California’s 2018 legislative session a ‘mixed bag’ for marijuana businesses

The 2018 California legislative session in Sacramento – which wound to a close Aug. 31 – was a blend of highs and lows for licensed cannabis companies, with some major victories scored literally on the last day while other high-profile bills died.

Some wins for marijuana businesses involved changes to the provisional licensing process and greater clarity on standard deductions cannabis businesses can take on state taxes.

Legislative disappointments included failed attempts to both drop the state cannabis excise tax rate and create a state-run MJ industry banking system.

The good news for next year: Most lawmakers now take marijuana business concerns seriously, and the industry has proved to be an economic powerhouse, according to both Lindsay Robinson, executive director of the California Cannabis Industry Association (CCIA), and Amy Jenkins, lead lobbyist for the organization.

“Nearly all cannabis bills required two-thirds (of support in both chambers) in order to pass, and it’s very difficult to get,” Jenkins said, referring to the supermajority of votes required to amend Proposition 64 and the state constitution.Jenkins said calling the legislative session “a mixed bag is fair, but … I think it’s important to emphasize that … what we saw were very significant changes as far as perceptions in the legislature.”

On many cannabis bills, she noted, “we were able to garner significant support from both Republicans and Democrats. Three years ago, that would have been unthinkable.”

Cannabis bills that passed

Senate Bill 1459

What it will do: Establish a provisional business license for cannabis companies that are in the process of getting their full annual permits.

The provisional license is a stopgap measure that will enable many temporary license holders to continue operations legally after Dec. 31 – when all temporary licenses expire – while obtaining a full annual license.

Lawmakers approved this last-minute measure Aug. 31.

SB 311

What it will do: Allow licensed distributors to transport cannabis products to – and sell to – other distributors instead of only to retail shops, microbusinesses and testing labs, thereby giving more flexibility to the state’s MJ supply chain.

Assembly Bill 1863

What it will do: Permit licensed marijuana companies to deduct standard business expenses under the state personal income tax.

AB 1741

What it will do: Allow cannabis businesses to pay state taxes by means other than electronic-funds transfer, a step needed by many companies that do not have access to banks. They could also pay by cash or money order, for instance.

SB 1294

What it will do: Require state regulators, including the Bureau of Cannabis Control (BCC), to begin work on a state-run, social equity program for the marijuana industry.

The bill gives the BCC until July 2019 to adopt “model equity ordinances” to be used statewide by city and county governments that want to give victims of the war on drugs a leg up in the newly regulated marijuana industry.

SB 829

What it will do: Resurrect “compassion programs” by allowing certain cannabis businesses to give free marijuana products to medical patients that qualify via their income status and have doctors’ recommendations for MMJ and a state ID card.

AB 2020

What it will do: Expands the choice of venues where legal cannabis festivals such as the Emerald Cup can be held.

Currently, events that allow recreational marijuana sales and consumption are limited to county fairgrounds or properties run by district agricultural associations.

This bill will allow such events to be held at any site as long as organizers have permission of local authorities.

Cannabis bills that died

Some of these may be resurrected in some form or another during the 2019 legislative session, but Robinson and Jenkins said it’s too early to tell for certain.

AB 3157

What it would have done: Temporarily reduced the state marijuana excise tax, from 15% to 11%. It was a priority for CCIA and the industry, but the bill died quietly in a May committee hearing.

Robinson said that tax reduction of some sort will be a key issue for CCIA in 2019, though no firm commitment has been made by this year’s sponsor that the bill will be reintroduced.

SB 930

What it would have done: Established a state-run banking system for cannabis companies. While the bill made it close to the finish line, it died in committee with just a few weeks left in the session.

Jenkins said it’s not clear if this issue will be raised again at the state level. Such a move could face serious hurdles given the complicated issues that marijuana businesses face when seeking clarity on banking issues.

AB 2641

What it would have done: Allowed growers and product manufacturers to obtain temporary event retail licenses so they could transport their goods directly to marijuana festivals and market or sell them directly to consumers onsite.

The measure would have likely resulted in far more retail opportunities – especially for cultivators – but the bill died in committee in August.

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