NY Is Set to Legalize Recreational Marijuana

UPDATE: Governor Andrew Cuomo just signed into law the Marihuana Regulation and Taxation Act.

After years of fits and starts, New York has passed legislation to legalize recreational marijuana under the Marihuana Regulation and Taxation Act (S854-A) which Governor Cuomo intends to sign. The legalization aspect of the bills would take effect immediately, while Senate Finance Committee Chair Liz Krueger has indicated that sales could begin as soon as one year after enactment, and Assembly Majority Leader Crystal Peoples-Stokes said it could take between 18 months and two years for a regulated market to come into operation. The state is to begin preparing to license dispensaries in anticipation of an effective date.

Following is a summary of the provisions of the bill.

Permitted Use

Cannabis use will be permitted for purchase and possession for those 21 years of age and up.

Home cultivation will be allowed for those 21 years of age and up. Six plants may be cultivated for personal use, provided only three are mature at a time. There is a maximum of twelve plants for households, regardless of the number of eligible persons living there. Municipalities may not ban people from cultivating, but they are able to impose regulations. Those who are properly registered to use medical cannabis would be eligible to start growing plants six months after the law takes effect. Personal use consumers must wait eighteen months after the first marijuana retailer launches.

Criminal Regulation

The Department of Health is required to study devices that test saliva to determine if a person is impaired from marijuana. The efficacy of such technology is still disputed. Police would be permitted to use the odor of cannabis to identify impairment but may not use it to justify a vehicle search. Penalties for possession of less than three ounces of cannabis are eliminated from existing law. This legislation calls for the automatic expungement or resentencing for anyone with a previous marijuana conviction that would now be legal. Further, cannabis is added to the Clean Indoor Air Act, establishing where cannabis can be smoked or vaped.

Local Opt-Out

Social consumption sites are permitted under the bill, subject to proper licensure of the site. Individual municipalities have until December 31, 2021, or nine months following enactment to opt out of allowing retailers or social consumption sites, however, voters may overturn these bans through local ballot measures.

Oversight

The bill establishes the Office of Cannabis Management, an independent office that is part of the New York State Liquor Authority and is composed of five members. The office is responsible for regulating and overseeing the cannabis market. The governor will appoint three of the members, and the Senate and Assembly will each appoint one member.

Tax Structure

The legislation establishes a 13% sales tax; 9% of which is allocated to the state, and 4% to localities. In addition, an excise tax based on THC content, the active ingredient in cannabis, would be collected by the distributors. This excise tax will be 0.5 cents per milligram of THC for cannabis flower, 0.8 cents per milligram of THC for concentrated cannabis and 3 cents per milligram of THC for cannabis edibles. The taxes already imposed on marijuana sold for medical purposes will remain unchanged.

The cannabis tax structure echoes the one levied on alcohol, with tax revenue first covering the administrative costs associated with the Office of Cannabis Management. Following this distribution, the remaining cannabis tax-revenue will be divided among a variety of programs, including those designed to provide restorative justice to communities disproportionately affected by from marijuana possession arrests; help neighborhoods; education; and drug treatment. The distribution is split three ways, with 40% of the remaining dollars going to a community reinvestment fund, 40% to public schools, and 20% to drug treatment facilities and public education programs.

Licensure

There is to be a two-tier licensing structure, separating growers and retailers. Certain exceptions allow microbusinesses to be vertically integrated. The criteria of a microbusiness is to be determined in regulation by the board of the Office of Cannabis Management. A licensed cultivator or processor may not have a financial interest in a retail dispensary.

The legislation sets a goal that 50% of licenses for distribution and retail be issued to social equity applicants. These applicants include individuals from communities disproportionately impacted by the enforcement of cannabis prohibition, such as people with past marijuana convictions and those who have relatives with such records; those living in economically distressed areas; minority- and women-owned businesses; service-disabled veterans; and financially distressed farmers.

Medical Marijuana

There are currently 10 companies with New York medical marijuana licenses. These companies can apply for recreational licenses. The law increases the number of medical dispensaries a medical marijuana licensee may operate, as well as the number of medical marijuana products that can be sold including smokable products. The law further expands the eligibility for medical marijuana to a greater number of conditions, as well as allowing those qualified to obtain a 60-day supply rather than a 30-day supply. Existing medical dispensaries may establish four additional dispensing sites, providing that two sites must be in underserved areas. These registered medical marijuana organizations will be permitted to sell recreational use cannabis at a maximum of three of their locations.

For legal assistance or questions with respect to New York’s new cannabis rules and regulations, please contact us.