September 29, 2017 – California’s three cannabis licensing authorities have announced the official withdrawal of the draft medical cannabis regulations that were proposed in late spring. The three cannabis licensing authorities will develop emergency regulations based new laws that passed this year, and will incorporate the robust and valuable public comment received on the proposed medical cannabis regulations.
A summary of public comments, as well as the responses to those comments, received by each agency – either in writing or in person at one of the public comment forums hosted by the three agencies – can be viewed by clicking the links below:
The licensing authorities will use the emergency rulemaking process for the new regulations. The emergency regulations are expected to be published in November. The implementation date for the issuance of commercial cannabis licenses remains January 1, 2018.
For additional information about the three licensing authorities, or to learn about updates as they become available, please visit the state’s Cannabis Web Portal. The BCC’s website has been overhauled to provide the public with new resources and updated information regarding upcoming regulations and licensing applications.
Also, the California Department of Tax and Fee Administration has issued notice of New Cannabis Taxes. Beginning January 1, 2018:
“If you sell cannabis or cannabis products, you must register with the California Department of Tax and Fee Administration (CDTFA) for a seller’s permit. Cannabis cultivators, processors, manufacturers, retailers, microbusinesses, and distributors making sales are required to obtain and maintain a seller’s permit as a prerequisite for applying for a license with the California Department of Food and Agriculture, the California Department of Consumer Affairs, or the California Department of Public Health. Distributors of cannabis and cannabis products must also register with the CDTFA for a cannabis tax permit to report and pay the two new cannabis taxes to the CDTFA. The cannabis tax permit is in addition to your seller’s permit.” Read more.
UPDATE September 2017 – The Governor has signed AB 133, a new budget trailer bill making last-minute adjustments to California’s cannabis regulations. Among the most important of these is to allow medical and non-medical licensees to operate on the same premises. (This would formerly have been provided under the Bonta bill AB 64, but it and other cannabis regulation bills have been canned by the legislature at the Governor’s request. Other technnical provisions in the trailer bill would adjust how and when the cannabis tax is assessed. The new trailer bill does NOT include the provision in AB 64 that would have allowed for trademarking of cannabis products.)
SB 663 (Nielsen) was vetoed in favor of pending regulations regarding packaging and labeling. AB 350 (Salas) was amended to read: “A cannabis product shall not be made in the shape of a person, animal, insect, or fruit,” and maintains a 10 mg maximum dose.
UPDATE July 2017 – The Governor has signed a new bill, SB 94, entitled the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), which took effect immediately. MAUCRSA melds the state’s medical-only regulations passed by the legislature (a.k.a. MCRSA) with the adult-use rules approved by the voters under Prop. 64, a.k.a. AUMA (Adult Use of Marijuana Act). For the most part, MAUCRSA follows the more flexible, industry-friendly rules of AUMA, such as allowing applicants to get licenses in different phases of the industry—cultivation, manufacture, distribution and retailing—rather than restrict so-called vertical integration by allowing just a single kind of license, as under MCRSA. It also eliminates MCRSA’s independent distributor requirement, authorizes the issuance of temporary special-event licenses, and drops the California residency requirement for license applicants.
Under MAUCRSA, applicants have the choice of applying for a medical “Type M” or adult-use “Type A” license in any category (cultivating, manufacture, etc.). It requires medical and adult-use business to operate separately, but a provision to allow co-location of adult and medical use facilities has been incorporated in a separate regulatory clean-up bill, AB 64 by Asm. Ron Bonta (D-Alameda), co-sponsored by Asm. Jim Wood (D-Healdsburg), Reggie Jones-Sawyer (D-Compton), Ken Cooley (D-Rancho Cordova) and Tom Lackey (R-Palmdale).
AB 64 would :
(1) allow medical and adult-use licenses to operate on the same premises;
(2) amend California’s Model State Trademark Law to allow trademarks for cannabis products; and
(3) allow existing medical collectives, which must still operate as not-for-profits under SB 420 pending state regulation, to operate on a for-profit basis immediately.
The Governor has signed into law AB 2516 by Asm. Jim Wood to authorize a new “specialty “cottage” license for home growers with no more than 2,500 square feet of outdoors space.
