The Washington, D.C. Council has unanimously passed a bill to make extensive changes to the medical marijuana program in the District. The bill eliminates cannabis business licensing caps, provides tax relief to operators, further promotes social equity and creates new regulated business categories, including on-site consumption facilities and cannabis cooking classes. The bill also provides a way for current “gifting” operators, who sell non-cannabis items in exchange for “free” marijuana products, to enter the licensed market, while simultaneously sanctioning officials to crack down on those who operate illegally. The bill now heads to Mayor Muriel Bowser’s desk for signature.
While the bill eliminates cannabis business licensing caps, it does create a process for regulators to set caps or moratoriums “on the issuance of cultivation center, retailer or internet retailer licenses.”
Another amendment adopted prior to passage concerns enforcement actions that regulators will be authorized to take against unlicensed marijuana operators, including those that have leveraged the District’s “gifting” policy to circumvent regulations. The now-passed legislation says enforcement action can’t be taken for at least 315 days after the bill’s enactment.
According to Council Chair Mendelson, “What we are doing here is really giving a path for full business recognition for many of our [unlicensed] shops who, to their credit, found a loophole in the law and jumped on it, as many have in many different industries over time.” “By adding this regulation, we’ve further pushed the shops in this industry to challenge each other—and so with respect to product safety and product quality, with a fully legitimate path to full legalization for these businesses, they are now fully in the free market and competing and pushing each other” to improve, he said.
The application period for unlicensed businesses to seek a license was extended from 60 to 90 days, and unlicensed businesses can also now apply for cultivation center licenses. The bill was additionally amended to create a process for applicants to appeal license rejections.
Notably, the passed legislation also contains language that says marijuana businesses can deduct taxes under local statutes that they are prohibited from making under the federal Internal Revenue Services (IRS) code known as 280E.
A separate provision that would have allowed medical cannabis dispensaries to make deductions for losses due to reduced patient fees was eliminated under the amendment that was adopted on Tuesday.
The bill also makes self-certification permanent, allowing adults 21 and older to become medical cannabis patients who can buy marijuana from dispensaries without receiving a doctor’s recommendation.
The legislation stipulates that 50 percent of certain licenses needed to be set aside for equity applicants and existing medical cannabis operators in perpetuity, “all new retailer, internet retailer, courier, cultivation center, and manufacturer” licenses being reserved for social equity applicants. Regulators must make applications available for new licensees no later than May 1, 2023. “It’s crucial that we embed racial equity and economic equity in this bill from the very start—and that would be aligned with the realities of our actual cannabis market,” Councilman Kenyan McDuffie.
Existing medical cannabis cultivation centers and dispensaries will be permitted to be vertically integrated under one provision of Mendelson’s amendment. The proposal further calls for the creation of a new license category for internet retailers that would be able to sell marijuana without having a physical storefront.