2016 LEGISLATIVE HIGHLIGHTS

Prepared by Amy Jenkins, Legislative Advocate

The California Cannabis Industry Association (CCIA) achieved significant legislative victories in 2016 on behalf of California’s cannabis industry.

To total, CCIA tracked 20 bills in 2016.  Among its legislative accomplishments, CCIA sponsored its first bill, which was signed by the Governor in September to establish protections from criminal prosecution for locally permitted medical cannabis extractors.  CCIA also defeated seven bills that would do harm to the industry, including a cannabis training proposal and medical cannabis taxation proposal.  CCIA also successfully negotiated amendments to four other bills, including legislation sponsored by the Brown Administration to clarify elements of the Medical Cannabis Regulation & Safety Act (MCRSA).

CCIA continued to build strong relationships with state legislators, committee staff and the Brown Administration; and worked hard to improve relationships, as well as cultivate new relationships with strategic partners representing local government, law enforcement, the business community, the banking industry and labor.  CCIA also established strong relationships with the relevant licensing entities and other state agencies tasked with implementing the MCRSA.  These relationships will greatly enhance our efforts to achieve both CCIA’s legislative, as well as regulatory objectives in 2017.

Formed in 2012, CCIA strives to unite California’s cannabis industry and speak with one voice at the state and local levels. CCIA strives to educate and inform policy makers on all segments of the cannabis industry and currently represents over 250 members. 

Legislative Accomplishments

CCIA’s Co-Sponsored Medical Cannabis Extraction Bill Signed by the Governor.  A bill, sponsored by CCIA, aimed at establishing new best practices for manufacturers of medical cannabis extracts was signed by the Governor in October.  This was CCIA’s first sponsored bill, since the organization was founded in 2012.

AB 2679, authored by Assemblymember Ken Cooley (D-Rancho Cordova) and co-authored by Assemblymembers Rob Bonta (D-Alameda), Tom Lackey (R-Palmdale), Reggie Jones Sawyer (D-Los Angeles) and Jim Wood (D-Healdsburg) represented an unprecedented consensus agreement reached between the cannabis industry, local governments and law enforcement to provide critical protections to locally permitted manufacturers from prosecution under state law.

While the legislature took significant steps in 2015 to regulate the medical cannabis industry with the passage of the MCRSA, the legislation advertently left some areas of law unclear.  The MCRSA only exempts cannabis extraction facilities from criminal liability after they obtain both a local and state license. Since state licenses will not be available until 2018, cannabis extraction facilities, even if locally authorized, are still vulnerable to criminal prosecution under Health and Safety Code Section 11379.6.

This ambiguity in state law led to at least three raids in 2016 on locally compliant cannabis extraction facilities. It also created uncertainty among local governments that were attempting to regulate cannabis extraction businesses and, in some instances, stymied local regulation efforts altogether.

AB 2679 established protections from criminal prosecution for locally permitted medical cannabis extractors that also adhere to nationally recognized food processing extraction methods, modeled after chocolate, decaffeinated coffee, essential oils and other food extracts.  The bill also clarified several important concerns that will directly protect the health and safety of medical cannabis patients while providing medical cannabis businesses with transparency into state processes associated with licensing, enforcement and administration by the various entities governing medical cannabis.

CCIA Defeated Cannabis Tax Measure.  A bill to impose a state tax on medical cannabis failed passage in the Assembly Revenue and Taxation Committee in June 2016 thanks to aggressive lobbying by CCIA staff and its members.  

SB 987 by Senator Mike McGuire (D-Healdsburg) would have imposed a 10 percent excise tax on the retail sale of medical cannabis.  CCIA strongly opposed this bill arguing that such a tax was premature as the industry seeks to comply with the new regulations being developed under the MCRSA.  Staff further argued that it would encourage illicit activity, denying medical cannabis patients access to quality medicine; that the restricted medical market could not sustain such a tax that could approach 40 percent in some areas; and that imposing such a tax on medicinal products was contrary to existing public policy.

CCIA Defeated Cannabis Training Bill.  A bill to mandate training for all cannabis employees was held in the Senate Rules Committee after the bill’s sponsors reneged on an agreement with CCIA concerning who could conduct such training.

AB 26 by Assemblymember Reggie Jones Sawyer (D-Los Angeles) would have required cannabis operators with 20 or more employees to implement an employee training program to educate, inform, and train the licensee’s agents and employees on compliance with the Act.

Amendments to the bill were struck in the Senate Business, Professions and Economic Development (Sen. BP&ED) Committee in late June after the bill was amended to only allow labor unions to conduct third party training.

While CCIA wholeheartedly supports training for cannabis workers, we consistently maintained that any mandated third party training not be limited to labor unions; that community colleges, trade associations and other private sector programs also be permitted under the third-party provider definition so long as they adhere to a uniform set of minimum standards prescribed by the licensing entities.  

The Sen. BP&ED Committee concurred with CCIA’s argument and helped negotiate a consensus between CCIA and the bill’s sponsor. Unfortunately, the agreement was rescinded by the sponsors and amended again in the Senate Appropriations Committee to only allow labor unions to provide third party cannabis training.

