Proposals to legalize marijuana in Virginia cleared key committee votes in both chambers of the state legislature over the weekend and Monday morning as lawmakers raced to qualify the bills for full floor votes ahead of an upcoming mid-session deadline on Friday.
Gov. Ralph Northam (D) and top lawmakers unveiled the legalization plan in mid-January, on the first day of a short 2021 legislative session scheduled to end later this month. To survive into the next stage of the session, versions of the marijuana proposal must pass the Senate and House of Delegates by Friday, the state’s so-called crossover deadline.
“This is a breakneck speed for us,” Del. Vivian Watts (D), vice chair of the House Courts of Justice Committee, said at a virtual meeting on Sunday, where the panel voted to approve the House version of the legislation, HB 2312, and refer it to the House Appropriations Committee. If it succeeds there, the measure would next advance to the House floor.
Our bill on cannabis legalization is continuing to make its way through the process. It passed House Courts committee & is moving to Appropriations next week. Proud to serve as Chief patron on this ground breaking legislation that is huge step towards justice in the Commonwealth. pic.twitter.com/mSiHG3UIgN
— Charniele Herring (@C_Herring) January 31, 2021
On the Senate side, the Judiciary Committee approved that chamber’s version of the bill, SB 1406, at a hearing Monday morning after it cleared that panel’s Expungement subcommittee over the weekend. That bill now goes to the Senate Finance and Appropriations Committee, next scheduled to meet on Tuesday, before potentially proceeding to the full Senate.
All told, the two marijuana legalization bills sailed through a total of five committees and subcommittees over the past three days alone.
Despite amendments made in both chambers, lawmakers at hearings over the weekend said they have lingering questions over numerous specific details, including business regulation, effective dates, social equity and penalties for violating proposed limits on possession and sales. Legislative leaders repeatedly stressed that there would be further opportunities to make changes as the proposal proceeds.
“This has been a very robust process involving a number of members on a number of committees, and it continues,” Watts said Sunday afternoon before calling for a vote on the bill. “With that understanding, this is a work in progress.”
Reform advocates said lawmakers’ immediate goal is to get the bills to the floor so they can clear the crossover hurdle. If the legislation don’t get floor votes by Friday, legalization is dead for the session.
“At this point it’s unnecessary to get mired in minutiae,” Jenn Michelle Pedini, executive director of Virginia NORML, told Marijuana Moment. “Currently, efforts are largely focused on advancing the bills to their required floor votes before the crossover deadline, and in a posture that is generally acceptable by the majority of each chamber.”
That dynamic was on display Saturday at a hearing of the House General Laws Committee, as members began digging into a new rule in the chamber’s bill that would prevent licensed marijuana companies from owning multiple categories of business licenses, a practice known as vertical integration. Some members of the committee said they worried that prohibiting vertical integration altogether could hurt small cannabis businesses that might, for example, want to both grow cannabis plants and process them into products such as edibles or tinctures.
One public commenter, representing the Cannabis Business Association of Virginia, suggested adding a class of microbusiness licenses that would allow small companies to vertically integrate. The comment drew follow-up questions from lawmakers, but the committee’s chair, Del. David Bulova (D), told colleagues he was “hesitant about making any changes on the fly.”
Ultimately the panel approved the bill without further addressing vertical integration, with Bulova assuring the committee the matter would be taken up again. “This is not the final decision,” he said. “I can’t imagine this would be the final stop with respect to how we land on vertical integration.”
Other proposed changes are more certain to make it into the final legislation. For one, the Virginia’s alcohol regulators won’t be in charge of overseeing the legal marijuana market, as originally proposed in the governor’s bill. Instead, the House General Laws Committee voted to mirror a change made last week by the Senate Rehabilitation and Social Services Committee and establish a new, separate regulatory body for marijuana called the Virginia Cannabis Authority.
To accommodate the creation of the new agency, committees in both chambers also agreed to push back the start of legal sales one year, to January 1, 2024.
It’s still not settled when simple possession of marijuana would become legal, although Senate lawmakers moved in subcommittee to make it so that would occur on July 1 of this year.
“Otherwise all we’re doing is setting up a situation where people are paying civil fines for something that is going to be completely legal eventually,” said Sen. Jennifer McClellen (D), who introduced the successful amendment in the Senate Judiciary’s Expungement Subcommittee. Home cultivation would not be legalized until cannabis stores come online in 2024 under the chamber’s bill, however.
Last year the state passed legislation decriminalizing 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.
Some House lawmakers who met over the weekend, however, worried legalizing possession too soon before opening licensed stores could end up fueling the illicit market. It’s an issue likely to see further discussion as the bill continues its path through the legislature.
“There are still a multitude of finer points to debate, and that’s to be expected a little further along in the legislative process,” said Pedini, who also serves as national development director for NORML. “Should both bills succeed, they will be sent to a conference committee for reconciliation.”
Other changes made by House lawmakers over the weekend would affect wide-ranging issues around business licensing, social equity, criminal justice and home cultivation of cannabis.
