On March 27, 2021, New York State Governor Cuomo and state legislative leaders formally announced an agreement on legislation to legalize adult-use cannabis, making New York the 16th state to fully legalize cannabis. The bill, titled the Marijuana Regulation and Taxation Act (MRTA), is expected to be passed by the legislature and signed by Governor Cuomo as early as this week. The MRTA contains some key changes from when we last reported on the draft legislation. Among other things, the MRTA would permit adults 21 years old and over to purchase marijuana for recreational use, allow home growing (a provision not included in the previous versions), and create new income streams for education, drug treatment programs, and state and local governments.
In addition, the MRTA would establish the Office of Cannabis Management to implement a comprehensive regulatory framework that would cover medical, adult-use, and cannabinoid hemp. It would also expand New York State’s existing medical marijuana and cannabinoid hemp programs. Further, the MRTA provides licensing for marijuana producers, distributors, retailers, and others in the cannabis market and creates a social and economic equity program to encourage those who have been disproportionately impacted by cannabis enforcement that want to participate in the industry.
Viewed as a potentially powerful economic development opportunity, state leaders estimate that the legalization of adult-use marijuana will result in an additional $350 million in annual tax revenue and create 30,000–60,000 new jobs. Retail sales of marijuana would include a state sales tax of 9 percent. Localities’ sales tax would be 4 percent, with counties receiving one-quarter of tax revenue and three-quarters would go to the local municipality.
Under the bill, 40 percent of the revenues would go towards education, 40 percent would go to community reinvestment grants for communities harmed by the criminalization of drugs, and 20 percent would go to drug treatment and public education programs.
Some key highlights include:
Establish the Office of Cannabis Management (OCM)
The OCM would be charged with enforcing a comprehensive regulatory framework governing medical, adult-use, and cannabinoid hemp. It would be governed by a five-member board, with three members appointed by the governor and one appointment by each house of the state legislature. The OCM would be an independent office operating as part of the New York State Liquor Authority.
Medical Cannabis
The MRTA expands the list of medical conditions, allowing more individuals access to medical marijuana, increases the number of caregivers allowed per patient, and permits home cultivation of medical cannabis for patients.
Adult-Use Cannabis
A two-tier licensing structure would allow for a large range of producers by prohibiting those growers and processors from also owning retail stores. The MRTA creates licenses for producers and distributors, among other entities, and the MRTA will implement strict quality control, public health, and consumer protections. A social and economic equity program would facilitate and encourage participation from individuals disproportionally impacted by cannabis enforcement, including creating a goal of 50 percent of licenses going to minority- or woman-owned business enterprises, distressed farmers, or service-disabled veterans.
As mentioned above, the MRTA also proposes a new cannabis tax structure that would replace a weight-based tax with a tax per milligram of THC at the distributor level with different rates depending on final product type. The wholesale excise tax would be moved to the retail level with a 9 percent state excise tax. The local excise tax rate would be 4 percent of the retail price. Counties would receive 25 percent of the local retail tax revenue and 75 percent would go to the municipality.
Cannabinoid Hemp
The MRTA permits the sale of hemp flower in the cannabinoid hemp program and allows for the sale of smokeable forms only when adult-use retail stores are operational.
Adult-Use Cannabis Tax Revenue
All cannabis taxes would be deposited in the New York State cannabis revenue fund. Revenue covers reasonable costs to administer the program and implement the law. The remaining funding would be split three ways:
- 40 percent to education
- 40 percent to community reinvestment fund
- 20 percent to drug treatment and public education fund
Municipal Opt-Out
Cities, towns, and villages may opt-out of allowing adult-use cannabis retail dispensaries or on-site consumption licenses by passing a local law by December 31, 2021, or nine months after the effective date of the legislation. Municipalities cannot, however, opt-out of adult-use legalization.
Traffic Safety
The use of cannabis by drivers is prohibited; however, there is currently no roadside testing technology to certify the presence of cannabis. The MRTA directs the New York State Department of Health (DOH) to work with institutions of higher education to conduct a controlled research study designed to evaluate methodologies and technologies for the detection of cannabis-impaired driving. After completion of the research study, the DOH may create and implement rules and regulations to approve and certify a test for the presence of cannabis in drivers. The MRTA includes additional funding for drug recognition experts and law enforcement to ensure safe roadways.
Personal Possession and Home Cultivation
The following conditions apply to growing cannabis at home and personal possession of cannabis outside the home:
- Personal possession outside of the home: Up to 3 ounces of cannabis and 24 grams of cannabis concentrate
- Home possession: Amends limits of what is permitted in the home, which must be kept in a secure location away from children
- Home grow: Is permitted. However, is subject to possession limits in 18 months for recreational adult-use and subject to regulations of the medical program being promulgated no sooner than six months:
- Three mature plants and three immature plants for adults over 21 years old.
- A maximum of six mature plants and six immature plants per household.
Criminal Justice and Record Expungement
In 2019, New York State decriminalized possession of up to 2 ounces of cannabis. The revisions to criminal justice provisions are much broader, with a restructured cannabis penalty framework avoiding the criminalization seen in prohibition and reducing penalties for possession and sale. In addition, the MRTA:
- Creates automatic expungement or resentencing for anyone with a previous marijuana conviction that would now be legal under the law and provides necessary funding.
- Adds cannabis to the Clean Indoor Air Act (CIAA) which establishes a baseline on where cannabis can be smoked or vaped. (Municipalities and local governments are permitted to make laws that are more restrictive than the CIAA.)
- Contains various provisions to ensure that cannabis is treated as a lawful substance and to prevent discriminatory enforcement.
Protections for the Use of Cannabis and Workplace Safety
Unlawful discrimination would be prohibited and workplace safety protections would be implemented.
Public Health and Education Campaign
The OCM will establish a robust public health and education campaign and work with neighboring states and associations to coordinate actions and policies to protect regional health and safety.
Recreational marijuana remains illegal in New York State, pending passage of the bill. Medical and recreational cannabis are still illegal federally. Even after Governor Cuomo signs the MRTA into law, as is expected, many facets of the new law won’t take effect for months or even years.
Barclay Damon will continue to closely monitor developments in cannabis law in Barclay Damon Live: The Cannabis Counselor With Aleece Burgio, the firm’s cannabis podcast series.
If you have any questions regarding the content of this alert, please contact Chris Harrigan, partner, at charrigan@barclaydamon.com; Aleece Burgio, Cannabis Team leader, at aburgio@barclaydamon.com; or another member of the firm’s Cannabis Team.