On March 31, 2021, the highly anticipated Marihuana Regulation and Taxation Act (S.854-A/A.1248-A) was signed into law by Governor Andrew Cuomo, adding New York to the list of states where adult use of cannabis is legal. It is unclear when dispensaries will open and sales will begin, although there has been speculation that this will not occur until at least 2022. The cannabis market is expected to be incredibly lucrative and provide lots of new opportunities.
A summary of the key provisions of the new law is set forth below.
Office of Cannabis Management:
The new law establishes the Office of Cannabis Management (OCM), which will be part of the New York State Liquor Authority. The OCM will be responsible in crafting and overseeing the corresponding regulations covering medical, adult-use, and cannabinoid hemp.
As per the law, licenses will be issued for growers, distributors, and retailers. Microbusinesses will be allowed to be vertically integrated, although the criteria for a microbusiness has not yet been established. The law also sets a goal whereby 50% of licenses will be issued to social equity applicants, including those individuals disproportionately impacted by cannabis enforcement, minority and women-owned businesses, financially distressed farmers, and service-disabled veterans. Cities, towns, and villages may opt-out of allowing dispensaries and will have until the end of the year (December 31, 2021) to do so.
Existing Medical Marijuana Business:
The new law will also expand New York’s existing medical marijuana program in order to make it less restrictive. For instance, additional medical conditions will be covered, patients will not be restricted from smoking medical marijuana, the current supply cap will be increased, and home cultivation for medical cannabis patients will be permitted. Furthermore, medical marijuana companies will be able to add additional sites where they can operate (provided certain conditions are met), as well as apply for recreational licenses.
Due to the significant economic opportunities associated with the new legalization, it is anticipated that tax collections from the adult-use cannabis program will reach $350 million annually. The legislation establishes a 13% sales tax; 9% of which is allocated to the state, and 4% to localities. In addition, distributors would collect an excise tax based on THC content. The taxes already imposed on marijuana sold for medical purposes will remain unchanged.
The legislation also includes additional funding for drug recognition experts and law enforcement to ensure safe roadways. The Department of Health has been tasked with studying devices that determine if a person is impaired from marijuana. The use of cannabis by drivers will remain prohibited and will be subject to the penalties currently in effect.
Personal Possession and Home Cultivation:
Although legal, the new law sets limits with respect to the amount of cannabis that can be grown at home and personal possession of cannabis outside the home. Six plants may be cultivated for personal use, provided only three are mature at a time. Adults are now permitted to possess up to three ounces of cannabis for recreational use or twenty-four grams of concentrated cannabis.
Criminal Justice and Record Expungement:
Under the new law, the records of people previously convicted of crimes relating to cannabis that would now be legal will be expunged. Reduced penalties will also be implemented for possession and sale.
As per the new legislation, OCM will be responsible for establishing a public health and education campaign in order to ensure the health and safety surrounding those affected by the new law.
While the legalization of adult cannabis can provide new, lucrative opportunities for individuals and businesses, a thorough due diligence review should be completed before entering into the cannabis space. Furthermore, it is imperative that all potential business arrangements be reviewed not only from a compliance standpoint but also from a business standpoint in order to maximize benefit and minimize risk.
Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.
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