O’ What a Wonderful Time it is to be a Californian

In case you did not know, our heroic, Governor threw the Medical Cannabis Regulation & Safety Act MMRSA in the trash based on public comments received during the 60 day public comment period.

MMRSA has been replaced by Senate Bill No. 94, CHAPTER 27, Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) [Approved by Governor June 27, 2017. Filed with Secretary of State June 27, 2017.

There will be another 60 day public comment period but, our Governor is confident implementation will begin on January 1, 2018.

This post will focus on the initial changes and provide guidance in preparing for and obtaining a California, County or City (retail – Medical Cannabis and/or Adult Use) permit.

MAUCRSA repealed the Medical Cannabis Regulation & Safety Act (MCRSA) and include certain provisions of MCRSA in the licensing provisions of the Adult Use of Marijuana Act (“AUMA”). Under MAUCRSA, these consolidated provisions would be known as the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). MAUCRSA renames the bureau the Bureau of Cannabis Control, revise references to “marijuana” or “medical cannabis” in existing law to instead refer to “cannabis” or “medicinal cannabis,” respectively, and applies a definition of “cannabis” similar to the definition used in MCRSA to MAUCRSA. MAUCRSA generally impose the same requirements on both commercial medicinal and commercial adult-use cannabis activity, with specific exceptions. MAUCRSA would make applying for and being issued more than one license contingent upon the licensed premises being separate and distinct.  It remains to be determined the precise definition of “premises” and “separate and distinct”.

MAUCRSA allows a person to test both adult-use cannabis and medicinal cannabis under a single testing laboratory license. MAUCRSA would require the protection of the public to be the highest priority for a licensing authority in exercising its licensing, regulatory, and disciplinary functions under MAUCRSA, and  requires the protection of the public to be paramount whenever the protection of the public is inconsistent with other interests sought to be promoted. MAUCRSA requires the advisory committee advising the licensing authorities on the development of standards and regulations to include persons who work directly with racially, ethnically, and economically diverse populations.

Under MAUCRSA, the types of licenses available for commercial adult-use cannabis activity and commercial medicinal cannabis activity would be the same. The types of licenses available under both MCRSA and AUMA would continue to be available for both kinds of activity, and specialty cottage cultivation licenses, microbusiness licenses, and commencing January 1, 2023, large outdoor, indoor, and mixed-light cultivation licenses would also be available for both kinds of activity. Producing dispensary and transporter licenses would not be available.

MAUCRSA imposes certain requirements on the transportation and delivery of cannabis and cannabis products, and provides the California Highway Patrol authority over the safety of operations of all vehicles transporting cannabis and cannabis products. MAUCRSA requires a retailer to notify the licensing authority and the appropriate law enforcement authorities within 24 hours after discovering specified breaches of security.

MAUCRSA prohibits cannabis or cannabis products purchased by a customer from leaving a licensed retail premises unless they are placed in an opaque package.

MAUCRSA requires distributors to store cannabis batches on their premises during testing, require testing laboratory employees to obtain samples for testing and transport those samples to testing laboratories, and require distributors to conduct a quality assurance review to ensure compliance with labeling and packing requirements, among other things, as specified. MAUCRSA would create the quality assurance compliance monitor, an employee or contractor of the bureau. MAUCRSA, commencing January 1, 2018, authorizes a licensee to sell untested cannabis or cannabis products for a limited time, as determined by the bureau, if the cannabis or cannabis products are labeled as untested and comply with other requirements determined by the bureau.

MAUCRSA also requires the bureau to issue testing laboratory licenses. MAUCRSA prohibit testings laboratory licensees from obtaining licenses to engage in any other commercial cannabis activity. There is no longer the requirement under MCRSA, until January 1, 2026, that places certain additional limits on the combinations of medicinal cannabis license types a person may hold (no longer prohibitions on Vertical Integration, except for testings laboratory licensees).  MAUCRSA will also continue to require AUMA prohibitions of large cultivation licensees from obtaining distributor or microbusiness licenses, but otherwise provides that a person may apply for and be issued more than one license to engage in commercial adult-use cannabis activity.

