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Medical Cannabis in Georgia: Federal Policy Effects on State Industries

By Reggie Snyder
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Under the U.S. Drug Enforcement Administration’s (DEA) Controlled Substance Act (CSA), drugs are classified into five distinct schedules depending upon their acceptable medical use and their overall potential for abuse or dependency. The DEA currently lists cannabis as a Schedule I drug, which the CSA defines as drugs having no currently accepted medical use and a high potential for abuse. It appears, however, that the DEA may soon reconsider its current Schedule I classification of cannabis.

This article considers how the DEA’s potential reclassification of cannabis potentially could affect Georgia’s medical cannabis industry. Specifically, the article discusses: (1) how Georgia medical cannabis distributors would operate within this new regulatory framework; (2) how this change would affect registered Georgia patients who are either currently purchasing medical cannabis or are planning to do so; and (3) whether this reclassification would cause big pharmaceutical companies to enter Georgia’s medical cannabis market, and if so, how.

The DEA’s Reclassification of Cannabis Would Likely Affect the Regulatory Framework of Georgia’s Medical Cannabis Industry

On April 2, 2019, Georgia became the 34th U.S. state to legalize cannabis for medicinal use when the Georgia Legislature passed House Bill 324 (“HB 324”), which recently took effect on Monday, July 1, 2019. In Georgia, medical cannabis is defined as a “low-THC oil” that contains 5% or less of tetrahydrocannabinol (THC)—the psychoactive chemical in cannabis that causes a “high.”

Georgia State Flag

If the DEA reclassifies cannabis, the regulatory framework of Georgia’s medical cannabis industry under HB 324 would likely be affected. For instance, depending on how the DEA elects to reclassify cannabis, low-THC oil products manufactured and sold in Georgia could become subject to the U.S. Food and Drug Administration’s (FDA) costly, complicated and time-consuming drug approval process. Then, any low THC oil products that the FDA approves will be subject to federally mandated quality, efficacy and potency standards for FDA-approved drugs. Also, any federal standards that stem from the DEA’s reclassification of cannabis will trump any conflicting provisions in HB 324 or any other conflicting rules, regulations or procedures established by the Georgia Access to Medical Cannabis Commission (GAMCC), the seven member state agency responsible for promulgating and implementing the state-based rules, regulations and procedures necessary to produce and distribute low-THC oil in Georgia, and the Georgia State Board of Pharmacy (Pharmacy Board). However, even if the DEA reclassifies cannabis, the following state regulatory framework established by HB 324 will remain unaffected:

  • The GAMCC will likely continue to oversee the state’s medical cannabis industry.
  • The following two different types of dispensary licenses issued under the legislation will still likely remain: retail outlets (issued by the GAMCC) and pharmacies (issued by the Pharmacy Board).
  • Licensed dispensaries will still likely not be located within a 1,000-foot radius of a school or church, and licensed production facilities will still not be located within a 3,000-foot radius of a school or church.
  • Pharmacists who dispense low-THC oil will still likely have to review each registered patient’s information on the state’s Prescription Drug Monitoring Program (PDMP) database to confirm that they have been diagnosed with one or more of the 17 approved conditions and diseases. The legislation does not require retail outlet dispensaries to review patient information on the PDMP database or employ a pharmacist to dispense the drug.
  • Registered patients will still likely be prohibited from vaping low-THC oil or inhaling it by any other electronic means. The legislation does not expressly prohibit the use of other, non-electronic delivery methods of low THC oil such as pills or nasal spray.
  • All licensed dispensaries (and all licensed production companies) will still likely be subject to an “on-demand” inspection when requested by the Georgia Bureau of Investigation (GBI), the GAMCC, the four-member Medical Cannabis Commission Oversight Committee (MCCOC), or local law enforcement. The GAMCC and the Georgia Drugs and Narcotics Agency (GDNA) will also still likely be able to conduct one, annual inspection of dispensary locations. And, upon request, licensed dispensaries will still likely be required to immediately provide a sample of their low-THC oil for laboratory testing to the GBI, GAMCC, MCCOC, GDNA or local law enforcement.
  • All licensed dispensaries (and all licensed production facilities) will still likely be required to utilize a GAMCC-approved seed-to-sale tracking software.
  • All licensed dispensaries (and all licensed production companies) will still likely be prohibited from advertising or marketing their low-THC oil products to registered patients or the public. However, they will still likely be allowed to provide information about their products directly to physicians, and upon request, physicians will still likely be allowed to furnish the names of licensed dispensaries (and licensed production companies) to registered patients or their caregivers.

The DEA’s Reclassification of Cannabis Would Likely Affect the Availability of Low THC Oil

To date, approximately 9,500 Georgians are registered with the state’s Low-THC Registry, which allows them to purchase low-THC oil from licensed dispensaries. Since the legislation’s passage, the number of registered patients has increased significantly and continues to steadily rise. If the DEA reclassifies marijuana, this patient number will likely increase at an even faster rate because the public will likely perceive reclassification as an acknowledgement by the federal government that marijuana possesses health and medicinal benefits. If that occurs, statewide demand for low THC oil could quickly outstrip the supply.

