Governor Releases Draft Language to Reconcile MCRSA and AUMA

April 4, 2017 - The Governor’s office has released a draft trailer budget bill, attempting to reconcile MCRSA (medical marijuana law passed by the legislature in 2015) and AUMA (passed by the voters as Prop. 64 in November 2016).

Unlike Gov. Brown's proposal of last year to merge the medical and recreational markets as much as possible for cost-cutting purposes, this year's proposal seeks to draw a bright line between medical and recreational licenses on all levels. This is possibly a response to the threat of federal interference in the adult market.

The proposal would end the voluntary state ID program for medical marijuana patients, and allow counties to continue to issue IDs should they choose to. It's unclear whether all patients, or only those with county ID cards, would continue to see relief from state sales tax should the Governor's proposal become law, which could happen in June.

The Governor's proposed language:

— Proposes to limit the number of Type 3 cultivation licenses consistent with MCRSA. Adds the Specialty Cottage license (1C) to the list of license types. Requires all licenses be designated as for commercial adult-use marijuana cannabis activity (Type “A”) as distinct from commercial medical cannabis activity (Type “M”). Proposes that the DHP and the CDFA also review micro businesses licenses provided for in AUMA. Maintains that no Type 5 cultivation licenses may be issued before January 1, 2023

- Removes cross-licensure restrictions in MCRSA, allowing unlimited licenses in any category, except for testing, "provided the licensed premises are separate and distinct. The licensee may conduct either adult use commercial cannabis or commercial medical cannabis activity at the licensed premises, but not both types of activities, unless otherwise specified in regulation.” (Section 26053)

- Removes residency requirement for licensees (Section 26054.1). Maintains priority licensing for those in operation before September 1, 2016 (26054.2).

- Extends the appeals panel in AUMA to medical businesses and allows a party to appeal to the Court of Appeals, similar to the ABC process

- Proposes AUMA be amended to include the environmental protections in SB 837 (requiring a water permit, etc.)

- Sets a deadline to establish appellations of January 1, 2020. (Section 26063)

- Ends the state ID card program and makes the program voluntary for counties (Section 11362.712); amends confidentiality language 11362.713

- Makes physician recommendations valid for only one year (Section 11362.745)

- Continues to allow 6 mature or 12 immature plants per patient, or more if a doctor recommends more (Section 11362.7)

- Strikes the definition of “volatile solvent” in 11362.3

- Amends B&P Code 26001 to define A Licenses (adult use) and M Licenses (medical) and defines products as being intended solely for medical or recreational use.

- Changes definition of “owner” to:

All persons with an aggregate ownership interest of 20 percent or more in the person applying for a license, unless such interest is solely a security, lien, or encumbrance;

(2) The chief executive officer of an entity or nonprofit;

(3) All members of the board of directors of a nonprofit; or

(4) An individual that will be participating in the direction, control, or management of the licensed commercial cannabis business.

- Defines “Cultivation site” as a location where cannabis is planted, grown, harvested, dried, cured, graded, or trimmed, or that does all or any combination of those activities.

- Specifies that: A topical cannabis product is not considered a drug as defined by Section 109925 of the Health and Safety Code.

- Strikes the definition of “unreasonably impracticable” in Section 26001; Instead says, "nor shall such regulations make compliance so onerous that the operation of a cannabis establishment is not worthy of being carried out in practice by a reasonably prudent business person unreasonably impracticable.” (26013)

- B& P Section 26009 changes Bureau of Marijuana Control to Bureau of Cannabis Control in the Department of Consumer Affairs; specifies that they have to authority to issue or deny, etc. licenses for micro businesses and other license types. (Section 26012). Allows emergency regulations to be readopted (Section 26013)

- Expands the advisory committee to include members of the cannabis industry, including medical cannabis. Section 26014

- Includes among grounds for disciplinary action the intentional and knowing sale of medicinal cannabis or medicinal cannabis products by an M-licensee to a person without a physician’s recommendation. (Section 26030). Allows each licensing authority to place licensees on probation for actions including and not limited to what is enumerated in 26030. Allows licensing authorities to revoke licenses based on local agencies notifying them of a licensees’ violation of state rules and regulations, and to recoup costs of investigation and enforcement. (Section 26031) Puts a 5-year deadline on licensing authorities to act on accusations against licensees. (Section 26034)

- Adds in Section 26036:

Nothing in this division shall be interpreted to supersede or limit existing local authority for law enforcement activity, enforcement of local zoning requirements or local ordinances, or enforcement of local license, permit, or other authorization requirements.

