the highs & lows of embracing cannabis highs... · the medical cannabis and regulatory safety...
TRANSCRIPT
The Highs & Lows
of Embracing Cannabis
Cannabis Laws in California Proposition 215: The Compassionate
Use Act – 1996
The Medical Cannabis and Regulatory Safety Act- 2015
Proposition 64: Adult Use of Marijuana Act – 2016
SB 94: Conforms MCRSA and AUMA into a single system of state regulation and tax collection. – 2017
Proposition 64 Vote
National Cannabis Legalization
Dark Green: Medical Cannabis Legal Light Green: Recreational Cannabis Legal
Cannabis Laws: Local
Authority
Proposition 64 includes multiple local control provisions that respect local government powers to: Permit, regulate and tax commercial cannabis activity Ban commercial cannabis activity Ban outdoor home cultivation
However, no local jurisdiction may ban: The personal consumption of cannabis within its jurisdiction The allowance of up to six plants for personal use The transportation of cannabis through the jurisdiction
Local Regulation Not only did California voters approve Proposition 64
by 56.1%, but they also approved a number of city and county local measures
There were 53 city and county measures on the November 2016 ballot, including taxation measures, regulatory measures, amendments to existing ordinances and citizens’ initiatives
Of these measures, 39 were successful
There are a total of nine county measures as of September 2017
Bureau of Cannabis Control is the lead agency in developing regulations for medical and
adult-use cannabis in California. The Bureau is responsible for
licensing retailers, distributors, testing labs and microbusinesses.
CalCannabis Cultivation
Licensing: CDFA
metrc - Marijuana Enforcement
Tracking Reporting Compliance is the seed to sale track and trace system.
Accela - that streamlines licensing
for the medical and recreational cannabis industry.
Board of Equalization (BOE)
California Department of Tax and Fee
Administration
Effective July 1, 2017 the State Board of Equalization has been restructured to better serve taxpayers.
https://www.cdtfa.ca.gov/
To Tax or Not to Tax?
SISTERS OF THE VALLEY
Panel
Members
Mendocino – Shari Schapmire
Monterey – Mary Zeeb
Santa Cruz – Edith Driscoll
San Luis Obispo – Jim Erb
Mendocino County’s Evolution of
Cannabis Revenue & Taxation
2007 - 9.31 Medical Cannabis Cultivation Regulation initiated – Zip Tie Program.
2011 - 9.31 Program shut down by federal intervention.
2012 - Resurrected 9.31 Program with amendments - voluntary only.
2013-2016 - Amendments adopted by BOS.
2016 - Lawsuit filed – County ceased accepting 9.31 applications per settlement agreement.
Cannabis Business Tax Implementation
November 2016 – Local Cannabis Business Tax approved by voters.
January 2017 – Cannabis Business Tax imposed on dispensaries.
April 2017 – Cultivation Ordinance adopted by BOS.
May 2017 – Cultivation Permits accepted (May 4, 2017 through June 30, 2018). Cannabis Business Tax imposed on cultivators.
October 2017 – Cannabis Facilities Business License Ordinance adopted by BOS.
November 2017 – Set to begin accepting business license applications and impose Cannabis Business Tax on cannabis facilities.
Tax on Cultivation – Gross Receipts with
Minimums Required, per Growing Cycle,
Based on Square Footage
Cultivation - 2.5% Gross Receipts – as of July 1, 2020, tax rate may increase in 2.5% increments with BOS approval, not to exceed the maximum tax rate of 10%.
Persons cultivating less than or equal to 2,500 square feet shall pay a tax of no less than $1,250 per growing cycle.
Persons cultivating 2,501 to 5,000 square feet shall pay a tax of no less than $2,500 per growing cycle.
Persons cultivating more than 5,000 square fee shall pay a tax of no less than $5,000 per growing cycle.
Tax on Dispensaries & Other
Commercial Cannabis Businesses
Dispensaries – 5% of Gross Receipts – as of July 1,
2020, tax rate may increase in 2.5% increments,
not to exceed the maximum tax rate of 10%.
Other Commercial Cannabis Businesses - $2,500
per fiscal year – CPI adjustments beginning in July
2020.
Track & Trace Vendor –
SICPA – CalOrigin
County contracted with SICPA prior to State
selection of vendor.
Emerald Triangle Presence.
Fees paid through TTC online or by cash in office.
MEN
DO
CIN
O
Collections Software Vendor –
Thomson Reuters Aumentum
Contracted with Thomson Reuters in 2015 for
Property Tax System, including Business Revenue
Module for TOT, BID, and Business Licenses – on
hold until completion at Riverside County.
After approval of tax measure, Thomson Reuters
agreed to move forward with a newly created
Cannabis Business Revenue Module, providing
no resources were pulled from Riverside County.
September 2017 – GO LIVE!
Monterey County State of California
Compassionate Use Act (Prop 215) in 1996
Medical Marijuana Program (SB420) in 2003
Monterey County
No local regulations
Early Summer of 2015
Growing interest & industry pressure for regulations & permitting
Board of Supervisors calls for 30 day temporary ban on new collective & co-ops
Monterey County
July 2015
BOS adopts an interim ordinance Prohibits new collective & cooperative operations
Creates exemptions
Current cultivators of medical cannabis in greenhouses
Cultivators in compliance with state law
Cultivators who had made substantial process towards cultivation.
BOS creates ah hoc committee to work on permanent regulations Two BOS members, CAO, County Counsel
Resource Management Agency
Sheriff, District Attorney
Tax Collector, Ag Commissioner
Economic Development, Environmental Health
Committee consultant provided rough draft of Ordinance Completely rewrote for Monterey County
Commercial Cannabis
Business Tax General Tax
Unincorporated area only
Tax rates consistent with other local jurisdictions
Tax rates in-line with other jurisdictions around the state
BOS adopts all ordinances and calls for an election November 8, 2016
Monterey County Measure Y passed with 74% voting yes
Tax operative January 1, 2017
Immediate Taxation and Business License Issues Staff
Collection software system CASH & security
Permits
Education & outreach
Self Reporting
Bills, forms, documents
Staff Went to the BOS in December
3 new positions in Tax - $120,353 Management Analyst Accountant Technician
Funding for construction - $73,815 Strengthened access restrictions
Remodel of an equipment room Additional security cameras.
Funding for supplies - $34,323 Security Cameras Security Guards Currency Counter Misc furnishings
Collections Software
System
Excel
HDL Prime
Cash
JetScan iFX® i400 Multi-Pocket Sorter
Taxpayers must make appointments for cash payments
Permits, Education,
Outreach, Self-Reporting
Forms, Bills & Documents
www.co.monterey.ca.us/taxcollector
Santa Cruz County
History of cannabis in Santa Cruz
Ordinance and Ballot Measures
Revenue
Dispensary, Cultivating and Manufacturer
Implementation process
TTC, AC and CLO Role
Edith Driscoll
Auditor-Controller / Treasurer-Tax Collector
Ordinance and Ballot Measures:
A brief history
In 1992 the voters enacted Measure “A”, adding Chapter 7.122 to the Santa Cruz County Code which declared support for making cannabis available for medical use
Ordinance and Ballot Measures:
Citizen Engagement
Ordinance and Ballot Measures:
Citizen Engagement
Ordinance and Ballot Measures:
Citizen Engagement
Nov. 14, 2014 Measure K
Nov. 8, 2016
Measure E
C4
Committee
BOS Agenda 6/23/2015
Santa Cruz County
Ordinances and Ballot Measures
Up to 10%
Gross Receipts
Tax
Currently 7%
Defined Cannabis
Modified Cannabis business
Cannabis
Business Tax
Licensing 13
eligible
dispensaries
Dispensaries: Plus One
Dispensaries: Revenue
http://www.co.santa-cruz.ca.us/
Departments/TaxCollector/CBTandTOTTaxData.aspx
Dispensaries: Revenue
Cultivating / Manufacturing
implementation process
Commissioned an Environmental Impact Report
for two proposed cannabis ordinances, County
Code 7.128 Commercial Cannabis Cultivation,
and County Code 7.132 Commercial Cannabis
Manufacture
Cannabis Environmental Review Status
Cannabis Tax Information
Treasurer –Tax Collector’s Role
Set up
• Open a TTC payment account
• Not Anonymous
Report
• Monthly
• Can be done electronically
Pay
• Monthly
• Can be done electronically or in person via Cash, Check, e-Check or Credit Card
Auditor-Collector’s Role
The ordinance – County Code
Chapter 4.06.220 –
“Audit and Examination of Records
and Equipment”
Santa Cruz County Cannabis Licensing Office Role
Implements the goals, strategies, policies and programmatic framework for the issuing of licenses through the Cannabis Registration and Licensing Program of the County. Build and manage the Cannabis Licensing Programs. Evaluate the licensing of cannabis locations and issue/deny/revoke licenses based on guidelines;; and to do other work as required.