Georgia Gov. Brian Kemp
Image: Georgia National Guard, Flickr

Under HB 324, the GAMCC is tasked with ensuring that the state has a sufficient number of retail outlet dispensaries across the state to meet patient demand but is limited to issuing only six production licenses. As the number of registered patients continues to grow, the GAMCC may be forced to recommend amendments to the statute allowing it to issue additional production licenses to increase the state’s supply of low THC oil, and depending on how many additional patients are added to the state’s Low-THC Registry, the GAMCC may also have to issue additional dispensary licenses to keep up with patient demand by relaxing the geographic limitations on locating dispensaries.

Thus, the DEA’s reclassification of cannabis likely would affect the amount of low THC oil available to registered patients in Georgia.

The DEA’s Reclassification of Cannabis Would Likely Cause Large Pharmaceutical Companies to Enter Georgia’s Medical Cannabis Market

Large pharmaceutical companies typically manufacture, market, sell and ship their products on a national and international scale. Given cannabis’ current status as a Schedule I drug under the CSA, these companies have largely steered clear of the burgeoning medical marijuana industry because of the inherent risk of violating federal law. If the DEA reclassifies cannabis, that risk will be diminished greatly, and the companies therefore will likely decide to enter the market by acquiring existing medical marijuana companies with established national or state-level medical cannabis brands.

If the DEA reclassifies cannabis, Georgia’s medical cannabis market will likely be affected in multiple ways.Depending on how the DEA reclassifies cannabis, low-THC oil in Georgia could be subject to stringent federal standards, including the FDA’s complex and expensive drug approval process. Georgia medical cannabis companies will likely not be accustomed to complying with such federal regulations. Large pharmaceutical companies, on the other hand, are very accustomed to dealing with the federal government, including FDA drug approval. So, if the DEA reclassifies marijuana, pharmaceutical companies will likely view reclassification as a tremendous opportunity to enter the Georgia market by leveraging their experience and institutional knowledge dealing with federal law to acquire or partner with a licensed Georgia cannabis company that has an established brand of low -HC oil.

Entering Georgia’s medical cannabis market won’t be easy, however, because HB 324 prohibits licensees from transferring their licenses for five years and requires that the original licensee be a Georgia business. But, HB 324 does not prohibit them from selling their businesses, which necessarily includes any licenses the business owns. Purchasing a licensed Georgia medical cannabis company requires payment of a production license business transfer fee. The fee for the first sale of a business with a Class 1 production license is $100,000 and the fee for a Class 2 license is $12,500. The fee for the second sale is $150,000 for a Class 1 production license, and $62,500 for a Class 2 license. The fee for the third and fourth sales is $200,000 for a Class 1 production license, and $112,500 for a Class 2 license.

Conclusion

If the DEA reclassifies cannabis, Georgia’s medical cannabis market will likely be affected in multiple ways. Specifically, depending on how the drug is reclassified, the regulatory framework for medical cannabis companies likely will change to include both state and federal requirements, potentially including the FDA’s complex drug approval process. Also, the amount of low-THC oil available for registered patients to purchase likely will be diminished precipitating the need for the GAMCC to modify the statute to allow for issuing additional production licenses and relaxing the geographic limitations on locating dispensaries. Finally, large pharmaceutical companies likely will attempt to enter Georgia’s medical cannabis market by purchasing existing, licensed Georgia companies that have established low-THC oil brands.

Illinois Legalizes Cannabis

By Aaron G. Biros
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Illinois just became the first state to legalize and regulate adult use cannabis through the legislature.

Earlier this month, the House passed HB 1438 in a 66-47 vote, with bipartisan help. Roughly 24 hours before that, the same bill cleared the Senate in a sweeping 38-17 vote. Governor J.B. Pritzker signed the Cannabis Regulation and Taxation Act (CRTA) into law on Tuesday, making Illinois the 11th state in the nation to legalize adult use cannabis and the first to do so via the legislature.

Illinois Governor J.B. Pritzker campaigned and won the election on this issue and helped design HB 1438. Sponsors of the bill, Senator Heather Steans (Chicago-D) and Representative Kelly Cassidy (Chicago-D), along with Governor Pritzker, have been viewed as the architects of this piece of legislation.

Illinois Governor J.B. Pritzker

Back in January, the sponsors of the bill announced their plans, backed with full support from the Governor’s office. Then in early May, the coalition announced the formal introduction of the bill.

Some supporters say the state legalizing cannabis in this particular fashion will have shockwave effects throughout the rest of the country. Not only did Illinois pass this legislation, but they did so with social equity and public health in mind. Back when the sponsors of the bill announced their intentions in January this year, Sen. Steans told a town hall meeting in Springfield, “We have a huge opportunity in Illinois to do this right and carefully… If we don’t address the social-justice issues of this, if we don’t address the collateral consequences of the ‘war on drugs,’ we will have failed.”

