Future Cannabis: MMRSA and AUMAThe Medical Marijuana Regulation and Safety Act

(MMRSA) is a bill “package” comprised of three bills:

Assembly Bill 243 (Wood)Assembly Bill 266 (Bonta, Cooley, etc.)Senate Bill 643 (McGuire)

The MMRSA bills took effect Jan. 1, 2016. Target date for state licenses: Jan. 1, 2018.

MMRSA: Key ConceptsAll commercial activity must be licensed.

Dual licensing by state/local “licensing authorities.”Criminal and civil penalties for unlicensed activity.“Local control” provisions allow cities and counties to regulate (or ban) commercial cannabis activities.New Bureau of Medical Marijuana Regulation created within Department of Consumer Affairs.Several other state agencies (Ag, Public Health) have regulatory and enforcement roles.

Lori Ajax, BMMR Chief

MMRSA: Key ConceptsCreates mandatory “track-and-trace” program to identify cannabis products from seed to sale.Applicants must obtain local “permit, license or other authorization” before applying for state license.“Robust” regulations designed to address major concerns of federal law enforcement (Cole memo).Many local zoning ordinances must be updated.Cannabis declared to be an agricultural crop.Does not expressly prohibit for-profit businesses.

State Permits and LicensingDept. of Consumer Affairs (new Bureau)Dept. of Fish and Wildlife Dept. of Food and Agriculture Dept. of Pesticide Regulation Dept. of Public Health Dept. of Justice State Board of Forestry & Fire ProtectionState Water Board / regional water boards

Which State Laws Were Amended?Agriculture CodeBusiness and Professions Code (most MMRSA statutes appear at B&P Code §§ 19300 - 19360)Fish and Game CodeHealth and Safety CodeLabor CodeRevenue & Taxation CodeWater Code

Which State Laws Were Amended?Agriculture CodeBusiness and Professions Code (most MMRSA statutes appear at B&P Code §§ 19300 - 19360)Fish and Game CodeHealth and Safety CodeLabor CodeRevenue & Taxation CodeWater Code

Refresher: Compassionate Use ActWhat is Proposition 215?

Ballot initiative passed by California voters in 1996.Created limited immunity for “qualified patients” who use or cultivate marijuana for medical purposes when such use has been recommended by a California doctor for a serious medical condition.Limited immunity also covers “primary caregivers.”Did not address local zoning laws or retail sales.Codified at Health and Safety Code §11362.5.

Refresher: Senate Bill 420What is the Medical Marijuana Program Act?

The Legislature's first attempt to regulate medical marijuana was Senate Bill 420. It took effect in 2004.Created a voluntary state ID card program, run by county health departments, to help identify qualified patients and primary caregivers for law enforcement.Extended limited immunity to include transportation and “collective or cooperative” cultivation projects.Established 6-plant personal cultivation threshold.Codified at Health and Safety Code §11362.7 et seq.

MMRSA: Commercial Activities

“...No person shall engage in commercial cannabis activity without possessing both a state license and a local permit, license, or

other authorization.”Business & Professions Code §19320(a)

Commercial CultivationThe California Department of Food and Agriculture is

tasked with state licensing of commercial cultivation.CDFA to promulgate new cultivation regulations through rule-making process with public input.Dept. of Pesticide Regulation will work with CDFA to establish standards and maximum tolerances.Medical Marijuana Cultivation Program is established within CDFA.“Unique identifier” for plants will constitute the starting point of new “track and trace” program.

Commercial Cultivation: OutdoorOutdoor cultivation license types:

Type 1, “Specialty Outdoor,” up to 5,000 sq.ft.Type 2, “Small Outdoor,” 5,001 - 10,000 sq.ft.Type 3, “Outdoor,” 10,001+ sq.ft., up to one acre.The number of Type 3 licenses will be capped.

Commercial Cultivation: IndoorIndoor cultivation license types:

Type 1A, “Specialty Indoor,” up to 5,000 sq.ft.Type 2A, “Small Indoor,” 5,001 - 10,000 sq.ft.Type 3A, “Indoor,” 10,001 – 22,000 sq.ft.The number of Type 3A licenses will be capped.

Commercial Cultivation: Mixed LightMixed-light cultivation license types:

Type 1B, “Specialty Mixed-Light,” up to 5,000 sq.ft.Type 2B, “Small Mixed-Light,” 5,001 to 10,000 sq.ft.Type 3B, “Mixed-Light,” 10,001 to 22,000 sq.ft.The number of Type 3B licenses will be capped.

