Governor Newsome Budget Proposal
On May 13, 2022, Governor Newsom released his proposed California Budget which included cannabis tax reform. The state has acknowledged that the current cannabis tax framework is overly complex and burdensome to both operators and consumers. The hope is to simplify the tax structure, remove unnecessary burdens and costs, and temporarily reduce taxes with hope to assist in stabilizing the cannabis market. The major proposed changes are as follows:
- eliminate the cultivation tax beginning July 1, 2022 and temporarily maintain the excise tax rate at 15%;
- shift the collection of the excise tax from the distributor to the retailer starting January 1, 2023;
- allow the excise the tax to increase between January 1, 2024 to July 1, 2025 depending on the amount of tax revenue received; and
- starting July 1, 2025, increase the excise tax to 19%.
The release of the proposal is the first step in the legislative process. The proposal will be reviewed and potentially accepted, rejected, or amended over the next four-weeks. Reach out to your local advocacy groups for information on how to reach out to your state representatives and voice your thoughts.
Other tax related bills have been moving forward through the California legislative process, including SB-1074 (eliminates the cultivation tax and increases the excise tax by an undetermined amount) which has recently been ordered inactive, and SB-1281 (discontinue cultivation tax and lowers the excise tax to 5%) which has been held at its current desk.
AB-2691 – Temporary Event Cultivator Retailer License
As of May 26, 2022, this bill has been ordered inactive at the request of Assembly Member Wood. The bill would have allowed equity applicants and cultivators of less than an acre of cannabis (inclusive of all licensed premises) to obtain up to 8 temporary event retail licenses per year to sell cannabis direct to consumers at licensed cannabis events. Additional work needs to be done to get this bill, or at least some version of this bill, to move forward.
SB-1148 – Cannabis: California Environmental Quality Act
The bill was last amended on May 23, 2022. If passed as written, CEQA review would not be required by the state agency to issue a state license if the local jurisdiction filed a notice of exemption or determination with the Office of Planning and Research specific to the cannabis activity. The exemption only applies to the activities associated and reviewed under CEQA by the local jurisdiction. As of May 27th, this bill was moved to the Assembly, read for the first time, and held at the Assembly desk.
SB – 1186 – Medicinal Cannabis Patient’s Right of Access
This bill prohibits local jurisdictions, on or after January 1, 2024, from adopting or enforcing any regulation that prohibits the delivery of medicinal cannabis within the local jurisdiction. On May 23, 2022, the bill passed the state Senate and ordered to the Assembly. Given that there are still a majority of the local jurisdictions that banned commercial activity, it has been burdensome for medical patients to receive their medicine. This could help ensure access to patients that don’t have the capability to travel to the nearest dispensary. As of May 24, 2022, this bill was moved to the Assembly, read for the first time, and held at the Assembly desk.
This blog is for informational purposes only and is not intended for legal advice. Emerge is tracking numerous pieces of state and local statutes, ordinances, and rules. If you have any questions, reach out to attorneys Genny Kiley or Delia Rojas.