The Marijuana Policy Project (MPP) has a handy overview of the legislation that breaks down exactly what was legalized. An MPP press release says this legislation is, “the most far-reaching social equity provisions ever included in a legalization law. It includes reinvestment in communities disproportionately harmed by cannabis prohibition, broad expungement provisions, and measures to ensure the industry includes communities that have been targeted by cannabis enforcement.”

You can find more information about the bill, proposed rules, licensing processes and regulations here.

Illinois Senate Passes Bill To Legalize Adult Use Cannabis

By Aaron G. Biros
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Illinois lawmakers came one step closer to legalizing adult use cannabis this week. The Illinois Senate voted 38-17 to pass HB 1438, which is now headed to the House for a vote. Sponsors of the bill, Senator Heather Steans (Chicago-D) and Representative Kelly Cassidy (Chicago-D), along with Governor J.B. Pritzker, have been viewed as the architects of this piece of legislation.

Illinois Governor J.B. Pritzker

This is not the first time that Democrats in the Illinois legislature have attempted to legalize adult use cannabis. Back in 2017, state Representative Kelly Cassidy and state Senator Heather Steans, the two lawmakers sponsoring this bill, sponsored a legalization bill that failed to garner support.

Governor Pritzker, who campaigned on cannabis legalization, has been vocal about his support to push this bill through the legislature. Back in January, the sponsors of the bill announced their plans with the bill, backed with full support from the Governor’s office. Then in early May, the coalition announced the formal introduction of the bill.

It is clear that Illinois is excited about cannabis, including the less-than-0.3%-THC variety, or legal hemp under the Farm Bill. Within two days of announcing the opening of license applications for growing hemp, the Illinois Department of Agriculture received roughly 350 applications.

Regarding the bill that just cleared the Senate, one particularly contentious issue raised was the allowance for “home grow.” The Senate approved the bill after a provision was added allowing just medical cannabis patients to grow their own, not everyone.

If this bill manages to pass through the House, Governor Pritzker is expected to sign the bill immediately. The bill would legalize and regulate sales of cannabis and cannabis products on January 1, 2020.

Arizona Still Doesn’t Require Lab Testing, But That Could Change Soon

By Aaron G. Biros
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As of today, Arizona is the only state in the country that has legalized medical cannabis but does not require producers to test their medical cannabis. States throughout the country that legalize medical cannabis routinely implement regulations that require third-party, independent lab testing to protect patient and consumer safety. Arizona legalized medical cannabis for a number of qualifying conditions back in 2011, but still has no measure like other states to protect patient safety.

Lawmakers in Arizona now have the opportunity to change that with SB1494, which passed unanimously through the state’s Senate back in March of 2019. According to the Arizona Cannabis Laboratory Association (ACLA), the bill awaits action in the House of Representatives. The ACLA says in a press release that “supporters of the bill are calling on lawmakers to move on a bill that unanimously passed in the Senate earlier this year.” The bill would require producers to use independent, third-party labs to test cannabis for things like harmful toxins and molds.

Ryan Tracy, co-founder of the ACLA and founder/CEO at C4 Labs.

According to Ryan Treacy, co-founder of the ACLA and CEO/Founder of C4 Laboratories, the ACLA was formed for a few important reasons: “We feel it is very important that we encourage and cultivate a professional and collaborative rapport among the reputable Arizona cannabis labs,” says Treacy. “So that we can call upon the collective groups’ years of experience to help provide insight and suggestions on how we as a group can insure the most accurate and consistent results for our clients throughout the state and ultimately their patients.” Treacy went on to add that it is particularly important their collective voice be heard at the State Capitol as lawmakers work towards passing SB 1494.

“There isn’t any reason to wait for someone to get sick before the legislature passes this bipartisan bill. Let’s get it done!”George Griffeth, President of the ACLA, says there is a sense of urgency in passing this bill before the voters decide on legalizing recreational adult-use cannabis next year. “Everyone agrees that now is the time to be proactive to protect patients from unsafe contaminants,” says Griffeth. “Currently 61 tons of medical marijuana is consumed by patients and many believe that the number of people using the medicine will continue to grow. With a ballot initiative related to the recreational use of marijuana facing voters next year, Arizona must act now to make sure standards are in place.”

They say the bill has bipartisan support and many stakeholders in Arizona’s cannabis industry express support for it as well. For Ryan Treacy, he is worried about patients consuming harmful chemicals and toxins. “My colleagues and I are deeply concerned that more than two-hundred thousand people who use medical marijuana could be inadvertently exposing themselves to toxic chemicals, E. Coli, Salmonella or mold,” says Treacy. “There isn’t any reason to wait for someone to get sick before the legislature passes this bipartisan bill. Let’s get it done!”