Commercial Cultivation: Seeds and ClonesOther cultivation license types:

Type 4 “Nursery” license is for cultivation of immature plants and seeds as nursery stock only. A nursery licensee may transport live plants.The law does not specifically define or address “genetics” or seed companies, but the CDFA has authority over all ag seeds sold in California. “Specialty cottage” license type for small growers up to 2,500 square feet proposed (AB 2516 – Wood).

Other License Types

Type 6: Manufacturer 1 (non-volatile solvents).Type 7: Manufacturer 2 (volatile solvents; capped).Type 8: TestingType 10: Dispensary, general (single site). AB 1575 adds “non-storefront” subtype for delivery-only.Type 10A: Dispensary, special (3 sites max.)Type 11: Distribution (tax capture; quality assurance)Type 12: Transporter

MMRSA: Limits on cross-licensing“Vertical integration” of companies is prohibited.

Most growers will deal with Type 8 and Type 11 licensees. All cannabis and cannabis products must go through lab testing and quality assurance.Testing labs must be certified, fully independent.Some crosses are allowed: Cultivation/Nursery, Cultivation/Manufacturer, Manufacturer/Dispensary.Overall purpose is similar to “tied-house” regulations applied to alcohol manufacturing and distribution.

MMRSA: Limits on cross-licensing“Vertical integration” of companies is prohibited.

Most growers will deal with Type 8 and Type 11 licensees. All cannabis and cannabis products must go through lab testing and quality assurance.Testing labs must be certified, fully independent.Some crosses are allowed: Cultivation/Nursery, Cultivation/Manufacturer, Manufacturer/Dispensary.Overall purpose is similar to “tied-house” regulations applied to alcohol manufacturing and distribution.

Who's eligible for state licensing?You do not have to be a qualified patient. However...

You should have some money saved up. License application and renewal fees will be expensive.You must pass DOJ fingerprint check (LiveScan).Convictions for violent felonies, fraud/embezzlement and other specified offenses will disqualify you.License may be denied on other “suitability” factors.The level of security and background checks applied to owners, employees and licensed sites could be comparable to alcohol or cardroom regulations.

Criminal and Civil Penalties

Criminal and Civil Penalties“...[C]riminal penalties shall continue to apply to an

unlicensed person engaging in commercial cannabis activity in violation of this chapter, including, but not limited to, those individuals covered under Section 11362.7 of the Health and Safety Code.”*

Business & Professions Code §193218(c)

* Qualified patients and caregivers do not have limited immunity if charged with engaging in commercial cannabis activity.

Criminal and Civil PenaltiesLimited immunity for collectives is going away.H&S Code §11362.775 is repealed one year after the state commences commercial licensing. This could happen as soon as Jan. 1, 2019.Operators of unlicensed “collective or cooperative” businesses and cultivation sites will no longer have an affirmative MMJ defense if charged criminally.Underlying business structure of current collectives (nonprofit mutual benefit corporation) could survive, but for-profit business entities are being formed too.

Who's in Charge of Enforcement?State and local agencies share enforcement duties.

City: Police | code enforcement | city attorney | DA.County: Sheriff | county counsel | district attorney.Dept. of Agriculture | county ag commissioners.Dept. of Consumer Affairs (BMMR).Dept. of Public Health | county health officers.State/local water and environmental agencies. State Board of Equalization (state/local taxes).

MMRSA: Show Me The Tax RevenuesMMRSA was passed without a state cultivation tax that

was proposed by Assembly Member Wood. State Sen. McGuire introduced a bill to impose a 15% state excise tax on medical marijuana sales; amended so it won't take effect if AUMA passes.Weight-based cultivation tax re-introduced by Wood but did not pass Assembly committee vote.Tax measure requires 2/3 vote of the Legislature.MMRSA affirms local government taxation authority, subject to local voter approval (Prop. 218).

Where does medical cannabis come from?

Dispensaries: Lawful Access is LimitedDispensary bans are in place in Fresno County and

most other cities and counties in the Central Valley. Among the known storefront dispensaries closest to

Coalinga are:Tulare: 59 miles.Goshen: 63 miles.Bakersfield: 102 miles (unregulated).Sacramento: 196 miles.Los Angeles: 202 miles.

Deliveries: Convenient but UnregulatedThe number of delivery services grew rapidly because

of local dispensary bans. Quality of medicine, service and pricing varies widely. Assembly Bill 1575 would create “storefront” and “non-storefront” dispensaries.

Personal CultivationSmall gardens exempt from MMRSA licensing.

Qualified patient: Up to 100 square feet.Primary caregiver: Up to 100 square feet per patient. Up to 500 square feet for up to five patients. The legal definition of “primary caregiver” is strict.Personal cultivation is subject to local ordinances. The California Supreme Court has not ruled on whether total growing bans violate Prop. 215. Excess cultivation is criminalized under MMRSA. Kelly-style litigation is anticipated over new limit.