CCIA quickly countered, meeting with numerous Senate offices, arguing that the industry should be subject to the same standards as applies to other professions and, therefore, permitted to conduct third party training if they opted to do so.  CCIA also discussed process, arguing that an agreement had been reached in one committee and subsequently rescinded in another.  Ultimately, the Senate agreed and, the following day, AB 26 was pulled from the Senate Floor and referred to the Senate Rules Committee where it was held under submission.

For CCIA and the cannabis industry at large, the defeat of AB 26 marked a major accomplishment for an industry seeking to establish credibility in Sacramento.

CCIA Negotiated Amendments to Medical Cannabis Trailer Bill.Governor Brown signedSB 837 on June 27, which made numerous clarifying and technical changes to the MCRSA.  Key amendments successfully negotiated by CCIA included:

1. Authorization for the licensing entities to establish emergency regulations, ensuring more timely implementation of the MCRSA, which is anticipated in January 2018.  

2. Clarification that wholesale transactions between manufacturers of cannabis concentrates and manufacturers of cannabis-infused products are permitted without requiring the services of a licensed distributor to facilitate the sale.

CCIA Successfully Negotiated Amendments to Medical Cannabis Tax Amnesty Act.  AB 567 by Assemblymember Mike Gipson (D-Carson) sought to create the Medical Cannabis Tax Amnesty Program and require the Board of Equalization (BOE) to administer a tax penalty amnesty program for medical cannabis-related businesses for a three-month period beginning July 1, 2017 through September 30, 2017.  

While CCIA ultimately supported the bill with amendments, prior iterations of the legislation also applied the tax amnesty provisions to the Employment Development Department (EDD).

CCIA supports efforts that ensure cannabis operators are fully compliant with state law.  However, a failure to pay employment taxes was never contemplated in the MCRSA when it was enacted in 2015 and was never considered a disqualifying factor for receiving a state license.  Conversely, the MCRSA does require applicants seeking a state license to provide a seller’s permit number as a condition of state licensure.

For these reasons, CCIA successfully negotiated amendments to remove the EDD provisions from the bill, arguing that as the industry seeks to achieve compliance at the state and local levels, imposing additional requirements on cannabis operators was premature and could discourage compliance.

While CCIA ultimately supported AB 567, as amended, the bill was ultimately vetoed by the Governor.

CCIA Successfully Negotiated Amendments to MCRSA Clean-up bill, AB 1575.  AB 1575 by Assemblymember Rob Bonta (D-Alameda) would have made numerous technical and clarifying changes to the MMRCA.  CCIA staff worked diligently with the author’s office, negotiating the following amendments in the bill to clarify that: 1) medical cannabis licensees may operate as for-profit businesses subject to local approval; 2) licensed medical cannabis extractors are exempt from criminal liability; 3) medical cannabis operators seeking to establish non-store operations may apply for a Type 10 license; and 4) product packaging standards are exclusively subject to state regulation.  Despite considerable work by CCIA and other stakeholder groups to move this bill through the legislative process, AB 1575 was held in the Senate Appropriations Committee under submission in August 2015.  However, the demise of this bill lead to the introduction of CCIA-sponsored bill, AB 2679 (Cooley, et all), which was signed by the Governor in September.

CCIA Supported Legislation to Waive 10% Cash Penalty Signed by the Governor.   AB 821 by Assemblymember Mike Gipson (D-Carson), was signed by the Governor in October 2015.  The bill modified existing law to authorize the Board of Equalization (BOE) to allow businesses who owe taxes in excess of $10,000 to pay their tax liabilities by check, credit card, or cash in lieu of the required electronic fund transfer without the 10% penalty.  AB 821 was strongly supported by CCIA, which aggressively lobbied for its enactment.

CCIA Successfully Negotiated Amendments to Exempt Cannabis from E-Cigarette Regulations.The Board of Equalization (BOE) began implementing provisions of SB2x 5 by Senator Mark Leno (D-San Francisco), which was enacted in May 2016, to regulate electronic cigarettes the same as other tobacco products.  In August, BOE Member Fiona Ma (D-San Francisco) contacted CCIA to inform staff that, the BOE staff were poised to capture medical cannabis products under the definition of e-cigarette.  CCIA immediately implemented an opposition strategy, which included discussions with BOE staff and the bill’s author, Senator Leno.  Following those discussions, BOE tabled its original recommendation to capture cannabis and cannabis products in the definition of tobacco.

Other Legislation of Interest and CCIA Involvement

1. AB 2149 (Bonilla) sought to enact the Medical Cannabis State Payment Collection Law and authorize the Board of Equalization (BOE) and counties to collect cash payments from medical cannabis-related businesses for state agencies.  CCIA involvement and outcome:  CCIA strongly supported this bill, lending lobbying support and providing committee testimony.  Despite these efforts, AB 2149 was held in the Senate Appropriations Committee under submission.

2. AB 2169 (Allen) would prohibit a person from maintaining or operating a place of business in which drug paraphernalia sold, except as authorized by law.  CCIA involvement and outcome: CCIA strongly opposed this bill and aggressively lobbied members of the Assembly Public Safety Committee to reject this bill in the committee.  Recognizing that he didn’t have the votes to move his bill out of committee, the author pulled his bill from consideration.

