California’s governor has signed into law a bill to put an end to a recent tax increase on marijuana products.
Governor Gavin Newsom (D) gave it final approval on Monday. Gavin Newsom, a Democrat from California, gave the final approval to it on Monday.
Newsom stated in a release that “we’re rolling back the cannabis tax increase so the legal marketplace can continue to expand, consumers can have access to safe products and local communities can see the benefits.”
The tax increases will be halted for five-years by the bill. To date, the governor has had up to October 12th to decide on measures that were presented to him during this session.
Haney said that California’s marijuana economy could bring huge benefits to its state, if the legal market is given an equal chance to compete in a non-regulated and untaxed illegal marketplace. AB 564 is a step in the right direction. This bill protects California jobs and small businesses, while ensuring that the legal cannabis industry can thrive as intended by voters.
Haney stated on the Assembly Floor earlier this month that “the legislation will provide immediate tax relief for California’s struggling marijuana industry by reverse an unprecedented 25% excise-tax increase.” “The bill enjoyed widespread bipartisan support both in houses.”
The Assembly later approved an amendment that was adopted by a Senate committee during its previous stop. This means the new effective date is October and not immediately. Tax hikes officially came into force last month.
Brian Camire said that the California cannabis industry received a lifeline with Governor Newsom signing AB 564. Brian Camire is chief legal counsel at Weedmaps. This rollback will stabilize a declining market, and discourage bad actors who undermine the legitimate players.
He said that “Governor Newsom, and Assemblymember Matt Haney’s bill author recognized the necessity to act as they knew a healthy marijuana industry brought jobs and tax revenue into the community where it operated.”
Officials from the state announced that on July 1st, cannabis tax rates would go up to 19%. Advocates held out hopes that existing budget legislation could be changed to match Haney’s bill. This didn’t happen.
Haney’s bill was passed despite Newsom supporting a tax-freeze in the 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 first advanced through the Assembly in June, the delayed implementation won’t take effect until October. The bill was included in a separate budget law that had just been passed. This would have made it effective immediately.
Prior to its arrival at the Senate Appropriations Committee the legislation had a pause in the tax increases on cannabis until June 30, 2020. The tax rate would be adjusted on a semi-annual basis by regulators, based on the amount that was collected under the cultivation taxes imposed before its discontinuation. This percentage would not exceed 19%, according to an overview.
The chair of the Appropriations Commission said that they had moved to “shortening the period during which the tax rate at 15 percent would be in place, as well as adding a reporting obligation.”
Haney’s proposal will 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 must “estimate” the amount that the tax on weighted cultivation would have generated in the fiscal year prior.
According to the legislation, “The cannabis excise rate reduction has the specific purpose of providing immediate tax relief to cannabis industries.” 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.”
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The Senate Appropriations Committee also recently unanimously passed legislation to integrate hemp-derived cannabinoid products into the state’s medical and adult-use marijuana program, while 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,” according to committee chair.
The panel additionally approved a measure to amend the state’s cannabis law to make it so cannabis microbusinesses with a license to ship products directly to patients, with amendments.
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 separately delivered a victory for the state’s marijuana program in June, rescinding a lower court ruling in a case that suggested federal prohibition could be used locally to undermine the cannabis market.
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.
Mike Latimer provided the photo.
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