Personal CultivationCultivation is vital in “dry” cities and counties. Personal cultivation does not require a state license.Nuisance/crime potential is limited by maximum size of license-exempt gardens. (100 sq.ft./patient.)Total bans may violate Prop. 215 (litigation risk).Trend: Ordinances that limit greenhouse/indoor growing to “fully enclosed and secure structures.”Natural sunlight is safest, cheapest growing method. Reduces carbon footprint and potential fire risks.

What About Federal Law? Although federal law prohibits all cannabis activities,

state/local MMJ laws are not pre-empted by default.The Compassionate Use Act does not obstruct the enforcement of federal law. Police agencies may not enforce federal law where federal authorities do not enforce it themselves. (City of Garden Grove v. Superior Court; 2007)State ID card program does not violate federal law. (County of San Diego v. San Diego NORML; 2008)U.S. Supreme Court declined review San Diego, Garden Grove cases; just declined Colorado case.

What About Federal Law? The Cole memo outlines major areas of U.S. DOJ

enforcement: Large “cartel” grows on public lands; cannabis activities near schools and sensitive uses.MMRSA regs are designed to address state and federal concerns and reduce federal enforcement.Gov. Brown on signing MMRSA: “This new structure will make sure patients have access to medical marijuana, while ensuring a robust tracking system. This sends a clear and certain signal to our federal counterparts that California is implementing robust controls not only on paper, but in practice.”

What about Legalization 2016? Adult-use legalization in other states is the main

reason that drove the state Legislature to pass the MMRSA. California voters are expected to approve a ballot initiative in November to legalize non-medical use.The Adult Use of Marijuana Act (AUMA) was drafted with the MMRSA framework as a model. Adults 21 and up can grow, possess and use small amounts. Commercial and retail activities are state-licensed.MMRSA gives cities some good tools to prepare.Adult use already legalized: Alaska, Colorado, Oregon, Washington state, District of Columbia.

AUMA: Key Concepts The Adult Use of Marijuana Act (AUMA) builds upon

MMRSA framework with added layers of regulation.Bureau of Medical Marijuana Regulation tasked with overseeing both medical and nonmedical marijuana.Revision of state criminal statutes reduces some cannabis penalties but stops short of “legalization.”Establishment and funding of new drug-diversion programs aimed at youth, with local grant options.MMRSA-style commercial licensing and oversight.Adult-use sales can be locally regulated or banned.

AUMA: More Key Concepts 15% state excise tax on cannabis cultivation, BUT may limit ability to impose local cultivation taxes.Express authority for counties to tax cannabis sales; existing authority for city sales taxes is implied.Cities and counties may not prohibit indoor cultivation of six living plants by adults 21 and up, nor the possession and use of designated amounts.Qualified patients and primary caregivers with valid state-issued ID card exempt from paying sales tax.More info: LetsGetItRightCA.org

Coalinga Options: Regulate, Tax or Ban MMRSA requires local implementation to work.

Personal cultivation: Consider MMRSA update; “indoor” options can include secure greenhouses. Anticipate/adopt regs for adult use if AUMA passes. Commercial cultivation: Outdoor unlikely, may be some indoor/mixed-light options in industrial zones.Dispensaries/retail sales: Storefront, delivery-only.Other license types: Heavy commercial/industrial.Ballot measure could add local tax component(s); recommend adding AUMA-compliant language.

Coalinga Options: Zoning Existing zoning can

frame land uses for MMRSA activities.

Personal cultivation.

Commercial cultivation.

Dispensary or delivery-only.

Other licenses.

Coalinga Options: MMRSA/AUMA Taxes MMRSA and AUMA authorize cities to tax commercial

cannabis activities, subject to local voter approval.Oakland: Voters approved a 5% tax on medical, 10% tax on nonmedical commercial activities. Desert Hot Springs: Voters approved 10% tax on dispensary sales and area-based cultivation tax.Sacramento: Business operations tax, up to 10%.Stockton: Ordinance and tax initiative pending.Marysville: Sizable annual fees in lieu of local tax.Palm Springs: Voters approved 15% dispensary tax.

Moving Forward Serve patients in your city and county. Medical cannabis is a rural health-care delivery challenge. Do not criminalize patients. (Kirby v. Fresno Co.)Address contentious issues in phases, by topic. Consider ballot placement of a tax measure only, covering both medical and nonmedical options. Develop regulatory ordinances on separate tracks. Topics: Personal, retail/commercial and industrial.Don't forget CEQA and planning laws. Good zoning ordinances take time to draft and review. Conduct initial study to identify potential impacts.

Future Cannabis: MMRSA & AUMA

Prepared for the

City of Coalinga

Michael S. Green Fresno Cannabis Association