3. AB 2243 (Wood) sought to impose a tax on licensed cultivators.  CCIA involvement and outcome: CCIA opposed this bill, which was ultimately held in the Senate Appropriations Committee under submission.

4. AB 2300 (Wood) is modeled after legislation enacted in 2011 to give landlords the discretion to prohibit the smoking of tobacco.  AB 2300 applied specifically to the smoking of cannabis.  Under the bill, patients would have been permitted to maintain their right to access and use medical cannabis through other consumption methods such as edibles or oils.  CCIA involvement and outcome:  AB 2300 narrowly passed the Senate Judiciary Committee with the caveat the concerns over patient access needed to be addressed before the bill could pass the Senate.  Unfortunately, those concerns were never fully address, so the Senate ultimately held the bill in the Senate.

5. AB 2385 (Jones-Sawyer) was an attempt to resolve conflicts between the MCRSA and Proposition D compliant collectives in the City of Los Angeles.  Specifically, the bill specified that state licensing authorities would not require a local license, permit, or other authorization as a condition of issuing a state license for commercial cannabis license applicants located in the City of Los Angeles, provided the applicant meets specified criteria.  CCIA involvement and outcome:  While CCIA did not take a position on the bill, staff participated in stakeholder meetings to resolve conflicts between Proposition D compliant operators and non-compliant operations.  Ultimately, AB 2385 was held in the Senate Appropriations Committee under submission.

6. AB 2545 (Bonta) would authorize the governor to enter agreements concerning medical cannabis with federally recognized sovereign Indian tribes; authorize the agreements to include provisions regulating activities between licensees operating on and off the land of federally recognized sovereign Indian tribes; and authorize the governor to delegate to the chief of the Bureau of Medical Marijuana Regulation authority to negotiate the agreements.  CCIA involvement and outcome: CCIA negotiated amendments to clarify that tribal governments seeking to obtain medical cannabis licenses must meet the same state and local licensure requirements in which the tribal land is located.  AB 2545 was ultimately held in the Assembly Appropriations Committee under submission.

7. AB 2740 (Low) would have create a per se standard for driving under the influence of cannabis by making it a crime for a person who has 5 ng/ml or more of delta 9-tetrahydrocannabinol (THC) in his or her blood to drive a vehicle. CCIA involvement and outcome:  While CCIA did not take a position on the bill, the author's office conducted extensive research on the issue and leaned on CCIA for counsel for the duration it was alive. Based on those conversations, CCIA was able to convince staff that the science behind the issue was not there yet. AB 2740 was ultimately held in the Assembly Appropriations Committee under submission.

8. SB 1462 (Huff) would have authorized an officer to use a preliminary oral fluid screening test that indicates the presence or concentration of a drug or controlled substance as a further investigatory tool to establish reasonable cause to believe the person was driving under the influence of drugs. While CCIA did not take a position on this bill, the author's office regularly used CCIA for technical information and advice on the bill.  CCIA involvement and outcome:  CCIA opposed this bill, which was ultimately held in the Senate Appropriations Committee under submission.

9. AB 2516 (Wood) would create a Type 1C, or “specialty cottage” license, to be issued by the California Department of Food and Agriculture (CDFA), for cultivation of medical cannabis of 2,500 square feet or less of total canopy size for mixed-light cultivation, up to 25 plants for outdoor cultivation, or 500 square feet or less of total canopy size for indoor cultivation, on one premise, as specified.  Status: Sponsored by the California Growers Association, AB 2516 was signed by the Governor in September 2015.

10. AB 2614 (Bonta) would prohibit the denial of a state license to an applicant if the denial is based solely on a conviction outside of the state of California where the sentencing did not include a period of incarceration, but only if a local government with knowledge of that prior conviction issues a permit, license, or other authorization permitting the applicant to engage in commercial cannabis activity.  Status:  Referred to the Assembly Business & Professions Committee, but never taken up by the author.

11. AB 2672 (Bonilla) would have renamed the Medical Marijuana Regulation and Safety Act to the Medical Cannabis Regulation and Safety Act; renamed the Bureau of Medical Marijuana Regulation to the Bureau of Medical Cannabis Regulation; renamed the Medical Marijuana Regulation and Safety Act Fund to the Medical Cannabis Regulation and Safety Act Fund; renamed the Medical Marijuana Fines and Penalties Account to the Medical Cannabis Fines and Penalties Account; and, made other conforming changes throughout the Business and Professions, Fish and Game, Government, Health and Safety, Revenue and Taxation, and Water Codes.  Status:  Referred to the Senate Business, Professions & Economic Development Committee.  However, the hearing was canceled at the request of the author following the enactment of SB 837, a budget trailer bill, which accomplished the similar objectives.

12. SB 1116 (McGuire) would have eliminated the specification that the imposition of a sale and use tax on medical marijuana only applies to licensed operators. Status:  Referred to the Senate Governance and Finance Committee, but never taken up by the author.