Two key efforts focused on California’s cannabis industry went in opposite directions in the final hours of the state’s legislative session. A push to regulate CBD in food, via a last-minute amendment to an unrelated bill, died despite promising negotiations with Governor Gavin Newsom’s administration, its sponsor told Cannabis Wire, while AB 1872, a budget bill that would provide “tax certainty” for 2021, is headed to Newsom’s desk.
In January, Newsom’s 2020-21 budget laid out cannabis priorities, and at the top was “tax reform.” His administration would, “in consultation with the industry and stakeholders,” consider “changes to the existing cannabis tax structure, including the number of taxes and tax rates to simplify the system and to support a stronger, safer legal cannabis market.”
Lawmakers immediately crafted legislation to begin to meet those tax priorities. While cannabis tax rates are subject to mark-ups and adjustments for inflation, the legislation would, in short, keep tax rates where they are until the end of 2021.
“We thought it was important to give these companies tax certainty over this next year because they are not getting much of the relief that other small businesses are getting through the federal government,” Assembly member Phil Ting, chair of the Budget Committee, told Cannabis Wire, referencing the Paycheck Protection Program and other federal financial services that have helped keep small businesses afloat amid COVID-19.
The budget legislation, Ting said, deals with “the two biggest issues” he hears about, which are “the cost of doing business as well as enforcement.”
“We want to make it as easy as possible to come forward to get a license to be a legal business in California. Unfortunately, we have too many companies who have just gotten used to operating in the shadows that are just fine doing that. And they are putting our legal cannabis businesses at a disadvantage,” Ting said, adding that lawmakers are “trying to take appropriate action to make sure we have proper enforcement, but also that we’re balancing the playing field regarding taxes.”
Amendments to another bill would have regulated hemp-derived cannabidiol (CBD) products in California, specifically in food, beverages, dietary supplements, and cosmetics. Assembly member Cecilia Aguiar-Curry told Cannabis Wire that she is surprised and confused by the fact that popular CBD products are not regulated in her state. So, she spearheaded negotiations with Gov. Gavin Newsom to amend AB 2028, a bill unrelated to cannabis, to finally regulate the flood of CBD products already on shelves and sold online.
But those efforts died over the weekend, Aguiar-Curry said, for now, despite CBD’s potential as an “incredible economic development tool for us.” The amended bill would have created new hemp and CBD rules, from testing to labeling. It also would have imposed a $250 fee on hemp manufacturers, the revenue from which would have gone toward the California Industrial Hemp Research Fund, to have been overseen by one of the University of California campuses.
“We’re moving in the right direction. I guess everything wasn’t lined up just perfectly,” a disappointed Aguiar-Curry told Cannabis Wire Sunday night, after it became clear that the amendments weren’t going to cross the finish line. “That’s the way government works sometimes.”
Aguiar-Curry, who represents the 4th Assembly District, which includes Wine Country and parts of the Sacramento Valley, introduced the amendments because both brick and mortar shops and internet outlets are selling unregulated, untested CBD products that “do not meet stringent California consumer protection standards.” Meanwhile some product labels make “outrageous” claims about potential benefits at a time when consumers, including seniors and parents of seriously ill children, seek out CBD products to treat various conditions.
For example, the Federal Trade Commission has issued warning letters to CBD companies for outlandish claims, including CBD as a COVID-19 treatment.
While Congress passed the 2018 Farm Bill, which legalized hemp, federal policies have lagged. As Cannabis Wire has covered, the Food and Drug Administration recently drafted its long-awaited policy on products containing CBD, and other cannabinoids, and sent it to the White House Office of Management and Budget for approval, a final step before publication, but the waiting game to see how the FDA will regulate these products continues.
While other cannabis-related bills failed to advance, as Cannabis Wire recently reported, here are the key cannabis bills brought forth by lawmakers that are headed to Newsom’s desk:
• AB 1525, a bill that would protect financial institutions that choose to work with the legal cannabis industry. Bill sponsor Asm. Reggie Jones-Sawyer told Cannabis Wire that his legislative colleagues have been “immensely supportive” of the measure. “My district is home to a number of financial institutions that would love to provide financial services to cannabis businesses, but feel there is too much risk without assistance from the state. AB 1525 responds to those concerns by providing additional access to financial services for cannabis businesses in a manner that protects proprietary business information,” Jones-Sawyer told Cannabis Wire.
• SB 67, a bill that would “limit the approval of appellations of origin for cannabis unless it requires the practice of planting in the ground in flowering areas and excludes the practices of using artificial lighting and structures in flowering areas.” It would also “require the department to establish standards by which a licensed cultivator may designate a city or city and county of origin for cannabis produced 100% within the designated city or city and county.”
California’s cannabis appellations program is the first of its kind. And just as a wine cannot be called Champagne unless it was produced in Champagne, there will be such branding for, say, Humboldt cannabis. (Read Cannabis Wire’s extensive coverage of the process to create appellations in California.)