Under changes adopted by the General Laws Committee, the number of business licenses available would be capped at a maximum of 400 retail, 25 wholesale, 60 manufacturing and 450 cultivation. Licensees could only hold licenses of a single type—vertical integration would be prohibited—and no entity could have more than five licenses.
The state’s four existing medical marijuana businesses would be able to apply for licenses under the separate adult-use system, but they wouldn’t have an advantage in getting licenses or be able to start sales early. Some lawmakers questioned the rationale for that approach.
Del. Paul Krizek (D), who chairs the House General Laws ABC and Gaming Subcommittee and helped coordinate the panel’s marijuana legislation, explained that the provision was aimed at promoting small business and local control over comparatively large marijuana companies operating in multiple states. The same justification was behind limiting vertical integration.
“Our goal was to craft the best regulatory framework we can to legalize adult use of marijuana in a safe and equitable manner,” Krizek said.
Retail stores under the House bill would be permitted to sell only marijuana products and paraphernalia—not meals, snacks or other goods, as once envisioned in the bill. Marijuana products would need to be tested for both contaminants and THC potency.
Both retailers as well as licensed cultivators could sell seeds and immature plants to adults 21 and over, who would be allowed to grow up to two mature cannabis plants and two immature plants at home for personal use. But unlike the Senate’s version of the bill, which would allow adults to grow the plants indoors or outdoors, changes adopted by the House General Laws Committee on Saturday would allow only indoor grows.
The committee also established a social licensing category for businesses that are at least 66 percent controlled by alumni of historically Black colleges and universities (HBCUs) in the Commonwealth, an effort to ensure that those from communities most harmed by the war on drugs share in the new industry’s profits.
The House committee also adopted changes to licensing provisions aimed at protecting union organizing efforts in the cannabis industry, allowing state regulators to suspend the business license of a marijuana company that “fails to stay neutral on union organizing efforts or does not pay prevailing wage per the U.S. Department of Labor or designates more than 10 percent of employees as independent contractors,” David May, an attorney at the state Division of Legislative Services, said at Saturday afternoon’s hearing.
House lawmakers made further changes at the Courts of Justice hearing on Sunday, clarifying a rule that would allow adults over 21 to gift each other up to an ounce of marijuana and increasing penalties for personal possession of between one and five pounds of cannabis.
Regarding the legislation’s plan to automatically expunge past convictions for low-level marijuana possession, Colin Drabert, deputy director of the Virginia State Crime Commission, said there might be technical issues with how those cases are coded. The obstacle could force individuals to petition the court themselves to erase past criminal convictions.
Lawmakers didn’t immediately address that concern, however. Watts, the vice chair, suggested “a technical amendment that could possibly be handled at the floor or appropriations committee.”
While lawmakers took public testimony during the hearings, they did not propose any amendments in response to comments.
Billie Brown, founding member of the Cannabis Equity Coalition of Virginia, was one of a handful of public commenters who urged lawmakers to ensure the bill recognizes the harm the war on drugs has done Black and brown people and invests in rebuilding those communities.
We propose strongly that Virginia allocates 70% (not 30% as currently written in the bill) of tax revenues to the Cannabis Equity Reinvestment Fund.
— ACLU of Virginia (@ACLUVA) January 22, 2021
In testimony before both House committees, Brown urged lawmakers to increase funding from marijuana revenues to the Cannabis Equity Reinvestment Fund, which would direct money to scholarships, job training and workforce development, low- and zero-interest loans for social equity marijuana business applicants and other programs for historically marginalized populations.
Currently 30 percent of revenue from the legal system would go to the equity fund, while another 40 percent would go to fund pre-kindergarten education. Brown called for the full 70 percent to be directed toward equity. The ACLU of Virginia has called for a similar change.
“While CECA is in favor of funding pre-K,” Brown told lawmakers, “this has always been a direct obligation of Virginia taxpayers from the general fund.”
Other issues lawmakers considered but did not immediately act on included limits on advertising—which many said they hope to make as strict as possible without violating free speech protections, in order to avoid appealing to children—as well as certain homegrow and consumption rules that seem to privilege homeowners over rental tenants and those living in public housing. Changes to those and other provisions of the bills could still be coming.
While Virginia’s legalization proposal has a long way to go with just weeks left in the legislative session, lawmakers said so far they’re impressed by the effort that the bill’s lead patrons, as well as other lawmakers and advocates, have put into the policy change.
We led the fight to decriminalize cannabis in the Commonwealth of Virginia. Now it's time for legal, regulated use.
The House Courts of Justice Committee is meeting TODAY at 1pm to discuss adult marijuana use. Submit a request to provide testimony here:https://t.co/zLyl7CKymt
— Mark Herring (@MarkHerringVA) January 31, 2021
The state’s legalization proposal stemmed from an official state study conducted by a legislative commission on legalization as well as a working group consisting of four state cabinet secretaries and other officials. Those studies were part of the marijuana decriminalization bill passed last year.
“This is the product of an incredible amount of hard work,” Del. Mark Levine (D) said at Sunday’s hearing, “and it shows in the 563-page bill.”
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.
Marijuana Moment is already tracking more than 1,200 cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.
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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: