New Jersey Cannabis Law Update – April 2018

There have been numerous developments over the past few months impacting New Jersey’s budding cannabis industry.   Below is a summary:

  • In January 2018, the IRS released an update to their policies that included a new provision that will harm cannabis-related organizations. In their new policy, the IRS stated that they will not accept tax-exempt status from organizations “whose purpose is directed to the improvement of business conditions … relating to an activity involving controlled substances … which is prohibited by federal law regardless of its legality in the state in which such activity is conducted.” This means groups that advocate for the cannabis industry will not be eligible for tax-exempt status.  The New Jersey Cannabis Industry Association was denied tax-exempt status.   If these non-profits are denied tax-exempt status, then they’ll have to pay significant taxes to the IRS, which would then limit their ability to advocate on behalf of the industry.

 

  • In March 2018, Governor Phil Murphy unveiled his proposed 2019 budget setting a January 1, 2019 target for marijuana sales to adults, and incorporating $80 million in proceeds from taxes on cannabis into the state’s expected revenue. The budget provides for New Jersey lawmakers to approve a bill legalizing adult-use marijuana by June 30, 2018, which is the deadline for passing the state budget, and would give state officials six months to develop rules and regulations for selling cannabis within the state.
  • 19 New Jersey towns so far have announced their stance regarding legalizing recreational marijuana by either passing ordinances banning the cultivation, production and sale of cannabis, stating plans to pass such an ordinance or by publicly declaring their support for legalization. Here is a list of the towns and their position:
    • Towns that have already said no
      • Berkeley
      • Cranbury
      • Garfield
      • Hasbrouck Heights
      • Hazlet
      • North Caldwell
      • Old Bridge
      • Point Pleasant Beach
      • Spotswood
      • Wall
    • Towns that might say no
      • Chatham Township
      • Hawthorne
      • Linden
      • Middletown
      • Oceanport
      • Parsippany-Troy Hills
      • Seaside Heights
      • Toms River
    •  Towns that have publicly announced they will welcome weed with open arms
      • Asbury Park
      • Jersey City
  • Congress included a provision in the temporary spending bill recently passed prohibiting federal dollars from being allocated to federal prosecutions against medical marijuana businesses and patients in states where medical marijuana laws are in place. The budgetary protection expires in September 2018.

 

  • In March 2018, Gov. Phil Murphy signed an executive order expanding New Jersey’s medical marijuana program. Effective immediately, doctors in New Jersey can recommend that their patients use medical marijuana to treat anxiety, various forms of chronic pain, migraines and Tourette’s syndrome.  The program will cut registration and renewal fees from $200 to $100 every two years, with senior citizens 65 and older and veterans added to the category of patients who pay only $20.  Physicians must still recommend patients to the medical marijuana program but Gov. Murphy abolished the public registry, which deterred patients and doctors from joining fearing the stigma associated with a substance that is still federally illegal.  Murphy also directed the Dept. of Health to license more companies to grow, cultivate and sell medicinal marijuana, which will occur after the legislature passes a revised version of the medical marijuana law and new and less cumbersome regulations.

 

