Virginia lawmakers approved a bill to legalize marijuana with just hours left before the deadline to get legislation to the governor this session.
The Senate and House of Delegates approved differing reform proposals earlier this month, and negotiators have since been working to reconcile the bills in conference committee—a contentious process that at times appeared as if it would end without a deal.
But on Saturday, lawmakers agreed to the bicameral compromise plan.
The Senate voted 20-19 to approve the conference committee report on its bill as well as the identical version for the House legislation. The House voted to approve the conference report on its bill, 48-43, with two abstentions. When considering the Senate version, the House voted 47-44, with one abstention.
“It’s been a lot of work to get here,” Sen. Adam Ebbin (D), the lead sponsor of the Senate version of the legislation, said prior to the Senate vote. “But I would say that we’re on the path to an equitable law allowing for responsible adults to use cannabis.”
House Majority Leader Charniele Herring (D), the chief sponsor of the her chamber’s legalization bill, said that “racial justice is about more than addressing penalties for simple possession.”
“It is about reformative justice that provides equitable and social economic opportunity for individuals and communities which have been harmed by disproportionate policing and prosecution of cannabis,” she said. “Legalizing cannabis does not end systematic racism but it does remove one of the tools used in advancing systematic racism.”
The compromise legislation now goes to the desk of Gov. Ralph Northam (D), who supports ending cannabis prohibition.
Among the most pressing issues for lawmakers to negotiate in recent weeks was the timeline for crafting regulations for the cannabis market. The Senate has pushed for a reenactment clause to be included which would extend the process into next session, whereas the House side wanted to complete legislative work during the current session, arguing that enough research has already been done to effectively decide the issue. But Senate negotiators won out, meaning that the legislature will revisit cannabis regulations and post-legalization penalty structures next session.
Another major area of contention dealt with how the state would approach cannabis possession in the time between the bill’s signing and implementation of legal sales going into effect. Under both versions, the adult-use market wouldn’t launch until January 1, 2024 to give the state time to establish a regulatory agency to oversee the program. While the Senate had wanted to make the legalization of simple possession and home cultivation take effect starting on July 1 of this year, negotiators ultimately agreed to delay it to coincide with commercialization in 2024.
In the meantime, under the deal, a new Virginia Cannabis Control Authority will begin work this July to lay the ground for a legal marijuana industry.
Here are some of the other major provisions that were resolved in conference:
Referendum—The Senate version of the bill would have asked voters to weigh in on legalization through a nonbinding referendum on this November’s ballot. But the issue became increasingly contentious in recent days and conference negotiators decided to drop the idea.
Local control—Whereas the Senate measure called for individual cities to be able to ban marijuana businesses from operating in their area, the House version did not include an opt-out provision. Conferees decided to allow municipalities to elect to ban cannabis commercialization, but they must do so by December 31, 2022.
Penalties for youth—Under the House bill, minors caught possessing cannabis would be subject to a $25 fine with a referral to substance misuse treatment. The Senate, meanwhile, proposed a $250 fine for youth possession for the first offense and then criminal charges and even jail time for subsequent convictions. The agreed-upon final legislation would continue the current approach of treating youth possession as a delinquency, subject to a civil penalty of up to $25, but add a mandatory substance misuse treatment or education program or both. There would be no interaction with courts for such youths. For people between the ages of 18 and 20, the conference deal would continue the existing $25 fee that exists under the state’s decriminalization law and add that they may be ordered to enter a treatment or education program or both.
Social equity—Both versions of the legislation called for licensing priorities for social equity businesses, but there were differences in how each chamber defined what constitutes a social equity applicant. The final legislation defines an equity business as one that has at least 66 percent ownership by people who have been convicted of misdemeanor marijuana offenses (or have family members with such convictions) or people who live in a geographic area that is economically distressed or has a disproportionate rate of cannabis policing. People who graduated from a historically black college or university located in the state would also qualify. Also, beginning on July 1, the state would establish Cannabis Equity Reinvestment Fund and a Cannabis Equity Business Loan Fund.
Vertical integration—The House’s measure would ban vertical integration, a process that would allow a single company could control aspects of growing, processing and selling marijuana products. The Senate, meanwhile, wanted to allow vertical integration only if a cannabis business paid a $1 million fee into a state equity fund. Under the final legislation, vertical integration will be generally limited but will allow existing medical cannabis and hemp businesses to partially vertically integrate. Micro-businesses will also be able to vertically integrate.