Treacy says this bill is particularly difficult to pass because the original measure to legalize medical cannabis was a ballot initiative. That means the bill needs 75% support in both the House and the Senate in order to amend the original measure. “The passing of this bill would be a huge win for the patients and will help to ensure honesty and transparency for those that operate in the current medical cannabis program here in AZ,” says Treacy. “This testing bill is also written with legislative intent to cover any and all future adult use or recreational use legislative laws or ballot initiatives. We hope to have a final verdict on this bill by end of this week or early next.”

Georgia Governor Signs Medical Cannabis Cultivation Bill Into Law

By Aaron G. Biros
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On Wednesday, April 17, Georgia Governor Brian Kemp signed HB 324 into law, closing a loophole that has been around for years, which prevented the cultivation of cannabis in-state. Before the signing of this bill, possession of medical cannabis was technically legal, but the cultivation of it was still illegal under state law, preventing legal patient access entirely.

Georgia Gov. Brian Kemp
Image: Georgia National Guard, Flickr

Back in 2015, Georgia’s legislature legalized medical cannabis with less than 5% THC, as well as CBD oil for a number of qualifying conditions. Since then, the state has added more qualifying conditions such as chronic pain and PTSD, bringing the total to sixteen types of illnesses that would qualify patients for medical cannabis.

Governor Kemp signing HB 324 into law sets in motion the process to establish a regulatory framework for six growing licenses in the state. According to WSB-TV Atlanta, the new law goes into effect on July 1, but it could take up to two years to establish legitimate cultivation operations in the state. The law gives a state commission the authority to investigate and establish the regulations further.

That state commission will give priority to pharmacies for distributing cannabis, but reserves the right to establish licenses for independent retail locations as well. According to ABCNews, “The commission can also attempt to legally obtain the oil from other states. Two universities will be allowed to seek federal approval to research and produce the oil.”

Legalization & Regulation Recap: This Week’s News

By Aaron G. Biros
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Across the country, a handful of states are expected to move forward with a number of bills making their way each state’s legislature. Here is a quick recap on some of the more newsworthy bills from this week.

Arizona

When Arizona legalized medical cannabis use, there was no provision in the legislation that required laboratory testing to insure the safety of cannabis products. To this day, Arizona is one of the few states left that has legalized medical cannabis, but does not require lab testing. A bill, SB 1494, that just passed through the state’s Senate could very well change that. According to azmarijuana.com, the bill passed unanimously through the Arizona Senate and would require the Arizona Department of Health Services (ADHS) to implement regulations for laboratories to test for contaminates like pesticides.

They need at least 75% of the House to vote in favor in order for it to pass. If that happens, testing could be required as soon as June 1, 2020.

New Hampshire

In the Northeast, New Hampshire and Vermont have bills related to cannabis making their way through the state legislatures. A committee in the New Hampshire House of Representatives just backed a bill to legalize recreational cannabis.

The House Criminal Justice and Public Safety Committee voted 10-9 to recommend HB 481, which would legalize recreational cannabis, including growing up to 12 plants, imposing a tax of $30 per ounce on cannabis sold through retail. It would also set up a regulatory agency in charge of licensing and regulating the industry.

New Jersey Governor Phil Murphy
New Jersey Governor Phil Murphy

New Jersey

Governor Phil Murphy met with lawmakers earlier this week to discuss the legalization of recreational cannabis. According to CBS New York, the Governor reached a deal with Senate President Steve Sweeney, Assembly Speaker Craig Coughlin, Sen. Nicholas Scutari and Assemblywoman Annette Quijano to introduce a bill that he would sign into law.

The deal would legalize and regulate recreational cannabis, expunge previous cannabis-related convictions, levy a $42 tax per ounce of cannabis sold, along with setting up a commission to issue licenses and regulate the market. When Governor Murphy ran for office, his campaign included a pledge to legalize recreational cannabis, A previous attempt to get a bill through the legislature failed to get enough votes last year.

Vermont

Back in February, the Vermont Senate passed a bill to regulate and tax recreational cannabis with a veto-proof majority. SB 54 is now in committee review in the House, where it is expected to see more hurdles, according to Burlington Free Press.

Another bill was introduced in the Vermont Senate, SB 117,which would reportedly open up more access to the medical cannabis program, including increasing possession limits, allowing patients to grow more plants at a time and set up a lab testing program as well.

Wyoming

Last week, Governor Mark Gordon signed a bill into law that legalizes and regulates the cultivation and sales of hemp-derived CBD. The state is now working with the WY Department of Agriculture to submit plans to the federal government for regulating the industry.

Vermont Becomes First State to Legalize Cannabis Through Legislature

By Aaron G. Biros
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On Monday, January 22nd, Vermont made history becoming the first state to legalize adult use cannabis via the legislature. Governor Phil Scott signed the bill, H. 511, into law, which legalizes adult possession and cultivation of cannabis, eliminating penalties for possessing one ounce or less and up to two mature marijuana plants and up to four immature plants for people 21 and older, beginning on July 1.

Vermont Gov. Phil Scott

According to the Marijuana Policy Project, they have been lobbying Vermont’s legislature since 2003 and they plan on working with the Vermont Coalition to Regulate Marijuana and the state task force to implement sensible and effective regulations for the state’s new industry. This makes Vermont the ninth state to legalize cannabis.

On Thursday, January 4th, the Vermont House passed this bill, sending it to the Senate for concurrence. On January 10th. The state’s Senate also passed the vote, sending it to Gov. Phil Scott’s desk to sign. Now that he signed the bill into law, Vermont is officially the first state to legalize cannabis through their legislature.

“After more than 15 years of hard work by MPP and our allies in the state, adults in Vermont no longer need to fear being fined or criminalized for low-level marijuana possession and cultivation,” says Matt Simon, New England political director for the Marijuana Policy Project. “This is a great step forward for the state and the whole region. Responsible adults will soon have the freedom to enjoy a safer option legally, and law enforcement will be free to concentrate on serious crimes with actual victims. We are looking forward to working with lawmakers and state leaders to continue improving marijuana laws in the Green Mountain State.”

Vermont Legislature Votes to Legalize Cannabis

By Aaron G. Biros
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Vermont could become the ninth state to legalize recreational cannabis soon, and the first to do so via the legislature. The Vermont Senate just voted to pass H. 511, a bill that would legalize cannabis for adults. The bill now goes to Governor Phil Scott’s desk for his signature, and he has indicated previously that he will sign this bill into law.

On Thursday, January 4th, the Vermont House passed this bill, sending it to the Senate for concurrence. Now that the Senate has passed the bill and Gov. Scott is expected to sign it into law, it is beginning to look like Vermont will be the first state to legalize recreational cannabis through the legislature, which is a monumental accomplishment.

Vermont Statehouse, Montpellier, VT
Image: Tony Fischer, Flickr

This could also be an important milestone for the East Coast, as legislatures in New Hampshire, New Jersey, Rhode Island, Connecticut and Delaware are seriously eyeing legalization bills as well. New Hampshire lawmakers in the state’s House approved a similar bill recently.

Matt Simon, New England political director for the Marijuana Policy Project, sees this as a massive win for the legalization movement. “Vermont is poised to make history by becoming the first state to legalize marijuana cultivation and possession legislatively, rather than by ballot initiative,” says Simon. “We applaud lawmakers for heeding the calls of their constituents and taking this important step toward treating marijuana more like alcohol.”

H. 511, the bill the Vermont Senate just approved, would eliminate penalties for possession of up to one ounce of cannabis and remove penalties for having two mature plants and four immature plants. A task force appointed by the governor will work on a report to investigate how the state should tax and regulate sales by December of 2018.

What’s Happening on Capitol Hill? Part 4: Banking & Tax Reform

By Brian Blumenfeld, J.D., M.A.
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To round out our federal reform review, we look at the bills introduced into the 115th Congress that attempt to resolve the banking and taxation problems faced by state-legal cannabis businesses. As this is perhaps the biggest thorn in the side of the cannabis industry, any movement by the feds on these issues will be welcomed. As it turns out, there are four proposals currently pending for fixing the broken cannabis financial services system, with each proposal comprising a pair of House-Senate companion bills. We look at each pair in turn.

Group 1

S. 1156 – SAFE Act; or, Secure and Fair Enforcement Banking Act

HR. 2215 – SAFE Act; or, Secure and Fair Enforcement Banking Act

Policy: These SAFE Acts would prohibit federal prosecutors and federal regulators from preventing or disciplining in any way a depository institution simply because that depository institution serviced a cannabis-related business.

Impact: The impact of these bills would be widespread for both the cannabis industry and for financial service institutions looking to capitalize on the cannabis industry. For banks, the bills would remove all of the barrier-risks that are now keeping them out of the cannabis business. Currently, the feds have handed down policy guidance to banks stating that as long as they submit what are called “Suspicious Activity Reports, or “SARs” for cannabis-related accounts, and conduct their due diligence to ensure such accounts are complying with state law, then those banks will not be pursued by federal law enforcement. The problem with this guidance is that it is only policy, it is not law, and so it can change on as little as an administrative whim. The protection from cannabis business risk, most banks have determined, is therefore temporary at best and illusory at worst. Passage of the SAFE Act would instantly change all of that and initiate a banking bonanza. Banks will be racing to profit off of what is amounting to a newly minted billion dollar industry. Cannabis businesses will benefit greatly from all of this. Not only will they be able to stop operating strictly in cash and have access to all the traditional financial services that other businesses heavily rely on, but they will also be the beneficiaries of a highly competitive, and therefore affordable and efficient, cannabis banking market.