Cannabis Licensing Officer and 4.0 fte
(2 Planners and 2 Code Compliance Officers)
Santa Cruz County
Request to be Notified
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events or news, please email:
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added to our mailing list.
County of San Luis Obispo
Land use ordinance
Tax consequences
Banned cultivation - water basins issues
Planning Commission recommendation:
50 outdoor grow sites
Unlimited indoor. Indoor means permitted structure. Hoop houses do not qualify as indoor.
Public opposition
County of San Luis Obispo
County solicited license interest
Put first 100 on a list, most out of the area
Chorizo Plains, remote part of the County,
land is inexpensive, $5,000 an acre or less
Grow size limited to one acre
108 grows in Chorizo Plains already
Some over an acre
County of San Luis Obispo
BOS has mixed feelings on allowing cannabis activities but overall agree it cannot be stopped
Taxation has only been discussed once, very high level
BOS direction: Recover license enforcement costs, possibly
through a fee based on square foot
$1.2 million budgeted
Approximately $1.05/sq ft for 100 growers
Would not require ballot measure – cost recovery only
Would be annual but based on prior year costs
County of San Luis Obispo
BOS agrees - tax needed to offset
consequences
We have listened to Humboldt County
BOS wants to tax but not burdensome
Smaller family farmers hoping to improve
annual income
Four County Supervisors involved in
agriculture or ranching
County of San Luis Obispo
My task; because no one else is doing it:
Determine a fair tax rate
Determine a tax method
Provide revenue estimates
Get to know people in the industry
We have not been approached by the
state to collect CBT.
Implementation – Gettin’ Down in Weeds
County of San Luis Obispo
Started with ballot measure - Monterey County
Compliance program
Leaning towards a 4% tax on Gross Receipts from Cultivators
Also 4% tax on all other active
Both are scalable to 10% with BOS approval (3/5th vote)
Ballot help - SCI
BOE & CSAC
Cannabis Regulation, Revenue
Collection & Banking Services –
California County JPA Solution
October 2017
Federal Law Conflict
Federal Statutes Conflict with State Law & Limit Banking Access/Services, Impacting Tax Collection &Compliance:
Schedule 1 Drug: Controlled Substances Act
The Money Laundering Control Act
The Bank Secrecy Act
Federal Guidance Key Documents:
The Department of Justice “Cole Memo”
The Department of Treasury’s FinCEN Guidance National Credit Union Association: July 2014
Letter indicates as long as a credit union is following the FinCEN Guidance, there would unlikely be any negative repercussions from the regulator
Impediments to Banking The largest impediment to providing access to
banking services is the demand on banking
institutions to conduct enhanced due diligence
(EDD).
EDD requires commercial banks taking on CRBs
to:
ensure their cannabis customers are not
engaging in money laundering, and
otherwise ensure that cannabis business
customers are complying with state and local
laws regulating and taxing the industry.