Nothing in this division shall be interpreted to require a licensing authority to undertake local law enforcement responsibilities, enforce local zoning requirements, or enforce local licensing, permitting, or other authorization requirements.

- Adds: "A violator shall be responsible for the cost of the destruction of cannabis and remediation associated with his or her violation, in addition to any amount covered by a bond required as a condition of licensure” to the fines in Section 26038 for those engaging in commercial cannabis activity without a license.

- Requires challenges to licensing decisions be heard in the Supreme Court or the courts of appeal (and no other). (Section 26045)

- Adds rules for temporary licenses (Section 26050.1)

- Adds Section 26050.5 regarding background checks on owners, and other requirements, including providing evidence that grows are further than 600 feet from schools and labor peace agreements are in place for companies with over 20 employees. (Replaces Sections 26056, 26056.1)

- Strikes Section 26051 regarding “excessive concentration” of cannabis businesses; strikes "A licensing authority may enforce this section by appropriate regulation” from Section 26052 regarding restraint of trade.

- Requires all local jurisdictions to provide the Bureau with their ordinances and regulations regarding commercial cannabis activity before January 1, 2018, and to keep them up to date on any changes. "In instances where a local jurisdiction allows cannabis business to operate, but does not issue permits, licenses, or local authorizations, the applicant will be responsible for ensuring compliance with division 13 of the Public Resources Code [Environmental Quality].” (Section 26055)

- Allows for a hearing if petitioned with 30 days of a license denial (Section 26058)

- Broadens authority and clarifies responsibility of CDFA regarding cultivation, water usage, CEQA, etc. (Section 26060). Adds more water regulations in Section 26060.1 and amends them in Sections 13276, 1831 and 1847 of the Water Code.

- Requires an organic certification program for cannabis by 2020, should the federal government permits it. (Section 26062)

- Adds or clarifies regulations for a Track and Trace program (Section 26067; strikes Section 26170) and cultivation re: taxation, etc. (Section 26068 and 26069). Allows for cooperative agreements with county ag commissioner and others to handle inspections, etc. around the cultivation of cannabis (Section 26069.1) Section 34012 of the Revenue and Taxation Code is further clarifies that The Department of Food and Agriculture is not responsible for enforcing any provisions of the cultivation tax.

Section 26070 gets into retailers, distributors and transportation. Again, they will be distinguished as to Type A or Type M.

- Removes Manufacturing Level 1 and 2 from Section 26100 and puts it in 26130.

- Amends testing standards (Section 26101 and 26104 ; removes 26102 & 3). Section 26110 amends quality assurance and inspecting, and Section 26120 amends packaging and labeling. Section 26121 is added to define misbranding and labeling. Section 26131 is added to define adulteration and Sections 26132 & 26133 delineate procedures for dealing with adulterated product; fines are added in Section 26134 and allowance for seizure of product in 26135.

- Generalizes advertising proscriptions to say "No licensee shall publish or disseminate advertising or marketing shall not be attractive to children" (strikes: "containing symbols, language, music, gestures, cartoon characters or other content elements known to appeal primarily to persons below the legal age of consumption”). (Section 26152) Broadens false claim language to extend to labels (26154)

- Changes language on yearly performance audits (Section 26190) and reports (Section 26191).

- Simplifies language in Section 11018.5 of the Health and Safety Code regarding Industrial Hemp. Has other clean up language in other codes, changing marijuana to cannabis or adding cannabis to medical cannabis.

Last week, the state Department of Finance issued reports on Cannabis Manufacturing and Cultivation, as well as a general report on the economic impacts of MCRSA.

Read more:

Jerry Brown wades into pot battle with plan to merge medical, recreational laws Sacramento Bee