SB 837 changed the name of the Medical Marijuana Regulation and Safety Act and the Bureau of Medical Marijuana Regulation to the Medical Cannabis Regulation and Safety Act and the Bureau of Medical Cannabis Regulation, and makes other changes.
Key Government Websites:
Bureau of Cannabis Regulation
DPH Office of Medical Cannabis Safety
CDFA Medical Cannabis Cultivation Program
North Coast Water Board Cannabis Program
Central Valley Water Board Cannabis Program
The new Medical Cannabis Regulation and Safety Act consists of three separate bills which were enacted together on Sept 11, 2015. The bill creates a comprehensive state licensing system for the commercial cultivation, manufacture, retail sale, transport, distribution, delivery, and testing of medical cannabis. All licenses must also be approved by local governments.
The law went into effect on January 1, 2016; however, the state has said it will need until January 2018 to set up the necessary agencies, information systems, and regulations to actually begin issuing licenses. In the interim, local governments may choose to adopt new ordinances to permit or license local businesses in preparation for state licensing. Facilities currently operating in accordance with state and local laws may continue to do so until such time as their license applications are approved or denied. In the meantime, prospective applicants are strongly advised to apply to the state Board of Equalization for a Resale Permit, and to prepare for seeking approval from their local governments.
AGENCIES AB 266 establishes a new Bureau of Medical Cannabis Regulation under the Department of Consumer Affairs. The Bureau is to establish a comprehensive internet system for keeping track of licensees and reporting the movement of commercial cannabis and cannabis products.
SB 643 & AB 243 give the Dept. of Food and Agriculture responsibility for regulating cultivation; the Dept. of Public Health for developing standards for manufacture, testing, and production and labeling of edibles; the Dept of Pesticide Regulation for developing pesticide standards; and the Depts. of Fish and Wildlife and State Water Board for protecting water quality. (Sec. 19332)
LICENSE TYPES The following license types are established under AB 266 (B&P code 19300.7)) and SB 643 (19331(g) and 19332):
(1) Type 1 = Cultivation; Specialty outdoor. Up to 5,000 square ft of canopy, or up to 50 noncontiguous plants
(2) Type 1A = Cultivation; Specialty indoor. Up to 5000 sq ft
(3) Type 1B = Cultivation; Specialty mixed-light. Using exclusively artificial lighting.
(4) Type 1C = Specialty Cottage, for cultivation using a combination of natural and supplemental artificial lighting at a maximum threshold to be determined by the licensing authority, of 2,500 square feet or less of total canopy size for mixed-light cultivation, up to 25 mature plants for outdoor cultivation, or 500 square feet or less of total canopy size for indoor cultivation, on one premises
(5) Type 2 = Cultivation; Outdoor. Up to 5000 sq ft, using a combination of artificial and natural lighting
(6) Type 2A = Cultivation; Indoor. 5001 -10,000 sq ft.
(7) Type 2B = Cultivation; Mixed-light. 5001 -10,000 sq ft
(8) Type 3 = Cultivation; Outdoor. 10,001 sq ft – 1 Acre
(9) Type 3A = Cultivation; Indoor.. 10,001 – 22,000 sq ft
(10) Type 3B = Cultivation; Mixed-light. 10,001 – 22,000 sq ft
(11) Type 4 = Cultivation; Nursery.
(k) Type 6 = Manufacturer 1 for products not using volatile solvents.
(l) Type 7 = Manufacturer 2 for products using volatile solvents.
(m) Type 8 = Testing
(n) Type 10 = Dispensary; General
(o) Type 10A = Dispensary; No more than three retail sites
(p) Type 11 = Distribution
(q) Type 12 = Transporter
CULTIVATION SIZE LIMITATIONS The maximum allowable size is 1 acre (43,560 sq ft) outdoors (Type 3) or 22,000 sq ft indoors (Type 3A and 3B licenses). The DFA is directed to limit the number of Type 3, 3A and 3B licenses. (AB 243, 19332(g)).
VERTICAL INTEGRATION There are complicated restrictions to prevent vertical integration (AB 266, 19328). In general, licensees can only hold licenses in up to two separate categories. Small cultivation licensee Types 1 -2 may hold manufacturing or Type 10A retail licenses (limited to three dispensaries). It appears that Types 3-4 licensees can’t apply for manufacturing licenses at all. However, Type 10A licensees can apply for both manufacturing and cultivation licenses, provided their total cultivation area doesn’t exceed 4 acres. Also, facilities in jurisdictions that require or permit cultivation, manufacture and distribution to be integrated as of July 1, 2015 may continue to operate that way until Jan 1, 2026.
