California Senate Committee has passed a bill that was approved by the Assembly to stop a recent tax increase on marijuana products. The senators have also made proposals for revising hemp regulation and allowing medical cannabis business to send products directly from them to patients.
The Appropriations committee passed the Cannabis Tax Bill, introduced by Assemblymember Matt Haney, (D), on Friday, 7-0, after making amendments.
The bill, if passed into law would stop the tax increases for five years.
A change adopted by the Senate committee at its last meeting would have the effect date fall in October rather than instantly. Tax hikes officially came into force last month.
In June, state officials said that cannabis taxes would rise from 15% to 19% on July 1. Advocates hoped that budget legislation pending would be modified to reflect Haney’s separate bill. It didn’t work out.
Haney’s bill was a response to a budget that passed earlier despite Governor. Gavin Newsom (D) supported the inclusion of a tax freezing in trailer legislation. Assembly Speaker Robert Rivas (D) also backed the delay, but Senate President Pro Tempore Mike McGuire (D) reportedly blocked it from the budget legislation.
Under Haney’s bill, which advanced through the Assembly in June, the delayed implementation wouldn’t take effect until October. The advocates wanted it to be included in the budget bill that was recently passed because it would have taken effect immediately.
The legislation would have halted the increase in cannabis taxes until June 30th 2030. A summary states that regulators will adjust the tax rates on a bi-annual basis to generate revenue equivalent to that collected by the cultivation tax prior to discontinuation.
However, according to the chairman, on Friday the committee moved “to shorten the period in which the 15 percent rate of tax would be in force, and to add a report requirement.” As the bill’s revised text hasn’t been made public, it is unclear what new timeline will be.
Haney’s proposal would make it so the California Department of Tax and Fee Administration (CDTFA), working with the Department of Finance, would be required to “adjust the cannabis excise tax rate upon purchasers of cannabis or cannabis products” based on the “additional percentage of the gross receipts of any retail sale by a cannabis retailer that the department estimates will generate an amount of revenue equivalent to the amount that would have been collected in the previous fiscal year,” the text says.
According to information that is available, the department will need to “estimate” the amount of tax revenue that was collected during the prior fiscal year due to weight-based taxes.
The measure clearly states that the reduction in the rate of cannabis excise taxes is intended to give immediate relief to cannabis producers. The Legislature can measure the effectiveness of the goal by comparing the gain or loss of cannabis excise taxes resulting from this law’s cannabis tax rate reduction.
It also mandates that CDTFA, on or before December 1, 2026 and each subsequent year the California “submit a report to the Legislature…detailing the amount of gain or loss in cannabis excise tax revenues resulting from the cannabis excise tax rate reduction allowed by this act.”
Senate Appropriations Committee also passed unanimously on Friday legislation to incorporate hemp-derived cannabis products into state medical and adult use marijuana programs, as well as banning synthetically-derived cannabinoids. Panel adopted amendments “to delete the excise tax provision, to revise, change and create definitions for topical salves, as well as clarifying and changing requirements and prohibitions pertaining to industrial hemp, hemp-derived cannabinoids and other hemp products,” said the chair.
A measure was also approved by the panel to amend state cannabis laws to allow cannabis microbusinesses that have a licence to send products directly to their patients.
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Meanwhile, California officials are inviting research proposals for a second round of grants under a program meant to better educate the public on the state’s marijuana law and help policymakers make informed decisions on the issue.
In June, the Governor’s Office of Business and Economic Development (GO-Biz) announced the recipients of over $52 million in community reinvestment grants to nonprofits and local health departments, also funded by marijuana tax revenue.
That marked the seventh round of cannabis-funded California Community Reinvestment Grants (CalCRG) under the state program.
California’s legalization of marijuana has led to the creation of a variety of grant programs that are aimed at combating the effects of prohibition of marijuana and trying to foster a well-regulated, strong industry.
California’s Supreme Court delivered an independent victory in support of the state’s cannabis program in June. The court overturned a ruling from a lower-court in a case which suggested that federal prohibition could have been used locally to undermine a market for marijuana.
The state Supreme Court ruling also came just weeks after California officials unveiled a report on the current status and future of the state’s marijuana market—with independent analysts hired by regulators concluding that the federal prohibition on cannabis that prevents interstate commerce is meaningfully bolstering the illicit market.
The governor did sign a bill in 2022 that would have empowered him to enter into interstate cannabis commerce agreements with other legal states, but that power was incumbent upon federal guidance or an assessment from the state attorney general that sanctioned such activity.
Meanwhile, a California Senate committee recently declined to advance a bipartisan bill that would have created a psilocybin pilot program for military veterans and former first responders.
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