BILL ANALYSIS Ó
AB 2243
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(Without Reference to File)
ASSEMBLY THIRD READING
AB
2243 (Wood)
As Amended June 2, 2016
2/3 vote. Urgency
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+---------------------|
|Revenue & |5-0 |Ridley-Thomas, | |
|Taxation | |Dababneh, Gipson, | |
| | |Mullin, O'Donnell | |
| | | | |
|----------------+-----+----------------------+---------------------|
|Appropriations |13-1 |Gonzalez, Bloom, |Quirk |
| | |Bonilla, Bonta, | |
| | |Calderon, Daly, | |
| | |Eggman, Eduardo | |
| | |Garcia, | |
| | | | |
| | | | |
| | |Roger Hernández, | |
| | |Holden, Santiago, | |
AB 2243
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| | |Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Enacts the Medical Cannabis Tax Law (MCTL).
Specifically, this bill:
1)Imposes, for the privilege of distributing "medical cannabis
flowers", "medical cannabis leaves", and "immature medical
cannabis plants", a tax upon every "distributor" at the
following rates:
a) Nine dollars twenty five cents ($9.25) per ounce of
"medical cannabis flowers";
b) Two dollars seventy five cents ($2.75) per ounce of
"medical cannabis leaves"; and,
c) One dollar twenty five cents ($1.25) per "immature
medical cannabis plant".
2)Requires the Legislative Analyst's Office to review regularly
the tax levels established by this bill, at a minimum of every
other year, beginning in 2020, and to make recommendations to
the Legislature on appropriate adjustments that would further
the goals of addressing public safety and the environmental
impacts caused by the proliferation of cannabis cultivation.
3)Defines "medical cannabis flowers" as the flowers of a
cannabis plant, excluding the leaves and stems, that are
intended to be sold for use by medical cannabis patients in
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California under the Compassionate Use Act of 1996
(Proposition 215), found in Health and Safety Code Section
11362.5.
4)Defines "medical cannabis leaves" as all parts of a cannabis
plant, other than cannabis flowers, that are intended to be
sold for use by medical cannabis patients in California under
Proposition 215.
5)Defines an "immature medical cannabis plant" as a cannabis
plant with no observable flowers or buds, that is intended to
be sold for use by medical cannabis patients in California
under Proposition 215.
6)Defines a "distributor" as a "distributor" under Business and
Professions Code (B&PC) Section 19300.5.
7)Charges the State Board of Equalization (BOE) with
administering and collecting the new tax under the Fee
Collection Procedures Law, found in Revenue and Taxation Code
(R&TC) Section 55001 et seq., except as specified.
8)Authorizes the BOE to prescribe, adopt, and enforce
regulations relating to the implementation, administration,
and enforcement of the MCTL, including applicant requirements,
collections, reporting, refunds, and appeals.
9)Authorizes the BOE to prescribe, adopt, and enforce any
emergency regulations as necessary to implement the MCTL.
10)Provides that the tax is due and payable to the BOE quarterly
on or before the last day of the month following each calendar
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quarter.
11)Requires a return for the preceding calendar quarter to be
filed with the BOE on or before the last day of the month
following each calendar quarter. Returns shall be
authenticated in a form or pursuant to methods as the BOE
prescribes.
12)Establishes the Cannabis Production and Environment
Mitigation Fund (Fund) in the State Treasury. All taxes,
interest, penalties, and other amounts collected and paid to
the BOE, less payments of refunds and costs of administration,
shall be deposited in the Fund.
13)Provides that, notwithstanding Government Code Section 13340,
all moneys deposited in the Fund are to be continuously
appropriated, without regard to fiscal year, in the following
manner:
a) Thirty percent (30%) to the Board of State and Community
Corrections for disbursement for local law
enforcement-related activities pertaining to illegal
cannabis cultivation. The Board of State and Community
Corrections shall give priority of funds to applicants that
demonstrate that the area within the applicant's
jurisdiction has a high rate of criminal activities from
organized crime, as defined, related to illegal cannabis
cultivation. Such funds shall be allocated on a
competitive grant application process administered by the
Board of State and Community Corrections;
b) Two percent (2%) to the Department of Justice to fund
and create Regional Marijuana Enforcement Officers who
shall coordinate enforcement efforts, related to illegal
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cannabis cultivation, between the Department of Fish and
Wildlife's Marijuana Enforcement Team, the Department of
Justice's Bureau of Narcotic Enforcement, the United States
Drug Enforcement Administration, and local law enforcement.
The Department of Justice shall prioritize creation of
Regional Marijuana Enforcement Officers in counties that
have demonstrated that the area within the county's
jurisdiction has a high rate of criminal activities from
organized crime related to illegal cannabis cultivation.
c) Thirty percent (30%) to the Natural Resources Agency to
fund a competitive grant program for environmental cleanup
restoration and protection of public and private lands that
have been damaged by illegal cannabis cultivation, as
specified. Such funds shall be prioritized to restoration
and cleanup projects, on public or private lands, based on
the level of damages that have occurred. At least 35% of
the funds shall be used for these purposes related to
public lands, including parks managed by the California
Department of Parks and Recreation, and at least 20% of the
funds shall be used for these purposes related to private
lands;
d) Eight percent (8%) to the Open Space Subvention Payment
Account of the California Land Conservation Act of 1965.
Administrative costs to the Department of Conservation
shall be no more than the reasonable costs to administer
the program and shall be no more than 0.5% of the 8%; and,
e) 30% to the multiagency task force, the Department of
Fish and Wildlife and the State Water Resources Control
Board, to address the environmental impacts of cannabis
cultivation on public and private lands in California and
fund other state enforcement-related activities pertaining
to illegal cannabis cultivation.