DISTRIBUTORS REQUIRED Type 11 distributors are a new kind of entity that has been created to regulate the flow of products. ALL cultivation and manufacturing licensees are required to send their products to a Type 11 licensee for quality insurance and inspection before passing them to the next stage of manufacturing or retailing. The Type 11 licensee in turn submits the product to a Type 8 laboratory for batch testing and certification. Afterwards, the sample returns to the Type 11 distributor for final inspection and execution of the contract between the cultivator and manufacturer or manufacturer and retailer. The Type 11 distributor charges a fee that covers the testing plus any applicable taxes (the act doesn’t impose any new taxes, but anticipates that could happen in the near future) (AB 266, 19326)
Type 11 distributors and Type 8 testing facilities can’t hold any other kind of licenses (however, licensees may have their own labs for in-house testing).
LOCAL PERMITS REQUIRED No person shall engage in commercial activity without BOTH a state license and a license, permit, or other authorization from their local government. (AB 266, 19320(a); AB 243, 11362.777 (b)).
LAWFUL ACTS Actions by licensees that are permitted by both a state license and local government are lawful and protected from arrest, prosecution, or other legal sanctions (AB 266, 19317).
GRANDFATHERING Facilities already operating in compliance with local ordinances and other laws on or before Jan 1, 2018 may continue to operate until such time as their license is approved or denied. (AB 266, 19321(c)). Facilities in operation before Jan 1, 2016 shall receive priority. Los Angeles may in any case continue to prosecute violations of Measure D.
APPLICANT QUALIFICATIONS (SB 643, 19322): Applicants must provide proof of local approval and evidence of legal right to occupy proposed location. Applicants shall submit fingerprints for DOJ background check. Cultivation licensees must declare selves “agricultural employers” as defined by Alatore-Zenovich-Dunlap-Berman Agricultural Labor Relations Act.
Licensing authority MAY deny application if applicant has been convicted of an offense substantially related to qualifications, including ANY felony controlled substance offense, violent or serious felonies, or felonies involving fraud, deceit or embezzlement, or any sanctions by a local licensing authority in the past 3 years (SB 643, 19323(a)5).
FOR-PROFIT ENTITIES are implicitly allowed under the qualifications established above. These were previously “not authorized” under SB 420, but the new licensing provisions extend to individuals, partnerships, corporations, business trusts, etc. (under the definition of “person” in AB266, 19300.5 (aj)). Likewise, applicants no longer need be patients.
CULTIVATION LICENSING The DFA shall establish a medical cannabis cultivation program. All cultivation subject to local land use regulations and permits. [The following provision was repealed by the enactment of AB 21 in Feb, 2016:
In cities and counties without cultivation regulations of their own, the state shall be the sole licensing authority as of March 1, 2016 (AB 243, 11362.777 (c)4).]
TRACK & TRACE PROGAM The DFA shall implement a unique identification program for all marijuana plants at a cultivation site, to be attached at the base of each plant. The information shall be incorporated into a “track and trace” program for each product and transaction. (SB 643, 19335 and AB 243, 11362.777 (e)). Cultivation in violation of these provisions subject to civil penalties up to twice the amount of the license fee, plus applicable criminal penalties. Fines enacted daily for each violation (SB 243, 19360).
DELIVERIES Cannabis may be delivered to qualified patients only by dispensaries and only in cities or counties where not prohibited by local ordinance. All deliveries to be documented. No locality can bar transport of delivered products through its territory. Deliveries may be taxed by local county. (AB 266, 19340). [In a separate section (19334 (a) 4) it is confusingly stated that dispensers who have no more than three dispensaries (Type 10A) shall be allowed to deliver “where expressly authorized by local ordinance.” It’s unclear what conditions if any apply to other, Type 10 licensed dispensers.]
MANUFACTURERS are to be licensed by DPH. The DPH shall limit the number of Type 7 licenses that produce products using volatile solvents.