MAUCRSA repeals the residency requirement. Under MAUCRSA, applicants for licenses under MAUCRSA would be subject to revised and recasted application requirements, and the persons subject to these requirements would also be revised. By modifying the scope of the crime of perjury, MAUCRSA would impose a state-mandated local program. MAUCRSA also requires local jurisdictions to provide information related to their regulation of commercial cannabis activity to the licensing authorities, as specified, and would require a licensing authority to take certain actions with regards to an application for license depending upon the response of the local jurisdiction. By requiring local governments to provide this information, MAUCRSA would impose a state-mandated local program. MAUCRSA, until July 1, 2019, would exempt from the California Environmental Quality Act the adoption of a specified ordinance, rule, or regulation by a local jurisdiction that requires discretionary review and approval of permits, license, or other authorizations to engage in commercial cannabis activity.

MAUCRSA also specifies requirements and limitations for those temporary licenses. MAUCRSA would provide that MAUCRSA does not prohibit the issuance of a state temporary event license to a licensee authorizing onsite cannabis sales to, and consumption by, persons 21 years of age or older at a county fair or district agricultural association event, provided that certain requirements are met.

MAUCRSA would expand these provisions to provide for the state delegation of the full power and authority to enforce MAUCRSA and regulations promulgated by the bureau and other licensing authorities under MAUCRSA to cities.

MAUCRSA would additionally authorize the denial of an application for licensure or renewal of a state license if the applicant has a license suspended under MAUCRSA or for inability to comply with certain requirements. MAUCRSA would remove the factors referenced above from consideration of a licensing authority in making a licensing decision, except that the bureau would continue to consider if an excessive concentration of licensees exists in determining whether to grant, deny, or renew a retail license, microbusiness license, or nonprofit license. MAUCRSA would require state licensing authorities to include in the first publication of their annual reports, which would be due on March 1, 2023, a joint report regarding the state of the cannabis market in California which identifies any statutory or regulatory changes necessary to ensure that the implementation of MAUCRSA does not result in those factors occurring, as specified. MAUCRSA would require, no later than January 1, 2018, the Secretary of Business, Consumer Services, and Housing Agency or the secretary’s designee to initiate work with the Legislature, the Department of Consumer Affairs, the Department of Food and Agriculture, the State Department of Public Health and any other related departments to ensure that there is a safe and viable way to collect cash payments for taxes and fees related to the regulation of cannabis activity throughout the state.

MAUCRSA additionally would prohibit a technology platform or an outdoor advertising company from displaying an advertisement from a licensee on an Internet Web page unless the advertisement displays the licensee’s license number. MAUCRSA would generally apply those advertising and marketing restrictions, and those adulteration and misbranding prohibitions and enforcement provisions, to both medicinal and adult-use cannabis and cannabis products. MAUCRSA would also require edible cannabis products to be marked with a universal symbol, as specified. MAUCRSA would revise the State Department of Public Health’s authority to issue citations and fines to include all violations of MAUCRSA and regulations adopted under MAUCRSA.

MAUCRSA would rename the Marijuana Control Fund the Cannabis Control Fund, would rename the Medical Cannabis Fines and Penalties Account the Cannabis Fines and Penalties Account, and would generally provide for the deposit of fine and penalty money collected under MAUCRSA into the Cannabis Fines and Penalties Account. MAUCRSA would appropriate $3,000,000 from the Cannabis Control Fund to the Department of the California Highway Patrol to be used for training drug recognition experts, as specified. MAUCRSA would require the bureau, in coordination with the Department of General Services, by July 1, 2018, to establish an office to collect fees and taxes in the County of Humboldt, County of Trinity, or County of Mendocino in order to ensure the safe payment and collection of cash in those counties.

MAUCRSA would require the cannabis excise tax to be measured by the average market price, as defined, of the retail sale, instead of by the gross receipts of the retail sale. MAUCRSA would define “enters the commercial market” and other terms for the purposes of the cannabis cultivation and excise taxes and would require distributors and, in certain circumstances, manufacturers, to collect and remit the taxes, as specified. MAUCRSA would require distributors, instead of retailers and cultivators, to obtain permits from the State Board of Equalization. By modifying the scope of a crime, MAUCRSA would impose a state-mandated local program. MAUCRSA would rename the tax fund the California Cannabis Tax Fund.

