Sunday night marked the final deadline for California Governor Gavin Newsom to sign or veto all new bills presented to him from the current legislative sesh and the Gov used every last minute to make his announcements about what would become the new law of the land, and what would go back to the drawing board.
The governor’s office boasted that he signed 870 new bills into law leading up to the cutoff at midnight last night at which point anything left undecided would automatically be vetoed. Instead, the governor spent most of the day yesterday vetoing dozens of bills himself, mostly citing financial concerns as his reasoning.
Among the legislation being considered were some crucial changes to the state’s regulated cannabis market and the governor’s propensity to push these issues to the 11th hour had many advocates smoking Sativa all weekend to stay awake for the news to come down from the state capitol.
Perhaps the most highly anticipated cannabis-centric bill on Newsom’s desk was SB-34, the Compassion Bill, which was aimed at eliminating the crippling tax burden on growers and retailers who intend to donate cannabis products to folks who cannot afford to stroll into a MedMen dispensary and shell out the prices that the new market demands. This bill faced strong opposition for a variety of reasons, the same reasons that an almost identical bill was vetoed last year by former Cali Governor Jerry Brown.
We’ve been told that compassion programs lead to the diversion of legal cannabis into illegal markets.
We’ve been told that compassion programs cannot discriminate accurately between those truly in need or not.
Hell, Jerry Brown tried to tell us that compassion “undermines” the will of Prop 64 voters.
The truth is, this compassion program eliminates the double (triple?) taxation that plagues the cannabis industry now and, as you know, anything that cuts into tax revenue is bound to have a target on its back from those who aim to gain from those revenues.
That last bit is what we felt posed the biggest risk to the passage of SB-34 but just before midnight on Saturday we got news that Gov. Newsom had signed SB-34 and an almost audible sigh of relief was let out by countless activists and patients up and down the state who have fought so hard to see this legislation manifest into reality. Groups like the Weed for Warriors Project, Santa Cruz Veterans Alliance, Sweetleaf Collective, and too many more to name deserve all of our gratitude for the effort they put in from the grassroots on up in order to put the compassion back in California’s cannabis.
With the ink now dry on the governor’s signature, as of March 1, 2020, people with a medical recommendation from a doctor will be eligible to receive donated cannabis products from retailers or from third-party compassion programs that are aligned with licensed retailers.
Now, because of SB-34, any portion of a licensed grower’s crop that is officially designated for compassionate use will be entered into the state’s track and trace system as such and will be exempt from the costly cultivation tax that is currently being assessed on every ounce of legally harvested weed.
That crop can then be passed up the supply chain to a processor and/or manufacturer who must use that entire batch of “compassion”-designated herb to create oils, topicals, edibles, etc. that can also qualify for tax-free donation under SB-34.
Further, licensed retailers will not owe excise or sales/use taxes on those donations.
Again, this bill will not take effect until March 1st of next year OR once Cali’s METRC track and trace system is updated to allow for these changes to be properly logged – whichever comes first. Organizations like the ones linked above can use your donations more than ever as they continue to be stretched thin due to current conditions.
SPEAKING OF TAXES…
As we have written before, General Motors, US Steel, Amazon, Netflix, and dozens more will likely pay exactly ZERO taxes this year due to government subsidies and tax breaks. The common, everyday tax write-offs afforded to 99.9% of businesses in this country through IRS Tax Code 280e often give them the “wiggle room” to keep the lights on.
Those fundamental write-offs are not afforded to any state-sanctioned cannabis company though, due to the federal prohibition of cannabis. The lack of access to these systemic benefits has been a slowly tightening chokehold on the regulated weed market here in California and lawmakers have heard the industry’s demands for action. The result is AB-37, signed into law this past weekend by Gov. Newsom, which will serve as a symbolic middle finger from the state of California to the Internal Revenue Service as we diverge sharply from established federal law. Beginning on January 1st, 2020, Cali cannabis companies can start taking the same deductions as the liquor stores and gun stores dotting their neighborhoods.
I mean… if it’s that easy to buck the Feds, let’s get some banking/insurance reform and some interstate commerce going, Gav!
NOT SO FAST…
This legislative session was not a total victory for cannabis advocacy in California.
SB-305 – aka Ryan’s Law – did not receive a single No vote in its unanimously supported bipartisan sprint to the governor’s desk for a signature, but it got the only No vote that matters, the governor’s veto.
The law would have required that certain hospitals or health care facilities allow terminally ill patients to use cannabis on-site to ease their final days. The law had been completely watered down over the course of its journey to the governor, and would only allow patients to eat or drink their cannabis, use it topically, or in suppository form – no smoking, dabbing, or vaping. Also, it would be a BYOW situation, where patients would need to have their own supply of weed, none would be made available by any hospital staff or service.