Procedural Status:

S. 1156

  • Introduced: May 17, 2017 by Senator Jeff Merkley (D-OR)

    Senator Jeff Merkley (D-OR)
    Image: Medill DC, Flickr
  • Cosponsors: 3 Republicans, 7 Democrats, 1 Independent
  • Referred to Senate Committee on:
    • Banking, Housing, and Urban Affairs

HR. 2215

  • Introduced: April 27, 2017 by Representative Ed Perlmutter (D-CO)
  • Cosponsors: 7 Republicans, 44 Democrats
  • Referred to House Committees on:
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
    • Financial Services

Group 2

S777 – Small Business Tax Equity Act of 2017

HR 1810 – Small Business Tax Equity Act of 2017

Policy: These bills would carve out an exception to IRC 280E allowing cannabis businesses to deduct ordinary business expenses from their federally taxable revenues.

Impact: If enacted these bills will dramatically ease the tax burden for cannabis businesses. Currently, even when they are in perfect compliance with state law, cannabis businesses are not permitted to deduct ordinary business expenses. This means that net taxable revenues are, and are going to continue to be, substantially higher than net taxable revenues for businesses in any other industry. If enacted, profit margins—and therefore product quality, operational efficiency and innovation—are going to uptick across all states that have legalized.

Procedural Status:

Senator Ron Wyden (D-OR)
Image: JD Lasica, Flickr

S. 777

  • Introduced: March 30, 2017 by Senator Ron Wyden (D-OR)
  • Cosponsors: 1 Republican, 4 Democrats
  • Referred to Senate Committee on:
    • Finance

HR. 1810

  • Introduced: March 30, 2017 by Representative Carlos Curbelo (R-FL)
  • Cosponsors: 10 Republicans, 24 Democrats
  • Referred to House Committee on:
    • Ways and Means

Group 3

S. 780 – Responsibly Addressing the Marijuana Policy Gap Act of 2017

HR. 1824  Responsibly Addressing the Marijuana Policy Gap Act of 2017

Policy: These bills combine to accomplish what each of the foregoing pairs accomplish separately. IRC 280E would no longer apply to state-legal cannabis businesses, and banking would become available for them as well. Additionally, advertising prohibitions in the CSA and the Communications act of 1934 would be removed, with the one exception that advertisements inducing travel from a state where cannabis is not legal to a legal cannabis state would be prohibited. Under Title II of the acts, barriers to federal bankruptcy proceedings would be removed. These bills would also reform the CSA as it relates to criminal liability for individuals, criminal record expungement and medical research for institutions, all of which are noteworthy but neither of which directly impact the legal cannabis industry.

Impact: For the impact of IRC reform, see “Impact” section under S.777/HR.180. For the impact of banking reform, see “Impact” section under S.1156/HR/2215.

By leaving advertising guidelines completely up to the states, we would probably witness the easing of advertising restrictions by the states. Currently, states have tight advertising rules because, after protecting consumers, they do not want their state’s legal cannabis industry to draw attention from the feds in any way. That concern would become moot and we could see more advertising in and across legalized states. This would drive competition across larger markets, in terms of both product and service quality and branding/marketing strategy.

Access to federal bankruptcy proceedings would clarify the landscape for all potential financial scenarios in the lifecycle of cannabis businesses, which in turn will ease uncertainty concerns of potential investors. The bankruptcy provision, combined with the banking provisions will undoubtedly open access to capital for cannabis businesses looking to grow operations and market presence.

Procedural Status:

S. 780

  • Introduced: March 30, 2017 by Senator Ron Wyden (D-OR)
  • Cosponsors: None
  • Referred to Senate Committee on:
    • Finance

HR. 1824

Representative Earl Blumenaur (D-OR)
Photo: Bridget Baker, 92bridges.com
  • Introduced: March 30, 2017 by Representative Earl Blumenaur (D-OR)
  • Cosponsors: 0 Republicans, 8 Democrats
  • Referred to House Committees on:
    • Judiciary
      • Crime, Terrorism, Homeland Security, and Investigations
      • Regulatory Reform, Commercial and Antitrust Law
      • Immigration and Border Security
    • Energy & Commerce
      • Health
    • Ways and Means
    • Financial Services
    • Natural Resources
      • Indian, Insular, and Alaskan Affairs
    • Education and the Workforce
    • Veterans’ Affairs
      • Health
    • Oversight and Government Reform

Group 4

S. 776 – Marijuana Revenue and Regulation Act

HR. 1823 – Marijuana Revenue and Regulation Act

Policy: Subchapters A and B of these bills would impose two additional federal tax requirements on cannabis businesses. The first would be an excise tax on all producers, beginning at a rate of 10%, and growing each year that a producer is in business to a cap of 25% at five years. The second tax would be an occupational tax of $1,000 per year, to be paid by the principals of any cannabis producer or warehouse proprietor. Significantly, these bills would also authorize the federal government to regulate operations in the industry.

