Politics
New California Emergency Marijuana Rules Aim To Help State’s Businesses Benefit From Trump’s Federal Rescheduling Move
California officials are making additional reforms to help the state’s marijuana businesses take advantage of federal tax and other benefits under Trump administration’s rescheduling move.
Specifically, the Department of Cannabis Control (DCC) on Monday proposed emergency regulations to let businesses with current licenses covering both medical and recreational marijuana secure a secondary license through a streamlined process to separate out the segments of their operations in light of the fact that the federal scheduling change currently only covers medical cannabis.
Under DCC’s proposal, marijuana businesses would be able to “create a second, related entity and hold two distinct licenses (one adult-use and one medicinal) at the same premises” under the expedited regulations.
“DCC is working on making this pathway available due to the timing and uncertainty of the federal process,” the department said. “Additional operational components—such as track and trace requirements, local authorization, tax collection, and other implementation matters—are still being evaluated and will be addressed through future guidance or rulemaking as needed.”
The proposed rules come weeks after the Justice Department finalized a process moving medical cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA). One of the more consequential policy impacts of that reform is that state-licensed medical cannabis businesses will be able to take federal tax deductions under an Internal Revenue Service (IRS) code known as 280E. Broader rescheduling of marijuana will be considered at a hearing starting next month.
“Things are moving quickly, and we currently have limited information about how federal implementation will unfold,” DCC Director Clint Kellum said in a notice about the move, which marks an expansion of initial reforms the department announced just days after the rescheduling announcement last month.
“We continue to request meetings with the federal offices leading this work, but so far, we have not received guidance beyond what is publicly available,” he said. “We recognize this creates uncertainty for our licensees, given the size and complex structure of our medicinal and adult-use markets. ”
“Our immediate focus is creating a pathway for operators interested in exploring federal registration. This includes proposing emergency regulations to create a pathway for licensees authorized to engage in retail activities to create a second, related entity and hold two distinct licenses (one adult-use and one medicinal) at the same premises.”
DCC added that, in order to “maintain the integrity of the existing licensing system, certain conditions will be placed on any new licenses issued under this process to ensure that the resulting medical cannabis businesses continue to comply with all existing requirements.”
Public comments on the emergency rules must be submitted to the Office of Administrative Law (OAL), with DCC copied, between May 27-31.
In its prior rescheduling-related update, DCC announced that cultivation licensees “no longer need to wait until renewal to request a change to their adult-use (A) or medicinal-use (M) designation.”
Additionally, DCC no longer requires a new local authorization for requests that change a license to medical designation only or add a medical designation to an existing adult-use designation.
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Meanwhile, the U.S. Department of the Treasury and Internal Revenue Service (IRS) said they plan to issue new tax guidance for the marijuana industry following the rescheduling announcement.
Back in California, state lawmakers are advancing legislation this session to allow marijuana retailers to offer drive-thru windows to serve customers.
Gov. Gavin Newsom (D), meanwhile, recently took credit for helping to lead the push for the state to legalize marijuana and discussed his own limited experience with using cannabis.
In October, however, Newsom vetoed a bill that would have allowed certain marijuana microbusinesses to ship medical cannabis products directly to patients via common carriers like FedEx and UPS, stating that the proposal “would be burdensome and overly complex to administer.”
Newsom did sign a bill earlier that month aimed at streamlining research on marijuana and psychedelics.
In September, the governor also signed a measure into law to put a pause on a recently enacted tax hike on marijuana products.
California officials recently awarded nearly $30 million in grants for marijuana-focused academic research projects.
Photo courtesy of Chris Wallis // Side Pocket Images.