Governor Newsom released a nearly full-page explanation for his decision on SB-305, noting that he made the final decision “begrudgingly”, blaming the federal prohibition of cannabis for his judgment. In his letter he expressed fear that facilities forced to participate in such a program could potentially lose their federal funding for Medicare and Medicaid patient treatment and that, he said, was a risk he was not willing to take.
Sounding like a mix of the little bald dude from A Princess Bride and an actual social justice warrior (of which he is neither), the governor said, “It is inconceivable that the federal government continues to regard cannabis as having no medicinal value. Its ludicrous stance puts patients and those who care for them in an unconscionable position.”
We totally agree but it is hard to reconcile with snubbing the feds on one issue, then hiding behind them on another. The difference is that Newsom welcomes retaliation against him and his office from the federal government, but he appears to not want to bring it down on the state’s health care facilities.
Look for similar bills to rise up every legislative session until one successfully passes – it only makes sense.
Here is a quick rundown of more legislation signed into law by California Governor Gavin Newsom in the past week or so:
AB-404 Commercial cannabis activity: testing laboratories
This new law will give third party cannabis testing labs more authority over when they can retest a sample or amend or even reissue a COA. No longer will a minor clerical error or equipment malfunction lead to days or weeks of delay for the supply side of the market.
AB-1529 Cannabis vaporizing cartridges: universal symbol
This law will require all pre-filled vape carts to have a ¼” x ¼” sticker or label affixed to every single unit letting anyone who sees it know that it contains THC. We have been told that it would help differentiate legal, regulated carts from those found on the streets. Because we all know that the streets could never counterfeit such a complex design… This ridiculous piece of legislation found its legs prior to the whole “VapeGate” vape pen crisis that now reaches from coast to coast. The idea that adding a stupid sticker or label to a cart full of hot dog water will do anything other than help cops bust more people is naïve.
This innovative piece of legislation will help California begin to establish legit appellations for various cannabis-growing regions. This bill will create a set of standards for licensed weed farmers to declare that their crop came from a specific county and to use that as a marketing tool. Much like champagne isn’t champagne unless it comes from Champagne, cannabis farmers in places like NorCal’s Emerald Triangle are betting that their terroir is a selling point that true cannabis connoisseurs will seek out.
This specifically affects “Type 1C Specialty Cottage” cultivation licenses and will add language covering maximum canopy size for outdoor grows under this licensure. Basically, if you hold a Type 1C Specialty Cottage license and you grow outdoors, the licensing authority will assess a total canopy size of 2,500 square feet or less with an option to ignore square footage and grow up to 25 total plants.
AB-1291 Adult-use cannabis and medicinal cannabis: license application: labor peace agreements
This bill will force any cannabis entity employing 20 or more people to establish a labor peace agreement. Any entity with less than 20 employees must sign an agreement that they will establish and adhere to such a program within 60 days of hiring their 20th employee.
With the passage of this bill, the state’s cannabis regulators have until January 1st, 2021 to establish a deferral or waiver program for the incredibly high amount of fees required to enter the legal market. This program will be exclusive to needs-based applicants and licensees. From the text of the bill: “The bill would require at least 60% of the total dollar amount of deferrals of fees pursuant to the program to be allocated to the deferral of fees for local equity applicants and licensees, and would require at least 60% of the total dollar amount of waivers of fees pursuant to the program to be allocated to the waiver of fees for local equity applicants and licensees.”
What’s up with that 2021 deadline, though? Speed it up!
SB-223 Pupil health: administration of medicinal cannabis: schoolsites
Also known as JoJo’s Act, this bill will authorize the governing board of a school district, a county board of education, or the governing body of a charter school that houses students grades K-12 to adopt policies that allow parents or guardians of a student to possess and administer medical marijuana to their child on campus at their school. The student/patient must be qualified under the protections of the Compassionate Use Act of 1996, and the cannabis administered cannot be in smoke or vape form.
AB-420 The California Cannabis Research Program
This aptly-numbered bill will provide the legal leeway for the University of California system of schools to bolster their already established “California Cannabis Research Program” with a $2,000,000 disbursement of funds to deepen their dive into cannabis research and to allow the program to cultivate its own cannabis. This bill will take effect immediately as it was passed as an emergency statute.
At the end of the sesh, the following pro-cannabis bills were signed into law by California Governor Newsom:
SB-34, AB-37, AB-404, AB-1529, SB-595, SB-185, AB-420, AB-858, AB-397, AB-1291, AB-1296, SB-223, SB-153, SB-527, SB-657
The governor took office riding a wave of support from cannabis consumers convinced that he would make right what Prop 64 got so terribly wrong. His track record on the issue has not been perfect so far, but this week’s flurry of signatures on successful cannabis legislation should show that the fight is not over yet and although he may not be the most reliable ally, he is certainly not the enemy.
The battle begins anew the second week of January with the state’s next legislative session.
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