Impact: The tax impact of these bills would be a straightforward additional tax that cannabis businesses would have to pay, on top of state and local taxes. The burden of additional taxes will inevitably impact profit margins, initial decisions on whether or not to enter the market and strategies for expansion and innovation. The impacts of federal authorization and regulatory requirements was discussed in the second article of the series, specifically under the “Impact” section of HR1841

Procedural Status:

S. 776

  • Introduced: March 30, 2017 by Senator Ron Wyden (D-OR)
  • Cosponsors: None
  • Referred to Senate Committee on:
    • Finance

HR. 1823

  • Introduced: March 30, 2017 by Representative Earl Blumenaur (D-OR)
  • Cosponsors: 0 Republicans, 8 Democrats
  • Referred to House Committee on:
    • Ways and Means

What’s Happening on Capitol Hill? Part 3: The Medical Bills

By Brian Blumenfeld, J.D., M.A.
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This article continues the bill-by-bill review begun in the August 1st article on cannabis reform legislation proposed in the 115th Congress. In the next article and final piece in this series, we will examine the banking and tax reform bills related to cannabis.

Medical Cannabis Reform Bills 

S. 1008 – Therapeutic Hemp Medical Act of 2017

HR. 2273 – Charlotte’s Web Medical Access Act of 2017

Policy: These bills would amend the CSA to end federal prohibition over all CBD products and all hemp plants with THC content levels of below 0.3%. In other words, people and businesses would be free to grow hemp and/or manufacture CBD products without any fear of federal prosecution. These products would most likely then fall under the regulation of other federal and/or state agencies, but the bills do not specify what agencies they might be or what controls might be put in place.

Impact: The impacts from these bills nationwide have the potential to be massive. Hemp is a plant that can be put to highly effective use in many different industries, from textiles and construction to foodstuffs and seafaring. The efficiency of its growth and the breadth of its utility will make it a highly valuable commodity and a competitor with many other raw materials. For state-legal cannabis businesses, the legalization of CBD and hemp at the federal level could fundamentally change the market for those products. States that legalized cannabis already have provisions in place dealing with hemp and CBD—sometimes alongside their cannabis laws, sometimes handled by a separate state agency—and they could either leave those as they are or open up those markets to interstate activity. In states that have not legalized, CBD and hemp are typically included in the state’s definition of cannabis, and therefore they will remain illegal under state law unless further action is taken. Most likely, if federal prohibition ends on hemp and CBD, state prohibition will follow suit. Because legalization at the federal level will allow for interstate commerce in hemp and CBD, expect the emergence of a nationwide market, driven by online sales and interstate marketing, and developing independently from a cannabis industry still constrained to in-state activities.

Procedural Status:

Senator Cory Gardner (R-CO) Photo: Gage Skidmore, Flickr

S. 1008

  • Introduced: May 2, 2017 by Senator Cory Gardner (R-CO)
  • Cosponsors: 7 Republican, 4 Democrat
  • Referred to Senate Committee on:
    • Judiciary

 HR. 2273

  • Introduced: May 1, 2017 by Representative Scott Perry (R-PA)
  • Cosponsors: 10 Republicans, 10 Democrats
  • Referred to House Committee on:
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
    • Energy and Commerce
      • Subcommittee on Health
    • Financial Services

S. 1276 – Cannabidiol Research Expansion Act

Policy: This bill would accomplish two objectives: First, it would open channels for researchers to access and experiment with cannabis and cannabis extracts. Second, it would initiate the process at the end of which the Attorney General must make a determination as to which Schedule of the CSA is most appropriate for cannabidiol (CBD).

Impact: The impact on this legislation to state-legal cannabis businesses is rather remote—in both time and practice. The research access provisions will certainly create an uptick in medical and psychological research activity, the outcomes of which will add to our knowledge of how consuming cannabis in different forms and amounts effects the brain and body. This type of government-regulated research takes many years to process and complete, as both bureaucratic and scientific standards must be met. As for initiating the re/de-scheduling review process for CBD, this is a direct response to the 2016 denial by the DEA to re/de-schedule cannabis. That determination, published in the Federal Registrar on August 12, 2016, was made following a comprehensive study of the medical benefits and harms of cannabis conducted by the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA). Although such an in-depth study and its resulting negative determination pronounced so recently would normally rule out the chances of success for another re/de-scheduling attempt so soon after, the DEA did leave the door open with its statement that it “did not focus its evaluation on particular strains of marijuana or components or derivatives of marijuana.” It is just this door that S. 1276 seeks to exploit. By focusing the re/de-scheduling process on CBD specifically, the presumption is that the outcome of the scientific CBD studies would have a far better chance at satisfying the re/de-scheduling criteria set forth in the CSA. If such a determination was made, then the impact would come in two potential varieties. One, CBD would be rescheduled and become available for medical use according to FDA rules applicable to other prescription drugs. Two, CBD would be descheduled and would fall under the prerogative of the states, in which case the above analysis for S. 1008 and HR. 2273 would pertain.

