is fully implemented.
– Directs excise and cultivation tax revenues to the newly established California Marijuana Tax Fund, a special fund. The Fund ensures that the new law is adequately funded and researched, and then dedicates the majority of revenue to programs for educating against substance abuse by youth, training law enforcement, and environmental cleanup.
– Allocates revenue from the Fund as follows:
– First, funds are allocated to cover any administrative costs that are not sufficiently funded by fees.
– Second, $10 million is disbursed annually through 2028 to a public university in California to conduct outcome research and evaluate the effects of the Adult Use of Marijuana Act. This begins in fiscal year 2018-19.
– Third, $3 million is disbursed annually for five years to the California Highway Patrol to develop protocols and best practices for determining when a person is driving while impaired, including from marijuana use.
– Fourth, funds are disbursed to the Governor’s Office of Business and Economic Development (GO-BIZ), to administer a grant program supporting economic development and job placement for communities disproportionately affected by past federal and state drug policies. This program will receive $10 M in the first year, then an additional $10 M each year until Year 5, then $50 M annually thereafter.
– Fifth, $2 million is disbursed annually to the UCSD Center for Medical Cannabis Research to further understanding of the medicinal uses of marijuana.
– Following those smaller allocations, the majority of funds are disbursed into the following subaccounts: The Youth Education, Prevention, Early Intervention and Treatment Account, the State and Local Government Law Enforcement Account, and the Environmental Restoration and Protection Account. The exact percentage allocations into each account and the purposes of the account are as follows:
– 60% of funds are disbursed to the Youth Education, Prevention, Early Intervention and Treatment Account, which establishes public health and education programs focused on minors that provide treatment and counseling, educate against and prevent substance abuse.
– 20% of funds are disbursed to the State and Local Government Law Enforcement Account, which is used to train local law enforcement to administer the new laws, with a focus on DUIs, grants to local governments and organizations that educate the public on traffic safety, and major grants to local governments for enforcement of laws related to regulation of adult use of marijuana.
– 20% of funds are disbursed to the Environmental Restoration and Protection Account, which is used for environmental cleanup, remediated and restoration of public lands damaged by cultivation, as well as environmental enforcement against illegal water diversion, illegal cultivation, distribution and use of marijuana on public lands.
Criminal Penalties Provisions:
– Allows prosecutors to continue charging the most serious marijuana-related offenses as felonies, including providing marijuana to a minor, cultivating marijuana illegally on public lands and transporting marijuana across state lines for unlawful sale.
– Some offenses committed by adults, such as possessing more marijuana for personal use than the Adult Use of Marijuana Act permits, are converted to misdemeanors. These penalties become wobblers that may be charged as felonies based on aggravating circumstances, such as repetitive offending.
– Allows those convicted of marijuana crimes that are no longer crimes or have been reduced to petition a court for penalty reductions or record expungement.
– Legalizes industrial hemp production, to be regulated by the Department of Food and Agriculture. Hemp is required to be tested for THC content to determine that it qualifies as hemp rather than as an intoxicant.
– Allows the Legislature to amend regulations, protect workers, and/or reduce criminal penalties by a majority vote consistent with the purposes of the Adult Use of Marijuana Act, in order to create maximum flexibility within the system. Other amendments may be made with a 2/3 vote of the Legislature, so long as they are consistent with the purposes of the Act.