In general under the legislation, adults 21 and older would be able to purchase and possess up to one ounce of cannabis and cultivate up to four plants for personal use. It also allows people to petition for suspended or modified sentences for marijuana convictions and establishes criteria for sealing past records.
The bill would set a cannabis excise tax of 21 percent and allow localities to add an additional 3 percent tax on top of the state’s existing 6 percent retail sales tax. Revenue would partly fund pre-K education programs for at-risk youth and would support the new equity funds as well as addiction prevention and treatment services and public health initiatives.
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The proposal would create a new cannabis-focused state agency to regulate the legal market as opposed to having it fall under the existing alcoholic beverage authority as was the case under the governor’s original plan.
Post-legalization penalties set to go into effect in 2024, which are subject to renewal by the legislature next session, would include a $25 fine for possessing between one ounce and one pound in public. For public consumption, there would be a civil penalty of no more than $25 for first offense. A second offense would come with a $25 civil penalty and an order to enter a substance misuse treatment or education program, or both. Third or subsequent offenses would constitute a Class 4 misdemeanor with no possibility of jail time. Meanwhile, bringing marijuana across state lines would be a Class 1 misdemeanor.
Now that the final bill is headed to Northam’s desk, the governor will have the opportunity to suggest amendments to lawmakers, who can then adopt the suggestions as is or change or reject them, at which point the bill would go back to the governor for final action.
Northam’s spokesperson indicated on Saturday that the governor intends to make some changes to the bill, saying that while its passage is a “major step,” he “looks forward to continuing to improve this legislation.”
Jenn Michelle Pedini, executive director of Virginia NORML, said the bill’s passage “is another historic step for cannabis justice” that will “replace the failed policy of cannabis prohibition with one that promotes Virginia’s economy as well as Virginians’ public health and safety.”
“This effort remains a work in progress and our efforts in Virginia are far from over,” Pedini, who also serves as NORML’s national development director, said. “NORML is dedicated to continuing our work with lawmakers and regulators to advance legislative reforms that are most closely aligned with the views of the majority of Virginians who desire a safe, legal cannabis market. In particular, we hope to expedite the timeline with which Virginia adults will no longer face either criminal or civil penalties for the personal possession and cultivation of cannabis.”
Matt Simon, senior legislative analyst for the Marijuana Policy Project, said it’s “exciting that Virginia is on track to end cannabis prohibition and replace it with sensible regulation.”
“Lawmakers in other states are already taking notice and seeking to learn from Virginia’s example,” he said.
Earlier on Saturday, the ACLU of Virginia and other groups had urged lawmakers to defeat the final proposal prior to the release of its actual text, saying that the provisions as described in media reports showed it to be a “symbolic marijuana legalization bill made behind closed doors that does not advance the cause of equal justice and racial justice.”
BREAKING: We, @thcjusticenow, @RISEforYouth, and @JusticeFwdVa urged Virginia lawmakers to vote no on a symbolic marijuana legalization bill made behind closed doors that does not advance the cause of equal justice and racial justice in Virginia. https://t.co/kS47X9qK7g
— ACLU of Virginia (@ACLUVA) February 27, 2021
The Virginia NAACP argued that the bill, based on press accounts, “includes Systemically Racist probable cause provisions” and pledged that its members “will not stand by while Jim Crow’s sister Jane tries to creep her way into Virginia law.”
We will not stand by while Jim Crow’s sister Jane tries to creep her way into Virginia law.”
— Virginia NAACP (@NAACPVirginia) February 27, 2021
But after the bill’s text came out, NAACP issued an updated statement saying that while the final legislation “is not perfect, it’s a step in the right direction.”
The Virginia NAACP will not rest until full equity and restorative justice is achieved.”
— Virginia NAACP (@NAACPVirginia) February 28, 2021
The ACLU, for its part, maintained its opposition, saying that lawmakers “failed to legalize marijuana for racial justice” and “paid lip service to the communities that have suffered decades of harm caused by the racist War on Drugs with legislation that falls short of equitable reform and delays justice.”
The new changes, which would not legalize simple possession until 2024, do nothing to break the chains of marijuana prohibition.
It would delay & deny justice to all those whose lives have been upended & who are still being harassed by police on the streets every day.