TESTING (AB 266, 19341-6) The DPH shall ensure that all cannabis is tested prior to delivery to dispensaries or other businesses, and specify how often such testing shall be conducted. *** Confusingly, 19346(c) says the costs of testing are to be paid by cultivators, whereas 19326(c) (3) states that distributors shall charge for the costs of testing; since distributors serve manufacturers as well as cultivators, it doesn’t make sense that testing costs for the former should be charged to the latter. *** Licensees shall use standard methods established by International Organization for Standardization approved by an accrediting body that is signatory to the International Laboratory Accreditation Cooperation Mutual Recognition Arrangement (AB 266, 19342). Licensees shall test for cannabinoids, contaminants, microbiological impurities, and other compounds spelled out in Section 19344. Licensees may conduct tests for individual qualified patients, but not certify them for resale or transfer to other licensees.
SCHOOL ZONES Cultivation and dispensary facilities must be at least 600 ft from schools (with grandfathered exceptions specified in HSC 11362.768). (SB 643, 19322 (a) 4).
TRANSPORTATION Only licensed transporters can transport cannabis or cannabis products between licensees (AB 266, 19326(a)). The bill doesn’t specify whether cultivators, manufacturers, or retailers can also have transport licenses, but 19328 (a) states they can generally have at most two separate kinds of licenses. Licensed transporters shall transmit an electronic shipping manifest to the state and carry a physical copy with each shipment (SB643, 19337).
LABOR PEACE AGREEMENTS Required of all applicants with 20 employees or more (SB 643, 19322 a (6))
PACKAGING Products shall be labeled in tamper-evident packages with warning statements & information specified in Section 19347.
PRIVACY Identifying names of patients, caregivers, and medical conditions shall be kept confidential. (AB 266, 19355)
SB 420 COLLECTIVE DEFENSE SUNSET The provision in SB 420 affording legal protection to patient collectives and cooperatives, HSC 11362.775, shall sunset one year after the Bureau posts a notice on its website that licenses have commenced being issued. After that date, all cannabis collectives will have to be licensed, except for individual patient and caregiver gardens serving no more than five patients.
PHYSICIAN RECOMMENDATIONS (SB 643): There are several new provisions clarifying the duties of medical cannabis physicians; however, they don’t substantially affect or impair patients’ current access to medical recommendations.
• The Med Board’s enforcement priorities are amended to include “Repeated acts of clearly excessive recommending of cannabis for medical purposes,or repeated acts of recommending without a good faith prior exam.” (SB 643, 2220.05). This is identical to existing language regarding controlled substances, which has generally been assumed to apply to MMJ heretofore.
• It is unlawful for physicians who recommend to accept, solicit, or offer remuneration to or from a licensed facility in which they or a family member have a financial interest.
• The Med Board shall consult with the California Center for Medicinal Cannabis Research in developing medical guidelines for MJ recs.
• The recommending person shall be the patient’s “attending physician” as defined in HSC 11362.7(a). Contrary to popular misconception, this in nothing new and in no way limits patients to their primary care physician. It merely restates current language in SB 420.
• Physician ads must include a warning notice that MMJ is still a federal Schedule One substance.
PESTICIDE STANDARDS shall be promulgated by DFA and Dept of Pesticide Regulation (SB643, 19332).
ORGANIC CERTIFICATION will be made available by DFA by Jan 1, 2020, federal law permitting. (SB643, 19332.5(a))
APPELLATIONS OF ORIGIN T.he bureau MAY establish appellations of origin for cannabis grown in California. No product may be marketed as coming from a county where it was not grown. (SB643, 19332.5(b-d)).