Senator Dianne Feinstein (D-CA)
Photo: Daniel Torok

Procedural Status:

S. 1276

  • Introduced: May 25, 2017 by Senator Dianne Feinstein (D-CA)
  • Cosponsors: 3 Republican, 2 Democrat
  • Referred to Senate Committee on:
    • Judiciary

S. 1374 – Compassionate Access, Research Expansion, and Respect States (CARERS) Act of 2017

HR. 2920 – Compassionate Access, Research Expansion, and Respect States (CARERS) Act of 2017

HR. 715 – Compassionate Access Act of 2017

HR. 714 – Legitimate Use of Medical Marijuana Act (LUMMA) of 2017

Policy: All four of these bills would make an exception to the CSA for state medical cannabis laws. Federal prohibition, in other words, would end for medical cannabis in those states that have legalized, and it would be left to those states to devise how it would be regulated. In states that have not legalized, both state and federal prohibition would remain. The companion CARERS Acts in the House and Senate, along with HR. 714, would also amend FDA rules to widen access to cannabis for research purposes.

Impact: The impact of these bills on the rules for state-legal medical cannabis businesses would be relatively minor in terms of functionality. This is so because they leave not only the determination to legalize up to the states, but they leave the design of the regulatory system up to the states as well. In other areas, however, big changes will be seen that benefit the industry: banking will open up for state medical businesses, and so will the opportunity to write-off ordinary business expenses. Investment risks over legality will end, making for easier access to capital. Questions about contract enforcement and risks of federal prosecution will become moot, and when state regulatory bodies make decisions on how to govern the industry, they will no longer have to concern themselves with U.S. DOJ enforcement and/or prosecutorial policies. Enactment of any of these bills would be a big win for medical cannabis.

Senator Cory Booker (D-NJ) Photo: David Shinbone, Flickr

Procedural Status:

S. 1374

  • Introduced: June 15, 2017 by Senator Cory Booker (D-NJ)
  • Cosponsors: None
  • Referred to Senate Committee on:
    • Judiciary

HR. 2920

  • Introduced: June 15, 2017 by Representative Steve Cohen (D-TN)
  • Cosponsors: 1 Republicans
  • Referred to House Committee on:
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
    • Energy and Commerce
      • Subcommittee on Health
    • Veterans’ Affairs
      • Subcommittee on Health

HR. 715

  • Introduced: January 27, 2017 by Representative Morgan H. Griffith (R-VA)
  • Cosponsors: 2 Republicans, 1 Democrat
  • Referred to House Committee on:
    • Energy and Commerce
      • Subcommittee on Health
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations

HR. 714

  • Introduced: January 27, 2017 by Representative Morgan H. Griffith
  • Cosponsors: 1 Democrat
  • Referred to House Committee on:
    • Energy and Commerce
      • Subcommittee on Health

HR. 2020 – To Provide for the Rescheduling of Marijuana into Schedule III of the CSA

Policy: As its wordy title indicates, this bill would bypass the schedule review process and by legislative fiat move cannabis from Schedule I to Schedule III of the CSA.

Representative Matt Gaetz (R-FL)

Impact: Businesses handling drugs in Schedule III must register with the DEA and comply with DEA record keeping and security requirements. Doctors would be permitted to prescribe cannabis products. Importing/exporting will become available by permit, which would bring state businesses into competition with foreign cannabis firms. The biggest impact will be that cannabis sold pursuant to federal law will have to undergo the FDA’s New Drug Application process conducted by the Center for Drug Evaluation and Research, the largest of the FDA’s five centers. This includes clinical testing and a comprehensive chemical/pharmacological review. The drug would then be subject to FDA regulation for marketing and labelling. For states that wanted to maintain their legal medical cannabis systems, a conflict would remain because cannabis cultivators and dispensaries could operate in compliance with state law while simultaneously failing to meet new FDA and DEA requirements. States will then have a choice: bring state laws into line with federal laws, creating all of the advantages of federal legality discussed above, yet causing major disruptions to the industry; or retain the status quo, allowing the industry to grow as is with all of the in-state advantages but without the advantages of federal legalization. This all would of course leave behind recreational cannabis which would remain in the legal gray zone.

  • Introduced: April 4, 2017 by Representative Matt Gaetz (R-FL)
  • Cosponsors:
  • Referred to House Committee on:
    • Energy and Commerce
      • Subcommittee on Health
    • Judiciary

HR. 331 – States’ Medical Marijuana Property Right Protection Act

Policy: Section 881(a)(7) of the CSA subjects to federal forfeiture all property involved with cannabis activities. This bill would make an exception to that provision for all property in compliance with state medical cannabis laws.

Impact: Although not legalizing medical cannabis, this bill would be a strong step in the direction of legitimizing state-legal medical cannabis businesses. As a result of the property forfeiture clause of the CSA, two impediments faced by the medical cannabis industry is that investors are hesitant to invest and land lords are hesitant to lease or otherwise engage the medical cannabis market. By eliminating the risk of such property loss due to the federal-state conflict, this bill would have the very welcomed impact of easing access to capital and expanding opportunities for land use.

  • Introduced: January31, 2017 by Representative Barbara Lee (D-CA)
  • Cosponsors:
  • Referred to the House Committee on:
    • Judiciary
      • Subcommittee on Crime, Terrorism, Homeland Security, and Investigations
    • Energy and Commerce
      • Subcommittee on Health