MAUCRSA would also transfer the performance audit to the Office of State Audits and Evaluations within the Department of Finance, would require the audit to be performed triennially instead of annually, and would transfer the allocation from the tax fund for the reasonable costs incurred in conducting that audit to the Department of Finance. By modifying the purposes for which the tax fund is continuously appropriated, MAUCRSA would make an appropriation.

MAUCRSA would require an application for a license for cultivation to identify the source of water supply. MAUCRSA would require a license for cultivation to include additional requirements for compliance with the above-described provisions and to include in every license for cultivation a condition that the license is prohibited from being effective until the licensee has complied with provisions relating to a streambed alteration agreement or has received written verification from the Department of Fish and Wildlife that a streambed alteration agreement is not required. MAUCRSA would prohibit the Department of Fish and Wildlife from issuing new licenses or increasing the total number of plant identifiers within a watershed or area if the board or the Department of Food and Agriculture finds, based on substantial evidence, that cannabis cultivation is causing significant adverse impacts on the environment in a watershed or other geographic area. MAUCRSA would expand the authorization for the State Water Resources Control Board, the Department of Fish and Wildlife, and other agencies to establish fees to cover the costs of their cannabis programs, regardless of whether the programs are regulatory. MAUCRSA would require the state board or the appropriate regional board to address the discharges of waste resulting from cannabis cultivation.

MAUCRSA would instead authorize the department to adopt general agreements for the cultivation of cannabis and would require the adoption or amendment of a general agreement to be done by the department as an emergency regulation. MAUCRSA would require any general agreement adopted by the department subsequent to adoption of regulations to be in lieu of an individual lake or streambed alteration agreement.

MAUCRSA would require the Department of Pesticide Regulation to develop guidelines for the use of pesticides in the cultivation of cannabis and residue in harvested cannabis. MAUCRSA would prohibit a cannabis cultivator from using any pesticide that has been banned for use in the state. MAUCRSA would instead require the Department of Pesticide Regulation to require that the application of pesticides or other pest control in connection with cannabis cultivation comply with the department’s general regulation of pesticide use. Because the violation of those provisions and regulations adopted pursuant to those provisions is a crime, MAUCRSA would impose a state-mandated local program.

MAUCRSA would eliminate the role of the bureau in establishing the designation and program. MAUCRSA would require, not later than January 1, 2021, the department to establish a program for cannabis comparable to the federal National Organic Program and the California Organic Food and Farming Act. MAUCRSA would require the department to be the sole determiner of organic designation and certification, unless the federal National Organic Program authorizes organic designation and certification for cannabis, in which case the department’s authority would be repealed on the following January 1. MAUCRSA would prohibit a person from representing, selling, or offering any cannabis or cannabis products as organic or with the designation or certification established by the department, except as provided.

MAUCRSA would transfer this responsibility to the Department of Food and Agriculture and require the department to begin establishing standards to designate a County of origin for cannabis no later than January 1, 2018. MAUCRSA would require the department, no later than January 1, 2021, to establish a process by which licensed cultivators may establish appellations of standards, practices, and varietals applicable to cannabis grown in a certain geographical area in California.

MAUCRSA would repeal and replace these provisions with a requirement that specific provisions concerning building standards relating to fire and panic safety and regulations of the State Fire Marshal, including a requirement that the chief of any city, county, or city and county fire department or district providing fire protection services, or a Designated Campus Fire Marshal, and their authorized representatives, enforce these standards and regulations in their respective areas, also apply to licensees under MAUCRSA. By increasing the duties of local agencies, MAUCRSA would impose a state-mandated local program.

MAUCRSA would require the establishment of a track and trace program to be the responsibility of the Department of Food and Agriculture, in consultation with the bureau. MAUCRSA would authorize a city, county, or city and county to administer a unique identifier and associated identifying information but would prohibit this from supplanting the Department of Food and Agriculture’s track and trace program.

MAUCRSA requires the Department of Food and Agriculture, in consultation with the State Board of Equalization, to create an electronic database containing the electronic shipping manifests to facilitate the administration of the track and trace program. MCRSA requires the information received and contained in records kept by the Department of Food and Agriculture or licensing authorities for the purposes of administering the medical cannabis track and trace program to be confidential and generally prohibits information from being disclosed pursuant to the California Public Records Act.

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