— ACLU of Virginia (@ACLUVA) February 28, 2021
All of this legislative action comes a little over a month after Northam and top lawmakers initially unveiled their legalization proposal.
The cannabis legislation’s structure was informed by separate studies conducted by a legislative research body and a working group made up of state cabinet officials.
Support for legalizing marijuana is strong in Virginia, according to a poll released this month. It found that a majority of adults in the Commonwealth (68 percent) favor adult-use legalization, and that includes most Republicans (51 percent).
The legislature has also taken up a number of other more modest cannabis reform proposals this session.
Bills to allow medical patients to access whole-flower cannabis in addition to oils, facilitate automatic expungements for certain marijuana convictions, protect employment rights of medical cannabis patients and allow those in hospice and nursing facilities to access medical marijuana have also advanced this session.
Virginia lawmakers passed separate legislation last year that decriminalized possession of up to an ounce of marijuana, replacing existing penalties with a $25 civil fine and no threat of jail time. The law took effect last July.
Read a summary of the provisions of the Virginia marijuana legalization conference report below:
Photo courtesy of Philip Steffan.
Top IRS Official Says Marijuana Banking Reform Would Help Feds ‘Get Paid’
The Internal Revenue Service (IRS) would like to get paid—and it’d help if the marijuana industry had access to banks like companies in other legal markets, an official with the federal department said. She also talked about unique issues related to federal tax deductions for cannabis businesses.
At an event hosted by UCLA’s Annual Tax Controversy Institute on Thursday, IRS’s Cassidy Collins talked about the “special type of collection challenge” that the agency faces when it comes to working with cannabis businesses while the product remains federally illegal.
While IRS isn’t taking a stand on federal marijuana policy, Collins said that the status quo leaves many cannabis businesses operating on a cash-only basis, creating complications for the agency, in part by making it harder for banks to “pay us.”
“The reason why [the marijuana industry is] cash intensive is twofold,” she said. “Number one, a lot of customers don’t want a paper trail showing that they’re buying marijuana, and number two, the hesitancy of banks to allow marijuana businesses to even bank with them.”
Of course, the reason why many financial institutions remain hesitant to take on cannabis companies as clients is because the plant is a strictly controlled substance under federal law.
“There’s been a number of legislative bills that have been introduced—and I am definitely not expressing any opinion personally or on behalf of the IRS about any pending or proposed legislation,” Collins, who is a senior counsel in the IRS Office of Chief Counsel, said. “But it is interesting to note that, if the law changed so that the marijuana businesses could have banks, that would make the IRS’s job to collect [taxes] a lot easier. As part of collection, we want the money. That’s our end goal there.”
A major part of what makes cannabis businesses unique is that they don’t qualify for traditional tax credits under an IRS code known as 280E. That policy “prohibits them from claiming deductions for business expenses because they’re technically being involved in drug trafficking,” Collins explained at the event, from which small excerpts of her comments were reported by Bloomberg.
There are some options available to lessen the burden on marijuana firms, however. At the end of the day, “IRS will work with marijuana companies because, again, we want to get paid,” Collins said.
One of the ways the agency works with marijuana business operators is to have them visit designated IRS “tax assistance centers” that accept cash payments in excess of $50,000. But the official warned businesses to “be prepared to be there for a little while” as the center checks—and double checks—the amount of cash being submitted.
“Revenue officers will assist the marijuana companies in paying us,” she said.
IRS officials could also help cannabis firms by having officials accompany them “to the bank in order to try to help the taxpayer secure a cashier’s payment to pay the IRS, as well as using money orders,” she said, adding that “our revenue officers are are wanting to work with the marijuana companies to help assist them to pay us.”
“When the revenue officers are there in person with the taxpayer, that could potentially help increase the likelihood that the bank will cooperate and help the taxpayer transition into a cashier’s check,” she continued. “And that has been a trend since this first became legal [at the state level], that more and more banks are allowing cannabis companies to bank with them.”
In a report published earlier this year, congressional researchers examined tax policies and restrictions for the marijuana industry—and how those could change if any number of federal reform bills are enacted.
IRS, for its part, said last month that it expects the cannabis market to continue to grow, and it offered some tips to businesses on staying compliant with taxes while the plant remains federally prohibited.
As it stands, banks and credit unions are operating under 2014 guidance from the Financial Crimes Enforcement Network (FinCEN) that lays out reporting requirements for those that choose to service the marijuana industry.