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14)Requires the BOE to submit a report to the Legislature on the
total amount of revenue that was collected for the two-year
period beginning on this tax's operative date. The report
shall be due on or before the last day of the month commencing
180 days after the two-year period.
15)Provides that this act shall become operative on or after
[sic] the first day of the first calendar quarter commencing
more than 270 days after adequate funding has been received by
the BOE to implement and administer this bill. The BOE shall
post a notice on its Internet Web site when this condition has
been satisfied.
16)Specifies that funds for the establishment and support of the
activities required under this bill shall be advanced as a
General Fund or special fund loan, and shall be repaid by the
BOE from the initial proceeds from taxes collected, no later
than six months after the bill's operative date.
17)Provides that the MCTL shall become inoperative on January 1,
2018, if the Secretary of State Initiative Number 1762, known
as the Control, Regulate and Tax Adult Use of Marijuana Act,
is approved by the voters at the November 8, 2016, statewide
general election and takes effect.
18)Provides that the tax shall be in addition to, and shall not
limit, any taxes or fees imposed by a county or city and
county.
19)Takes immediate effect as an urgency measure.
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20)Sunsets on January 1, 2025.
EXISTING STATE LAW:
1)Defines "cannabis" as all parts of the plant Cannabis sativa
Linnaeus, Cannabis indica, or Cannabis ruderalis, whether
growing or not; the seeds thereof; the resin, whether crude
or purified, extracted from any part of the plant; and every
compound, manufacture, salt, derivative, mixture, or
preparation of the plant, its seeds, or resin. [B&PC Section
19300.5]
2)Defines "distribution" as the procurement, sale, and transport
of medical cannabis and medical cannabis products between
licensed entities. [B&PC Section 19300.5]
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)Increased revenue of up to $77 million annually.
2)Significant administrative costs to the BOE of approximately
$3.5 million annually.
COMMENTS:
1)The author has provided the following statement in support of
this bill:
We are seeing unpermitted land grading and road
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construction, illegal stream diversions, discharge of
sediments, and pollutants into waterways, as well as
contamination of water and soil by pesticides,
rodenticides, fertilizers and fuels. Mammals, birds and
fish are dying horrible deaths from poisons used to
protect crops and left behind long after the growers
leave an area. These toxins seep into our water supply.
Water is being held from traditional agriculture to
ensure there is water in the streams for endangered fish,
but instead it is being pumped onto illegal marijuana
farms and poisoned by chemicals. Last year, Sproul
Creek, in Humboldt County, ran dry for the first time and
officials believe it was due in large part to illegal
diversions of water for marijuana.
The Medical Marijuana Regulation Safety Act, specifically
AB 243 (Wood), Chapter 688, Statutes of 2015, created an
environmental regulatory structure to address many of
these environmental damages, such as the establishment of
a permanent and statewide Watershed Enforcement Team
(WET), but the funding component was removed in AB 243
before the bill reached the Governor's desk.
2)Committee staff comments:
a) An overview of state law: The California Uniform
Controlled Substances Act prohibits, except as authorized,
the possession, cultivation, transportation, and sale of
marijuana and marijuana derivatives. Under Proposition
215, however, existing law does authorize a patient (or the
patient's primary caregiver) to cultivate or possess
marijuana for the patient's medical use when recommended by
a physician, as specified.
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i) SB 420: SB 420 (Vasconcellos), Chapter 875,
Statutes of 2003, established statewide guidelines for
Proposition 215 enforcement. Specifically, SB 420 called
for the establishment of a voluntary program for the
issuance of identification cards to qualified patients.
SB 420 further specified that no patient or primary
caregiver in possession of a valid identification card
shall be subject to arrest for possession,
transportation, delivery, or cultivation of medical
marijuana, as specified.
ii) Medical Marijuana Regulation and Safety Act (MMRSA):
In 2015, the Legislature enacted the 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.
Among its provisions, the MMRSA established the Bureau of
Medical Marijuana Regulation within the Department of
Consumer Affairs to oversee and enforce the state's
medical marijuana regulations, in collaboration with the
California Department of Public Health and the California
Department of Food and Agriculture (CDFA). Additionally,
the law established categories of licenses for various
medical marijuana activities, such as cultivation,
manufacturing, distribution, transportation, and sale.
AB 266 also added R&TC Section 31020 to require the BOE,
in consultation with the CDFA, to adopt a system to
report commercial cannabis and cannabis product movement
throughout the distribution chain (i.e., "track and
trace"). The adopted system must employ secure packaging
and provide information to the BOE. Section 31020 also
requires the system to capture, at a minimum, all of the
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following:
(1) The amount of tax due by the designated
entity;
(2) The name, address, and license number of the
designated entity that remitted the tax;
(3) The name, address, and license number of the
succeeding entity receiving the product;
(4) The transaction date; and,
(5) Any other information the BOE deems necessary
for the taxation and regulation of marijuana and
marijuana products.
b) What would this bill do? This bill would impose, for
the privilege of distributing medical cannabis flowers,
medical cannabis leaves, and immature medical cannabis
plants, a tax on distributors of cannabis. Funds generated
from the new tax would be used for, among other things,
both cannabis-related law enforcement activities and
efforts to address the environmental impacts of cannabis
cultivation on public and private lands in California.
Analysis Prepared by:
M. David Ruff / REV. & TAX. / (916) 319-2098
FN: 0003404
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