BILL ANALYSIS Ó
AB 2243
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Date of Hearing: May 11, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2243 (Wood) - As Amended May 3, 2016
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill creates a Medical Cannabis Tax Law, which is tax on
medical cannabis distributors that is administered by the Board
of Equalization (BOE). Specifically, this bill:
AB 2243
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1)Defines key terms, including "cultivator" and "distribution,"
for the purposes of the Medical Cannabis Tax Law.
2)Requires every distributor to pay a tax upon any distribution
of medical cannabis flowers, medical leaves, and immature
cannabis plants at the following rates:
a) $9.25 per ounce of medical cannabis flowers, or a
proportional rate on quantities of less than one ounce.
b) $2.75 per ounce of medical cannabis leaves, or a
proportional rate on quantities of less than one ounce.
c) $1.25 per immature medical cannabis plant.
1)Authorizes BOE to establish, by regulation, a method and
manner for payment of the tax that utilizes tax stamps or
product bags that indicate all required tax has been paid and
to adopt regulations related to implementation,
administration, and enforcement of the tax.
2)Requires the Legislative Analyst's Office (LAO) to review the
tax levels established in this bill every other year beginning
in 2020.
3)Establishes the Cannabis Production and Environment Mitigation
Fund (Fund) and requires all taxes, interest, and penalties,
less payments of refunds and costs of administration, to be
deposited into it. Moneys in the Fund will be allocated as
follows:
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a) 30% to the Board of State and Community Corrections
(BSCC) for disbursement for local law enforcement
activities related to illegal cannabis cultivation, to be
allocated through a competitive grant process administered
by BSCC.
b) 30% to the Natural Resources Agency to fund a
competitive grant program for environmental cleanup
restoration and protection of lands that have been damaged
by illegal cannabis cultivation.
c) 30% to the multiagency task force, the Department of
Fish and Wildlife and the State Water Resources Control
Board to address environmental impacts of cannabis
cultivation on California land.
d) 10% to the bureau of Medical Marijuana Regulations and
other qualified state agencies to conduct ongoing studies
of areas that may create challenges to compliance of
medical marijuana regulations, such as financial
transactions and the public safety implications of a cash
industry.
1) Sunsets the bill on January 1, 2018, if the Control,
Regulate and Tax Adult Use of Marijuana Act is approved by
voters at the November 9, 2016 statewide election
FISCAL EFFECT:
1)Increased revenue of up to $77 million annually. (Marijuana
Production and Environment Mitigation Fund)
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2)Significant administrative costs to BOE of approximately $3.5
million annually. (Marijuana Production and Environment
Mitigation Fund)
COMMENTS:
1)Purpose. According to the author, AB 2243 will provide funds
necessary to help fund the environmental regulatory structure
that addresses many of the environmental damages caused by
marijuana cultivation.
2)Background. In 2015, the Legislature enacted the Medical
Marijuana Regulation and Safety Act (MMRSA) through a package
of bills establishing a comprehensive licensing and regulatory
framework for medical marijuana. Specifically, the MMRSA
consists of three bills: (1) SB 643 (McGuire), Chapter 719,
Statutes of 2015; (2) AB 243 (Wood), Chapter 688, Statutes of
2015; and, (3) AB 266 (Bonta), Chapter 689, Statutes of 2015.
MMRSA created a comprehensive state licensing system for the
commercial cultivation, manufacture, retail sale, transport,
distribution, delivery, and testing of medical cannabis. In
addition, the bills affirm local control and require licensure
by both a local government and the state in order for a
licensee to operate. MMRSA went into effect on January 1,
2016, although licensure requirements will not go into effect
until the regulatory entities responsible for implementing
MMRSA pass necessary regulations.
Among other things, MMRSA establishes the new Bureau under the
DCA, which is responsible for licensing and regulating
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dispensaries, transporters, and distributors. In addition, the
CDPH is responsible for regulating manufacturers, testing
laboratories and the production and labeling of edible medical
marijuana products. The CDFA is responsible for regulating
cultivation, and other state agencies, such as the Department
of Pesticide Regulation and the State Water Resources Control
Board, are responsible for developing environmental standards.
3)Taxing distributors. This bill imposes a tax on distributors
of certain medical cannabis products for sale (medical
cannabis flowers, medical cannabis leaves, and immature
medical cannabis plants).
The May 3rd amendments to AB 2443 changed the imposition of
the proposed tax from the cultivator to the distributor. The
introduced version of this bill required the distributor to
collect the tax from the cultivator upon purchase of medical
cannabis products. In their analysis of the introduced version
of AB 2443, BOE noted two administrative challenges with this
approach:
a) Not all cultivators will sell their product directly to
a distributor. Cultivators may opt to send their product
directly to a manufacturer, who then sells their product to
a distributor.
b) The collection of taxes on the cultivator by the
distributor would be very complex to administer. Unlike
other distributor-level tax structures, the introduced
version of the bill would have the purchaser of the product
(the distributor) collect the tax from the cultivator.
The most recent amendments imposes the tax on the distributors
themselves, which puts AB 2243 in line with the cigarette tax,
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where the tax is imposed on whoever distributes the product
for first sale.
1)Senate bill. SB 987, which is currently pending in the Senate
Appropriations Committee, also imposes a tax on medical
marijuana. Unlike AB 2243, the tax imposed is a 15% excise tax
on medical marijuana sold to consumers. This bill is projected
to raise up to $126 million in FY 2016-17.
Analysis Prepared by:Luke Reidenbach / APPR. / (916) 319-2081