FEES and FUNDING Each licensing authority shall establish a scale of application, licensing and renewal fees, based upon the cost of enforcement. Fees shall be scaled dependent on the size of the business. (AB 243, 19350 (c)). A Medical Cannabis Regulation and Safety Act Fund is established in the state treasury to receive fees and penalties assessed under the act. $10 million is allocated to DCA to begin operations, with the possibility of an additional operating loan of $10 million from the General Fund (AB 243, 19352). The Bureau shall use the fund for a grant program to assist in state and local agencies in enforcement and remediation of environmental impacts from cultivation. (AB 243, 19351)
COUNTY TAXATION Counties may levy a tax on the cultivating, dispensing, producing, processing, distributing, etc, of medical cannabis subject to standard voter approval requirements. (Many cities already exercise this authority, but the authority of counties to do so has been unclear heretofore). (SB 643, 19348)
Sarah Armstrong, Directory of Industry Affairs for Americans for Safe Access, compiled this list of the deadlines in the bills:
July 1, 2015 – Date by which those claiming vertical integration had to be operating a vertically integrated business. (AB 266 Section 19328 (c1))
January 1, 2016 – date on which AB 266, AB 243 and SB 643 will take effect. (See: the end of the legislative summaries in all three bills)
January 1, 2016 – Beginning business operating date for cannabis businesses who are eligible for priority licensing. “In issuing licenses, the licensing authority shall prioritize any facility or entity that can demonstrate to the authority’s satisfaction that it was in operation and in good standing with the local jurisdiction by January 1, 2016.” (AB 266 Section 19321 (c))
January 1, 2017 – By January 1, 2017, the Division of Occupational Safety and Health shall convene an advisory committee to evaluate whether there is a need to develop industry-specific regulations related to the activities of facilities issued a licensee. (AB 266 Labor Code Amendment Sec. 7 147.5)
July 1, 2017 – By July 1, 2017, the advisory committee shall present to the board its findings and recommendations for consideration by the board. (AB 266 Labor Code Amendment Sec. 7 147.5)
July 1, 2017 – By July 1, 2017, the board shall render a decision regarding the adoption of industry-specific regulations pursuant to this section. (AB 266 Labor Code Amendment Sec. 7 147.5)
January 1, 2018 – “a facility or entity that is operating in compliance with local zoning ordinances and other state and local requirements on or before January 1, 2018, may continue its operations until its application for licensure is approved or denied pursuant to this chapter.” (AB 266 Section 19321 (c))
January 1, 2020 – Not later than January 1, 2020, the Department of Food and Agriculture in conjunction with the Bureau, shall make available a certified organic designation and organic certification program for medical marijuana, if permitted under federal law and the National Organic Program. (SB 643 Section 19332.5(a))
January 1, 2022 – Date by which the loan of up to $10,000,000. 00 from the general fund to establish the Medical Cannabis Regulation and Safety Act has to be repaid. If the fees collected by that time don’t repay the loan, they will begin using funds that come from imposing penalties to repay the loan. (AB 243 Section 19351 (b) (1))
March 1, 2023 – Beginning on March 1, 2023, and on or before March 1 of each following year, each licensing authority shall prepare and submit to the Legislature an annual report on the authority’s activities and post the report on the authority’s Internet Web Site. (AB 266 Section 19353)
January 1, 2026 – The date Type 10A Paragraph on licensing become inoperative “A Type 10A licensee may apply for a Type 6 or 7 state license and hold a 1, 1A, 1B, 2, 2A, 2B, 3, 3A, 3B, 4 or combination thereof if, under the 1, 1A, 1B, 2, 2A, 2B, 3, 3A, 3B, 4 or combination of licenses thereof, no more than four acres of total canopy size of cultivation by the licensee is occurring throughout the state during the period that the respective licenses are valid… This paragraph shall become inoperative on January 1, 2026.” ((AB 266 Section 19328 (a) (9))
January 1, 2026 – Date vertical integration section of AB 266 is repealed. (AB 266 Section 19328 (d))
UPDATE 2/3/2016 – Gov. Brown signed an urgency bill (AB21 – Wood) to delete a provision requiring localities to regulate cultivation by March 1, 2016 or else defer to state regulations. The bill also deletes language that explicitly authorized local governments to ban storage, cultivation, provision, transport, etc. by patients and caregivers.
UPDATE 1/7/2016 – A “clean up bill” on MMRSA, AB 1575, has been introduced, with new regulations on “virtual dispensaries” (delivery services); it ends the 2026 sunset on 10A licensees holding multiple licenses and leaves it up to the bureau to review by 2025; it amends rules on testing and residual levels of volatile solvents; it clarifies that cities and counties can add fees and taxes on top of state fees; it clarifies that a collective “may operate for profit, not for profit, or any combination thereof”; and it clarifies (in three places) that certain criminal statutes do not apply to licensees under the new law.
UPDATE October 9, 2015 – Governor Brown has signed the bills.