Need for Data Data is needed at three separate and distinct levels (1) Local Government, (2) State Government, and (3) Banking Institutions
Financial/Accounting information is necessary for local regulators to ensure that CRBs are in compliance with local ordinances, state law, and are fulfilling their tax obligations.
Financial/Accounting and operational information is necessary in order for banks to comply with enhanced due diligence requirements.
Data Collection Data points vary, and include (but are not limited to):
Type of CRBs (e.g., cultivation, manufacturing, retail)
Location of CRBs (needed for code enforcement)
Sales/Accounting Information (needed for tax calculations)
Employees (needed for employment tax/insurance)
Measures taken to prevent sales to minors/violence (example of FinCen requirements where data collection is needed)
Data Collection Challenge
Having multiple entities responsible for the collection of data - potential to create inconsistencies
Proposition 64 authorization for local regulation, while positive for maintaining local control, has the potential to exacerbate this problem given 58 counties and over 450 cities could regulate in a different manner and collect different types of information.
A single data repository could serve to to overcome
these challenges and lower costs for local government data collection, while also providing better information for local government policy makers.
Data Collection Solution
Advantages of 1 Data Collection Platform for Local Government:
Accessible to multiple local government agencies
Established common metrics to measure impacts
Access to information about CRBs operating in other jurisdictions
Solution: Create a Joint Powers Authority!
County Members only (as subdivisions of the state)
State/City/Banking entity participation
JPA Governance The California Cannabis Authority (CCA) Joint Powers Authority:
“Members” are comprised of counties that adopt an
ordinance to join, as well as “participants” including state agencies, cities, and banking institutions who are directly involved in taxing or regulating the cannabis industry. Cities will be treated as Participants who, by contract, will participate in the JPA but without Board voting authority.
The Board constitutes the governing body of the CCA and comprises each Member County choosing to sit on the Board and designate a Board Member.
The Board will designate an Executive Committee comprised of a President, Vice President, Secretary, Treasurer and three “at large members” that will be responsible for oversight of day-to-day Authority operations. The Executive Committee will be responsible for hiring an Executive Director and General Counsel who will be responsible for running the Authority on a day-to-day basis.
JPA Governance The California Cannabis Authority (CCA) Joint Powers Authority:
The purpose of the CCA will be multifaceted, but will initially focus on data collection and possibly other services intended to ameliorate the cash collection issues facing state and local taxing entities.
Create a system that will collect data to help improve tax collection for state and local agencies. Additionally, the CCA will be authorized to provide regulatory and tax administration support and services on behalf of Member and Participant agencies; coordinate regulatory and tax collection activities; promote efficiency among County regulatory and audit ordinances and practices; and facilitate industry compliance.
Through access to the combined information collected by CCA, Member and Participant agencies, the CCA will be in a position to provide unparalleled insights into cannabis operations in California – which will serve the needs of these Member and Participant agencies in their regulatory, tax, and public safety functions.
JPA Costs/Revenue
Baseline services of access to this financial information will not cost the member counties as CRBs will be required to pay for this service.
In order to offset the cost of of the services of the JPA, a revenue stream into the CCA will be needed to cover the cost of this service.
A requirement of joining the CCA will be to amend or adopt a local ordinance to require CRBs to submit certain financial and other information into the CCA database. This service will require a small fee imposed on the CRBs to the CCA for this service .
Scope of Services To join as a member of the CCA, the Board of Supervisors must pass a resolution
Member counties will have complete access for the data platform. This access will enable the following:
Ensure compliance with tax payments
Review of information for code enforcement
Public safety monitoring
Monitor market trends to determine impact on local economy
Meet banking enhanced due diligence requirements – provide assurance to banks
Get Started…Contact
For more information, please contact:
Cara Martinson, CSAC Senior Legislative Representative & Federal Affairs Manager, at 913-327-7500 or [email protected]
Alan Fernandes, Executive Vice President, CSAC Finance Corporation, at 916-955-1791 or [email protected]
Thank you!
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