Amid concerns about minority businesses being left out and general frustration with the pace at which Michigan is moving on both the medical and recreational marijuana fronts, a group of organizations with marijuana business interests is preparing legislation they hope will make significant changes in how the market will operate.
Their sweeping proposal — which will face a tough climb in the Legislature because some changes would require a super-majority vote — would make the “gifting” of marijuana illegal; fundamentally change the caregiver system that has been in place since 2008 when voters legalized marijuana for medical use; reimpose the 3 percent excise tax on medical marijuana that ended on March 6; allow medical marijuana dispensaries to begin immediately selling marijuana for adult recreational use; require people who grow their own marijuana to register any heavy equipment they use with their local community, and allow unlicensed dispensaries to continue to operate through the end of the year.
“We’re not trying to circumvent how recreational will operate,” said Eric Foster, a consultant with Banks & Company in Southfield, which has a number of marijuana business clients. “We’re just trying to accelerate the market and address some of the concerns from local government.”
Besides Banks & Company, the groups involved in developing the bills are the Florida-based Minorities for Medical Marijuana; Cannas Capital, a Muskegon insurance and investment agency that specializes in cannabis businesses; Michigan Economic Stimulus Fund, a Kalamazoo-based cannabis consulting firm and the Lake Newaygo County chapter of the NAACP.
Applicants for marijuana business licenses have been frustrated by the pace and inconsistency in action taken by the state Medical Marijuana Licensing Board. Since the state started awarding licenses last summer, only 121 licenses have been approved. Of those license approvals, 105 — 31 growers, 11 processors, 54 dispensaries, four testing labs and 5 transporters — have paid their state regulatory assessments and actually been awarded licenses. The state has denied 41 license applications, as well as 125 applications seeking preliminary approval.
Minority groups have especially been worried that they’ll be left out of the lucrative market. The state doesn’t keep statistics on the demographics of people who have been granted or denied licenses, but many Detroit-based marijuana businesses have been denied licenses.
The organizations have one potential sponsor in the legislature and is looking for others.
Rep. Ronnie Peterson, D-Ypsilanti, has met with the group and is interested in sponsoring some aspects of the proposal, but said there are other areas that need to be addressed too that aren’t included in the initial plan.
“How do the communities benefit from these businesses beyond the taxes? And we still have no legislation dealing with banking and community reinvestment programs,” he said, referring to the fact that the marijuana business is almost all done in cash, because the federal government still considers marijuana an illegal substance and banks don’t want to risk their license by accepting proceeds from pot sales.
Sen. Jeff Irwin, D-Ann Arbor, was involved in developing and campaigning for the November ballot proposal that voters approved, legalizing marijuana for adult recreational use. He doesn’t think the legislation has much of a chance in the Legislature. First, several aspects would need super-majority votes from ¾ of both the House and Senate because the bills would change voter-approved proposals, including getting rid of the current caregiver system from the 2008 medical marijuana ballot proposal and eliminating the “gifting” services that have popped up since the legal weed proposal passed last year.
And second, he said, such sweeping changes are premature.
“The citizens just overwhelming passed Proposal 1,” Irwin said. “I think we have an obligation to the citizens to let it work and see how it works before we start talking about changing it.”
He also questions the motives of those pushing the legislation.
“There is a certain group of deep-pocketed people and people from out of state who are already invested in the cannabis industry who want the Legislature to build a little walled garden so that they can make a lot of money off of Michigan consumers,” he said. “Anytime you have the Legislature trying to rope off an industry for a small group of people, I find that very dangerous.”
Some lawmakers tried to change the marijuana legalization law after the election, by outlawing home-grown marijuana, but the measure never came close to having enough support and never got a vote.
Medical marijuana caregivers would go away
The biggest change would be scrapping the caregiver system, which was created after the 2008 vote to legalize medical marijuana and allows each registered caregiver to grow up to 72 plant for six medical marijuana cardholders. The proposal would get rid of that category in favor of less expensive transitional licenses for smaller marijuana grow operations, and potentially open the market up to more minority business owners.
In Michigan, there are more than nearly 293,000 medical marijuana cardholders and 41,440 registered caregivers. The caregivers have been selling their excess marijuana to dispensaries, but after March 31, the caregivers will only be able to sell their overages to licensed growers and processors.
Peterson said it would be beneficial to allow caregivers to more easily transition to the licensed market without having the same regulatory expenses – a $6,000 state application fee, a $10,000 regulatory assessment and the ability to show $250,000 in assets. “These small shops should be able to compete with some type of entry level license because having to show $250,000 or a half a million in assets isn’t fair.”
Irwin said, however, that the November ballot proposal already created another class of license for “micro businesses,” that don’t carry the same large expenses.
This proposal would require a ¾ vote because it changes the 2008 ballot proposal on medical marijuana.
The proposed legislation would also allow unlicensed dispensaries that are awaiting a license from the state to continue to operate through the end of 2019. But those dispensaries, which have faced a variety of deadlines to get a license or shut down, are now facing a hard March 31 deadline.
3 percent excise tax would be revived
Foster said the 3 percent excise tax on medical marijuana should be reinstated as an incentive to communities to allow legal medical weed businesses in their towns because a portion of those revenues would come back to the communities. The language to remove the tax was included in the Legislature’s 2016 laws that regulated and taxed medical marijuana and stipulated that if recreational marijuana was legalized, the excise tax on medical marijuana would disappear. Medical marijuana is still subject to the state’s 6 percent sales tax. When recreational marijuana becomes commercially available for sale early next year, it will carry a 10 percent excise tax, along with the 6 percent sales tax.
Irwin said it will be a hard sell to convince lawmakers to reimpose a tax on those using medical marijuana.
‘Gifting’ of marijuana would be eliminated
In an attempt to tamp down the black market for marijuana, the proposed package would make “gifting” of marijuana illegal. Under the November ballot proposal, individuals can grow up to 12 plants for their personal use. They can give that product away, but not sell it. As a result, “gifting” services, which skirt the letter of the law, have cropped up across Michigan in which a person can pay $55 or more for a muffin and some juice or a T-shirt and get a gram of marijuana or a vape cartridge as a gift.
This also will need a ¾ vote in the Legislature because it changes a provision of the November ballot proposal.
Recreational marijuana sales would start immediately
The state has until December to come up with the rules and regulations that will govern the recreational marijuana market and then begin to accept applications for licenses for marijuana businesses.
But under the legislation that’s being drafted, medical marijuana dispensaries would be able to immediately begin selling recreational marijuana to people 21 and older, even before the regulations are developed by the state, Foster said.
That could pose problems for the state. In other states where recreational marijuana is legal, there are different standards and dosages for medical and recreational marijuana. Those standards haven’t been developed yet for the recreational market in Michigan.
Citing safety concerns, Peterson said he’s in favor of another provision in the proposed package that would require home growers to register any heavy equipment they use to grow marijuana with their local community.
“Particularly in urban cities, you could have five or six people growing in one block,” he said. “I’m very concerned about that.”
Foster said the bills are expected to be drafted and introduced in the next couple of weeks once sponsors have been identified.
The state Department of Licensing and Regulatory Affairs is taking a wait and see attitude on the proposals.
“We appreciate and evaluate input offered from all stakeholders,” said LARA spokesman David Harns. “If the proposal is introduced into the legislative system, we’ll take an in-depth look into it at that time.”
Kathleen Gray covers the marijuana industry for the Detroit Free Press. Contact her: 313-223-4430, kgray99@freepress.com or on Twitter @michpoligal.
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Let the circle of greed and control begin to close to completion.