Leaders in both chambers of Congress are working on legalization bills to end federal marijuana prohibition. But stakeholders are hopeful that, in the interim, legislators will enact modest marijuana banking reform. Legislation to protect financial institutions from being penalized for working with cannabis businesses passed the House for the fifth time last month.
Rodney Hood, a board member of the National Credit Union Administration, wrote in a Marijuana Moment op-ed this month that legalization is an inevitability—and it makes the most sense for government agencies to get ahead of the policy change to resolve banking complications.
IRS separately hosted a forum in August dedicated to tax policy for marijuana businesses and cryptocurrency.
Earlier this year, IRS Commissioner Charles Rettig told Congress that the agency would “prefer” for state-legal marijuana businesses to be able to pay taxes electronically, as the current largely cash-based system under federal cannabis prohibition is onerous and presents risks to workers.
Former Treasury Secretary Steven Mnuchin said in 2019 that he’d like to see Congress approve legislation resolving the cannabis banking issue and he pointed to the fact that IRS has had to build “cash rooms” to deposit taxes from those businesses as an example of the problem.
IRS released updated guidance on tax policy for the marijuana industry last year, including instructions on how cannabis businesses that don’t have access to bank accounts can pay their tax bills using large amounts of cash.
The update appears to be responsive to a Treasury Department internal watchdog report that was released earlier in the year. The department’s inspector general for tax administration had criticized IRS for failing to adequately advise taxpayers in the marijuana industry about compliance with federal tax laws. And it directed the agency to “develop and publicize guidance specific to the marijuana industry.”
Luxembourg Set To Become First European Country To Legalize Marijuana Following Government Recommendation
Luxembourg is poised to become the first European country to legalize marijuana, with key government agencies putting forward a plan to allow the possession and cultivation of cannabis for personal use.
The ministers of justice and homeland security on Friday unveiled the proposal, which will still require a vote in the Parliament but is expected to pass. It’s part of a broader package of reform measures the agencies are recommending.
Under the marijuana measure, adults 18 and older could grow up to four plants. However, under the non-commercial model that is being proposed, possessing more than three grams in public would still be a civil offense, carrying a fine of €25-500 ($29-581). Currently, the maximum fine for possession is €2,500 ($2,908).
In terms of access, adults would be able to buy and trade cannabis seeds for their home garden.
Justice Minister Sam Tamson said the government felt it “had to act” and characterized the home cultivation policy change as a first step, The Guardian reported.
👉🏻élaboration du projet de loi usage privé du #cannabis : jusqu’à 4 plantes à domicile & décorrectionnalisation <3g
👉🏻renforcement de la prévention & de l’accompagnement
👉🏻⬆️des moyens de la police
👉🏻élaboration d’un projet de production/vente #Luxembourg pic.twitter.com/8yre0Udt8J
— Sam Tanson (@SamTanson) October 22, 2021
“The idea is that a consumer is not in an illegal situation if he consumes cannabis and that we don’t support the whole illegal chain from production to transportation to selling where there is a lot of misery attached,” he said. “We want to do everything we can to get more and more away from the illegal black market.”
While limited in scope, the reform would make Luxembourg the first country in Europe to legalize the production and possession of marijuana for recreational use. Cannabis has been widely decriminalized in certain countries in the continent, but it has remained criminalized by statute.
Government sources in Luxembourg told The Guardian that plans are in the works to develop a program where the state regulates the production and distribution of marijuana. Tamson said they are working to resolve “international constraints” before taking that step, however, referring to United Nations treaty obligations that multiple U.S. states and other countries like Canada and Uruguay have openly flouted.
The measures include:
🟢 Regulation of cannabis use and cultivation: adults will be able to legally cultivate up to four cannabis plants for their own use, provided the cultivation is happening at their place of residence.
— European Greens (@europeangreens) October 22, 2021
For now, the country is focusing on legalization within a home setting. Parliament is expected to vote on the proposal in early 2022, and the ruling parties are friendly to the reform.
This has been a long time coming, as a coalition of major parties of Luxembourg agreed in 2018 to enact legislation allowing “the exemption from punishment or even legalization” of cannabis.
Meanwhile in the U.S., congressional lawmakers are working to advance legalization legislation. A key House committee recently approved a bill to end marijuana prohibition, and Senate leadership is finalizing a separate reform proposal.
