Politics
California Senators Approve Bills To Delay Marijuana Tax Hike And Revise State’s Hemp Laws
A California Senate committee has approved an Assembly-passed bill to put a pause on a recently enacted tax hike on marijuana products. Senators also advanced proposals to revise regulations on hemp and to allow medical cannabis businesses to ship products directly to patients.
About a month after the cannabis tax legislation from Assemblymember Matt Haney (D) cleared an earlier panel in the Senate, the Appropriations Committee on Friday passed it in a 7-0 vote, with amendments.
If enacted into law, the bill would pause the tax increase for five years.
An amendment adopted at the measure’s last Senate panel stop would make it so the effective date would be in October, rather than immediately. The tax hike itself officially took effect last month.
State officials announced in June that the cannabis excise tax rate would increase from 15 percent to 19 percent on July 1, and advocates held out hope that pending budget legislation would be amended to mirror Haney’s standalone bill. That didn’t come to fruition.
The passage of an earlier budget bill that Haney’s measure responds to came despite Gov. Gavin Newsom’s (D) support for including a tax freeze in the trailer bill. Assembly Speaker Robert Rivas (D) also backed the delay, but Senate President Pro Tempore Mike McGuire (D) reportedly blocked it from the budget legislation.
Under Haney’s bill, which advanced through the Assembly in June, the delayed implementation wouldn’t take effect until October. Advocates wanted to see it included in the separate, recently enacted budget legislation because it would’ve taken effect upon enactment.
Before arriving at the Senate Appropriations Committee, the legislation’s pause of the cannabis tax increase would have been in effect until June 30, 2030. After that, on a biennial basis, regulators would adjust the tax rate “by a percentage that will generate an amount of revenue that would have been collected pursuant to the cultivation tax imposed prior to its discontinuation, as specified, not to exceed 19 percent,” according to a summary.
The panel on Friday, however, moved to “shorten the period that the 15 percent tax rate would be in effect, and add a reporting requirement,” according to the chair. It’s not clear what the new timeline would be, however, as revised bill text is not yet available.
Haney’s proposal would make it so the California Department of Tax and Fee Administration (CDTFA), working with the Department of Finance, would be required to “adjust the cannabis excise tax rate upon purchasers of cannabis or cannabis products” based on the “additional percentage of the gross receipts of any retail sale by a cannabis retailer that the department estimates will generate an amount of revenue equivalent to the amount that would have been collected in the previous fiscal year,” the text says.
The department would need to “estimate the amount of revenue that would have been collected in the previous fiscal year pursuant to the weight-based cultivation tax” and “estimate this amount by projecting the revenue from weight-based cultivation taxes that would have been collected in the previous calendar year based on information available to the department.”
“The specific goal of the cannabis excise tax rate reduction is to provide immediate tax relief to the cannabis industry,” the measure states. “The efficacy of this goal may be measured by the Legislature by the amount of gain or loss in cannabis excise tax revenues resulting from the cannabis excise tax rate reduction allowed by this act.”
It also mandates that CDTFA, on or before December 1, 2026 and each subsequent year the California “submit a report to the Legislature…detailing the amount of gain or loss in cannabis excise tax revenues resulting from the cannabis excise tax rate reduction allowed by this act.”
The Senate Appropriations Committee on Friday also unanimously passed legislation to integrate hemp-derived cannabinoid products into the state’s medical and adult-use marijuana program, while banning synthetically derived cannabinoids. The panel adopted amendments to the bill “to delete excise tax provisions, to revise and change definitions, to create a pathway for topical hemp salves and clarify and change requirements and prohibitions regarding industrial hemp and hemp-derived cannabinoids,” according to the committee chair.
The panel additionally approved a measure to amend the state’s cannabis law to make it so cannabis microbusinesses with a license to ship products directly to patients, with amendments.
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Meanwhile, California officials are inviting research proposals for a second round of grants under a program meant to better educate the public on the state’s marijuana law and help policymakers make informed decisions on the issue.
In June, the Governor’s Office of Business and Economic Development (GO-Biz) announced the recipients of over $52 million in community reinvestment grants to nonprofits and local health departments, also funded by marijuana tax revenue.
That marked the seventh round of cannabis-funded California Community Reinvestment Grants (CalCRG) under the state program.
Legalization in California has created a number of new grant programs aimed at addressing the consequences of marijuana prohibition and attempting to nurture a strong, well-regulated legal industry.
California’s Supreme Court separately delivered a victory for the state’s marijuana program in June, rescinding a lower court ruling in a case that suggested federal prohibition could be used locally to undermine the cannabis market.
The state Supreme Court ruling also came just weeks after California officials unveiled a report on the current status and future of the state’s marijuana market—with independent analysts hired by regulators concluding that the federal prohibition on cannabis that prevents interstate commerce is meaningfully bolstering the illicit market.
The governor did sign a bill in 2022 that would have empowered him to enter into interstate cannabis commerce agreements with other legal states, but that power was incumbent upon federal guidance or an assessment from the state attorney general that sanctioned such activity.
Meanwhile, a California Senate committee recently declined to advance a bipartisan bill that would have created a psilocybin pilot program for military veterans and former first responders.