  • On March 12, 2018, Assemblyman Reed Gusciora introduced a new bill that would legalize recreational cannabis for adult use. The proposed bill differs from Senator Nicholas P. Scutari’s legalization bill in several material ways:
    • Creates three categories for licenses: Class 1 Marijuana Producer-Processor, Class 2 Marijuana Retail and Class 3 Marijuana Transportation.
    • Provides for: (i) up to 400 dispensaries (10 per legislative district); (ii) 15 cultivation/production licenses to be evenly granted among Northern (5), Central (5) and Southern New Jersey (5); and (iii) up to 2 transportation licenses per district for a total of 80 possible licenses.
    • A district that has a Medical Marijuana Alternative Treatment Center can have up to 11 dispensaries in total instead of 10.
    • Requires the following fees for licenses:
      • Class 1 Marijuana Producer-Processor: $50,000 one-time nonrefundable application fee; $150,000 license fee due with the application, which is refunded to the applicant if unsuccessful, for an initial three-year license term; and $40,000 license fee thereafter for each biannual renewal term;
      • Class 2 Marijuana Retail: $10,000 one-time nonrefundable application fee (per location); $22,500 license fee due with the application, which is refunded to the applicant if unsuccessful, for an initial three-year license term; and $10,000 license fee thereafter for each biannual renewal term; and
      • Class 3 Marijuana Transportation: $2,500 one-time nonrefundable application fee; $7,500 nonrefundable license fee if the application is successful, for an initial three-year license term; $5,000 license fee thereafter for each biannual renewal term.
    • Municipalities may also charge a license fee up to $10,000.
    • Restricts a natural person, corporation, partnership, limited liability company, limited liability partnership, employee cooperative, association, nonprofit corporation, or other business entity, or the agents thereof, from holding: (1) more than one Class 1 producer-processor license, or more than three Class 2 retailer licenses, at any time; and (2) a direct partial interest or indirect partial interest through intermediary business entities or other structures in more than five Class 2 retailer licenses at any time.
    • Mandates that industry regulations be issued within 18 months of the law’s passage.
    • Provides for 7% taxes in year 1, 10% in year 3 and caps out at 15% in year 5.

 

  • On March 22, 2018, Assemblyman Reed Gusciora proposed a new bill that would revamp the New Jersey’s current medical marijuana law. Some of the significant amendments include:
    • There will be separate licenses for growing cannabis and selling it through a dispensary.
    • The Department of Health is authorized to issue 6 growing licenses and 18 dispensary licenses as follows:
      • Northern New Jersey : 2 growing; 6 dispensaries
      • Central New Jersey: 2 growing; 6 dispensaries
      • Southern New Jersey: 2 growing; 6 dispensaries
    • A person or entity may not hold an interest in more than one medical marijuana cultivator-processor or more than one medical marijuana dispensary at any time, except that, an interest holder in a medical marijuana alternative treatment center may concurrently hold up to a 10 percent ownership interest in up to one additional medical marijuana alternative treatment center.
    • The Department of Health will issue a request for license applications within 120 days of the effective date of the law.
    • No additional licenses may be issued until the active patient registry reaches 270,000 qualified patients, at which time the Department of Health will be authorized, as may be necessary based on patient need throughout the State, to issue up to 3 additional medical marijuana cultivator-processor permits and up to 9 additional medical marijuana dispensary permits, to be distributed evenly throughout the northern, central, and southern regions of the State.
    • The bill adds specific requirements for the Department of Health to review and score the 18 additional permit applications based on a 100-point scale which includes evaluations of the applicant’s: operational plan, environmental impact plan, safety and security plan, business experience, proposed location, record of  social responsibility, philanthropy, involvement in research  concerning the medical efficacy and adverse effects of medical  marijuana, workforce development and job creation plan, and business and financial plan.
    • In evaluating an application, the Department of Health will consider the controlling owners, officers, directors, and employees’ responses, but will not consider responses pertaining to consultants, independent contractors, or prospective or part-time employees.
  • On April 4, 2018, Parsippany-Troy Hills’ City Council adopted a resolution: (1) supporting the location of Medical Marijuana Alternative Treatment Centers in appropriate locations to serve the residents of Parsippany-Troy Hills and to allow qualifying patients greater access to medical marijuana; and (2) announcing that the Township Council will review its zoning ordinances to consider appropriate locations for Alternative Treatment Centers within the Township.

We will continue commenting on the status of the recreational and medical marijuana laws in New Jersey as more developments occur.

Disclaimer:  This article discussing New Jersey’s cannabis laws is for informational purposes only, and is not intended by the author to provide legal advice to any particular set of circumstances.  Nor is the subject matter of this article intended to be an exhaustive summary of the relevant case law and statutes referenced herein.

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