In Mexico, a top Senator said this week that lawmakers could advance legislation to regulate marijuana in the coming weeks. The Supreme Court has already ruled that adults cannot be criminalized over possession or cultivation, but there’s currently no program in place to provide access.
Photo courtesy of Mike Latimer.
New Bipartisan Marijuana Research Bill In Congress Would Let Scientists Study Dispensary Products
A bipartisan group of federal lawmakers introduced a bill on Thursday to remove barriers to conducting research on marijuana, including by allowing scientists to access cannabis from state-legal dispensaries.
The Medical Marijuana Research Act, filed by the unlikely duo of pro-legalization Rep. Earl Blumenauer (D-OR) and prohibitionist Rep. Andy Harris (R-MD), would streamline the process for researchers to apply and get approved to study cannabis and set clear deadlines on federal agencies to act on their applications.
“Congress is hopelessly behind the American people on cannabis, and the quality of our research shows why that is an urgent problem,” Blumenauer told Marijuana Moment. “Despite the fact that 99 percent of Americans live in a state that has legalized some form of cannabis, federal law is still hamstringing researchers’ ability to study the full range of health benefits offered by cannabis, and to learn more about the products readily available to consumers.”
“It’s outrageous that we are outsourcing leadership in that research to Israel, the United Kingdom, Canada, and others. It’s time to change the system,” he said.
Late last year, the House approved an identical version of the cannabis science legislation. Days later, the Senate passed a similar bill but nothing ended up getting to the president’s desk by the end of the last Congress. Earlier this year, a bipartisan group of senators refiled their marijuana research measure for the current 117th Congress.
Meanwhile, lawmakers are also advancing a separate strategy to open up dispensary cannabis to researchers. Large-scale infrastructure legislation that has passed both chambers in differing forms and which is pending final action contains provisions aimed at allowing researchers to study the actual marijuana that consumers are purchasing from state-legal businesses instead of having to use only government-grown cannabis.
The new bill filed this week by Blumenauer and Harris, along with six other original cosponsors, would also make it easier for scientists to modify their research protocols without having to seek federal approval.
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It would additionally mandate that the Drug Enforcement Administration (DEA) license more growers and make it so there would be no limit on the number of additional entities that can be registered to cultivate marijuana for research purposes. It would also require the U.S. Department of Health and Human Services (HHS) to submit a report to Congress within five years after enactment to overview the results of federal cannabis studies and recommend whether they warrant marijuana’s rescheduling under federal law.
“The cannabis laws in this country are broken, including our laws that govern cannabis research,” Blumenauer said in remarks in the Congressional Record. “Because cannabis is a Schedule I substance, researchers must jump through hoops and comply with onerous requirements just to do basic research on the medical potential of the plant.”
The new legislation will “both streamline the often-duplicative licensure process for researchers seeking to conduct cannabis research and facilitate access to an increased supply of higher quality medical grade cannabis for research purposes,” he said, adding that expanded studies will help make sure “Americans have adequate access to potentially transformative medicines and treatments.”
For half a century, researchers have only been able to study marijuana grown at a single federally approved facility at the University of Mississippi, but they have complained that it is difficult to obtain the product and that it is of low quality. Indeed, one study showed that the government cannabis is more similar to hemp than to the marijuana that consumers actually use in the real world.
There’s been bipartisan agreement that DEA has inhibited cannabis research by being slow to follow through on approving additional marijuana manufacturers beyond the Mississippi operation, despite earlier pledges to do so.
In May, the agency finally said it was ready to begin licensing new cannabis cultivators. Last week, DEA proposed a large increase in the amount of marijuana—and psychedelics such as psilocybin, LSD, MDMA and mescaline—that it wants produced in the U.S. for research purposes next year.
Under the new House bill, the agency would be forced to start approving additional cultivation applications for study purposes within one year of the legislation’s enactment.
HHS and the attorney general would be required under the bill to create a process for marijuana manufacturers and distributors to supply researchers with cannabis from dispensaries. They would have one year after enactment to develop that procedure, and would have to start meeting to work on it within 60 days of the bill’s passage.
In general, the legislation would also establish a simplified registration process for researchers interested in studying cannabis, in part by reducing approval wait times, minimizing costly security requirements and eliminating additional layers of protocol review.
Read the full text of the new marijuana research bill below: