Bill Text: CA AB2243 | 2015-2016 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

---

Bill Title: Medical cannabis: taxation: cannabis production and environment mitigation.

Spectrum: Bipartisan Bill

Status: (Failed) 2016-11-30 - From Senate committee without further action. [AB2243 Detail]

Download: California-2015-AB2243-Amended.html

---

BILL NUMBER: AB 2243	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MAY 3, 2016
	AMENDED IN ASSEMBLY  APRIL 26, 2016

INTRODUCED BY   Assembly Member Wood
   (Coauthor: Senator Runner)

                        FEBRUARY 18, 2016

   An act to add Part 13.5 (commencing with Section 31001) to
Division 2 of the Revenue and Taxation Code, relating to medical
cannabis, and making an appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2243, as amended, Wood. Medical cannabis: taxation: cannabis
production and environment mitigation.
   The Medical Marijuana Regulation and Safety Act, administered by
the director of the Bureau of Medical Marijuana Regulation, provides
for the licensure of persons engaged in specified activities relating
to medical cannabis, including cultivation and distribution.
   The Fee Collection Procedures Law, the violation of which is a
crime, provides procedures for the collection of certain fees and
surcharges.
   This bill would impose a tax in specified amounts  on
  upon  the distribution  in this state by
a licensed cultivator, as defined,  of medical cannabis
flowers, medical cannabis leaves, and immature medical cannabis
 plants to a licensed distributor, as specified, and would
require the licensed distributor to collect the tax from the
cultivator and remit it to the State Board of Equalization. 
 plants.  The bill would require the State Board of
Equalization to administer and collect the tax pursuant to the
procedures set forth in the Fee Collection Procedures Law.  The
bill would require a distributor to register for a permit with the
board and would allow the board to suspend or revoke a permit. The
bill would authorize the board to prescribe b   y regulation
a method and manner for payment of the tax that utilizes tax stamps
or state-issued product bags.  The bill would require all
moneys, less refunds and costs of administration, to be deposited
into the Cannabis Production and Environment Mitigation Fund, which
this bill would establish in the State Treasury.
   This bill would continuously appropriate the moneys in that fund
in specified percentages to fund competitive grants for local law
enforcement-related activities pertaining to illegal cannabis
cultivation; to fund a competitive grant program for environmental
cleanup restoration and protection of public and private lands that
have been damaged by illegal cannabis cultivation; to address the
environmental impacts of cannabis cultivation on public and private
lands in California and fund other state enforcement-related
activities pertaining to illegal cannabis cultivation; and to fund
ongoing studies and reports of areas that may create challenges to
compliance of the Medical Marijuana Regulation  and  Safety
Act. This bill would require the bureau or other state agencies and
departments to submit reports to the Legislature on the results of
those studies funded by this tax by January 1, 2020, and every 2
years thereafter. 
   This bill, except as provided, would become inoperative on January
1, 2018, if the Secretary of State Initiative Number 1762, also
known as the Control, Regulate and Tax Adult Use of Marijuana Act, is
approved by the voters at the November 8, 2016, statewide general
election and takes effect. 
   By expanding the application of the Fee Collection Procedures Law,
which imposes criminal penalties for various acts, this bill would
impose a state-mandated local program.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
   Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Part 13.5 (commencing with Section 31001) is added to
Division 2 of the Revenue and Taxation Code, to read:

      PART 13.5.  Medical Cannabis Tax Law


      CHAPTER 1.  GENERAL PROVISIONS AND DEFINITIONS


   31001.  This part shall be known and may be cited as the Medical
Cannabis Tax Law.
   31002.  As used in this part, the following terms have the
following definitions:
   (a) "Board" means the State Board of Equalization.
   (b) "Cannabis" has the same meaning as that term is defined in
Section 19300.5 of the Business and Professions Code. 
   (c) "Distribution" has the same meaning as that term is defined in
Section 19300.5 of the Business and Professions Code.  

   (c) "Cultivator" means a person subject to licensing as a
cultivator for purposes of the Medical Marijuana Regulation and
Safety Act (Chapter 3.5 (commencing with Section 19300) of Division 8
of the Business and Professions Code).  
   (d) "Distribution" means all of the following:  
   (1) The sale of untaxed medical cannabis flowers, medical cannabis
leaves, and immature medical cannabis plants in this state. 

   (2) The use or consumption of untaxed medical cannabis flowers,
medical cannabis leaves, and immature medical cannabis plants in this
state.  
   (3) The placing in this state of untaxed medical cannabis flowers,
medical cannabis leaves, or immature medical cannabis plants in
retail stock for the purpose of selling the medical cannabis flowers,
medical cannabis leaves, or immature medical cannabis plants. 

   (e) "Distributor" has the same meaning as that term is defined in
Section 19300.5 of the Business and Professions Code.  
   (d) 
    (f)  "Immature medical cannabis plant" means a plant
described in subdivision (b) with no observable flowers or buds, that
is intended to be sold for use by medical cannabis patients in
California pursuant to the Compassionate Use Act of 1996 (Proposition
215), found in Section 11362.5 of the Health and Safety Code.

   (e) "Licensed cultivator" means a person that is licensed as a
cultivator under the Medical Marijuana Regulation and Safety Act
(Chapter 3.5 (commencing with Section 19300) of Division 8 of the
Business and Professions Code).  
   (f) "Licensed distributor" means "distributor" as defined in
Section 19300.5 of the Business and Professions Code. 
   (g) "Medical cannabis flowers" means the flowers of a plant
described in subdivision (b), which excludes the leaves and stems,
that are intended to be sold for use by medical cannabis patients in
California pursuant to the Compassionate Use Act of 1996 (Proposition
215), found in Section 11362.5 of the Health and Safety Code.
   (h) "Medical cannabis leaves" means all parts of a plant described
in subdivision (b), other than cannabis flowers, that are intended
to be sold for use by medical cannabis patients in California
pursuant to the Compassionate Use Act of 1996 (Proposition 215),
found in Section 11362.5 of the Health and Safety Code. 
   (i) "Sale" means the transfer of title or possession for
consideration in any manner or by any means whatever.  
   (i) "Medical cannabis product" means "medical cannabis" as defined
in Section 19300.5 of the Business and Professions Code. 
   (j) "Qualified nonprofit organization" means an organization
exempt from tax as an organization described in Section 501(c)(3) of
the Internal Revenue  Code .   Code. 
   (k) "Person" includes any individual, firm, partnership, joint
venture, limited liability company, association, social club,
fraternal organization, corporation, estate, trust, business trust,
receiver, assignee for the benefit of creditors, trustee, trustee in
bankruptcy, syndicate, or any other group or combination acting as a
unit.  
   (l) "Sale" means the transfer of title or possession for
consideration in any manner or by any means whatever.  
   (m) "Use" includes the exercise of any right or power over medical
cannabis flowers, medical cannabis leaves, and immature medical
cannabis plants, except that it does not include the sale of medical
cannabis flowers, medical cannabis leaves, and immature medical
cannabis plants in the regular course of business. "Use" includes a
withdrawal of medical cannabis flowers, medical cannabis leaves, and
immature medical cannabis plants from inventory and use in the
manufacture of a medical cannabis product. 
      CHAPTER 2.  IMPOSITION OF TAX


   31005.  (a) On and after the operative date set forth in Section
31030, for the privilege of distributing medical cannabis flowers,
medical cannabis leaves, and immature medical cannabis plants,
 a tax is hereby imposed upon all licensed cultivators at a
rate of nine dollars and twenty-five cents ($9.25) per ounce of
medical cannabis flowers, two dollars and seventy-five cents ($2.75)
per ounce of medical cannabis leaves, and one dollar and twenty-five
cents ($1.25) per immature medical cannabis plant from the sale of
all medical cannabis flowers, medical cannabis leaves, and immature
medical cannabis plants distributed to a licensed distributor in this
state.   every distributor shall pay a tax upon any
distribution of medical cannabis flowers, medical cannabis leaves,
and immature medical cannabis plants at the following rates: 

   (1) Nine dollars and twenty-five cents ($9.25) per ounce of
medical cannabis flowers.  
   (2) Two dollars and seventy-five cents ($2.75) per ounce of
medical cannabis leaves.  
   (3) One dollar and twenty-five cents ($1.25) per immature medical
cannabis plant.  
   (b) The licensed distributor shall collect the tax from the
licensed cultivator and shall separately state the amount of the tax
imposed under this part on the purchase order, which shall be given
by the licensed distributor to the licensed cultivator at the time of
sale.  
   (c) There are exempted from the taxes imposed by this part, sales
by a licensed cultivator that the state is prohibited from taxing
under the Constitution or laws of the United States or the
Constitution of this state. Any claim for exemption from the tax
imposed by this part shall be made to the board in the manner
prescribed by the board.  
   (b) The rates of tax imposed by this section shall apply
proportionately to quantities of less than one ounce.  
   (c) The tax imposed by this part shall not apply to the sale of
medical cannabis flowers, medical cannabis leaves, and immature
medical cannabis plants by a cultivator to the distributor. 

   31005.3.  The board may prescribe by regulation a method and
manner for payment of the tax imposed by this part that utilizes tax
stamps or state-issued product bags that indicate that all required
tax has been paid on the distribution of the medical cannabis
flowers, medical cannabis leaves, and immature medical cannabis
plants to which the tax stamp is affixed or in which the medical
cannabis flowers, medical cannabis leaves, and immature medical
cannabis plants are packaged. 
   31006.  The Legislative Analyst's Office shall regularly review
the tax levels established under this part, at a minimum of every
other year, beginning in  2018,   2020, 
and make recommendations to the Legislature, as appropriate,
regarding adjustments that would further the goal of addressing
public safety and the environmental impacts caused by the
proliferation of cannabis cultivation.
      CHAPTER 3.  ADMINISTRATION


   31010.   (a)    The board shall
administer and collect the tax imposed by this part pursuant to the
Fee Collection Procedures Law (Part 30 (commencing with Section
 55001) of Division 2 of the Revenue and Taxation Code) with
those changes as may be necessary to conform to this section.
  55001)), except that Article 1.1 (commencing with
Section 55050) of Chapter 3 of Part 30 shall not apply.  For
purposes of this part, the references in the Fee Collection
Procedures Law to "fee" shall include the tax imposed by this part,
and references to "feepayer" shall include a person required to pay
the tax imposed by this part. 
   (b) The tax that is required to be collected by the licensed
distributor and any amount unreturned to the licensed cultivator that
is not owed as part of the tax, but was collected from the licensed
cultivator under the representation by the licensed distributor that
it was owed as a tax, constitutes debts owed by the licensed
distributor to the state.  
   (c) A licensed cultivator is liable for the tax until it has been
paid to the state, except that payment to the licensed distributor
relieves the licensed cultivator from further liability for the tax.
Any tax collected from a licensed cultivator that has not been
remitted to the board shall be a debt owed to the state by the
licensed distributor required to collect and remit the tax. This part
does not impose any obligation upon the licensed distributor to take
any legal action to enforce the collection of the tax imposed by
this part. 
   31011.  (a) The board may prescribe, adopt, and enforce
regulations relating to the implementation, administration, and
enforcement of this part, including, but not limited to, applicant
requirements, collections, reporting, refunds, and appeals.
   (b) The board may prescribe, adopt, and enforce any emergency
regulations as necessary to implement this part. Any emergency
regulation prescribed, adopted, or enforced pursuant to this section
shall be adopted in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code, and, for purposes of that chapter, including Section 11349.6 of
the Government Code, the adoption of the regulation is an emergency
and shall be considered by the Office of Administrative Law as
necessary for the immediate preservation of the public peace, health
and safety, and general welfare.
   31012.  (a) The tax is due and payable to the board quarterly on
or before the last day of the month following each calendar quarter.
   (b) On or before the last day of the month following each calendar
quarter, a return for the preceding calendar quarter shall be filed
with the  board.   board using electronic media.

   (c) Returns shall be authenticated in a form or pursuant to
methods as may be prescribed by the board. 
   31012.1.  (a) A distributor required to pay the tax imposed under
this part shall register for a permit with the board. Every
application for registration shall be made in a form prescribed by
the board and shall set forth the name under which the applicant
transacts or intends to transact business, the location of the
distributor's place or places of business, and any other information
that the board may require. An application for registration shall be
authenticated in a form or pursuant to methods as may be prescribed
by the board.
   (b) The board shall grant and issue to each applicant that
complies with subdivision (a) a separate permit for each place of
business within the state.
   (c) A permit issued pursuant to this section is not assignable and
is valid only for the person in whose name it is issued and for the
transaction of business at the place designated therein. It shall at
all times be conspicuously displayed at the place for which it is
issued.  
   31012.3.  Whenever any distributor fails to comply with any
provision of this part or any rule or regulation of the board
prescribed and adopted under this part, the board upon hearing, after
giving the distributor at least 10 days' notice in writing
specifying the time and place of the hearing and requiring the
distributor to show cause why the permit should not be suspended or
revoked, may suspend or revoke the permit held by the distributor.
The board shall give to the distributor written notice of the
suspension or revocation of any of the distributor's permits. The
notices herein required may be served personally or by mail in the
manner prescribed for service of notice of a deficiency
determination. The board shall not issue a new permit after the
revocation of a permit unless it is satisfied that the former holder
of the permit will comply with the provisions of this part and the
regulations of the board prescribed and adopted under this part.

   31013.  (a) The Cannabis Production and Environment Mitigation
Fund is hereby created in the State Treasury. All taxes, interest,
penalties, and other amounts collected and paid to the board pursuant
to this part, less payments of refunds and costs of administration,
shall be deposited in the fund.
   (b) Notwithstanding Section 13340 of the Government Code, all
moneys deposited in the Cannabis Production and Environment
Mitigation Fund are hereby continuously appropriated, without regard
to fiscal years, in the following manner:
   (1) Thirty percent to the Board of State and Community Corrections
for disbursement for local law enforcement-related activities
pertaining to illegal cannabis cultivation. Funds allocated pursuant
to this paragraph shall be allocated on a competitive grant
application process administered by the Board of State and Community
Corrections. Applicants may include local entities that support
enforcement activities related to unpermitted activity. The Board of
State and Community Corrections shall promulgate guidelines for the
grant process as soon as administratively possible.
   (2) Thirty percent to the Natural Resources Agency to fund a
competitive grant program for environmental cleanup restoration and
protection of public and private lands that have been damaged by
illegal cannabis cultivation. Where appropriate, the agency may
administer funds using programs established pursuant to Chapter 3.8
(commencing with Section 5750) of Division 5 of the Public Resources
Code and described in subdivision (a) and paragraph (1) of
subdivision (l) of Section 75050 of the Public Resources Code. Funds
allocated pursuant to this paragraph shall be prioritized to
restoration and cleanup projects, on public or private lands, based
on the level of damages that have occurred. Not less than 35 percent
of the funds shall be used for these purposes related to public
lands, including, but not limited to, parks managed by the Department
of Parks and Recreation, and not less than 20 percent of the funds
shall be used for these purposes related to private lands. The agency
shall consult and partner with counties, cities, or cities and
counties and may partner with qualified nonprofit organizations,
other appropriate state agencies, and the appropriate federal
entities, including, but not limited to, the United States Department
of Agriculture and the United States Department of the Interior, for
the purposes of awarding grants to state or local government
entities and qualified nonprofit organizations that engage in
environmental cleanup and restoration. The agency shall promulgate
guidelines for the grant process as soon as administratively
possible.
   (3) Thirty percent to the multiagency task force, the Department
of Fish and Wildlife and  the  State Water Resources Control
Board, to address the environmental impacts of cannabis cultivation
on public and private lands in California and fund other state
enforcement-related activities pertaining to illegal cannabis
cultivation.
   (4) Ten percent to the Bureau of Medical Marijuana 
Regulations,   Regulation,  and other state
agencies or departments that the bureau determines is appropriate, to
conduct ongoing studies of areas that may create challenges to
compliance of the Medical Marijuana Regulation Safety Act (Chapter
3.5 (commencing with Section 19300) of Division 8 of the Business and
Professions Code), including, but not limited to, financial
transactions, allowable tax deductions, and the public safety
implications of a cash industry. The bureau or other state agencies
or departments shall prepare reports on the results of those studies
and submit those  report   reports  to the
Legislature, in compliance with Section 9795 of the Government Code,
on or before January 1, 2020, and on or before January  1,
  1  every two years thereafter.
      CHAPTER 4.  REPORT TO THE LEGISLATURE


   31020.  (a) The board shall submit a report to the Legislature on
the total amount of revenue that was collected for the two-year
period commencing on the operative date of this part. The report is
due to the Legislature on or before the last day of the month
commencing 180 days after the two-year period commencing on the
operative date of this part.
   (b) The report required by this section shall be submitted in
compliance with Section 9795 of the Government Code.
      CHAPTER 5.  OPERATIVE DATE AND FUNDING


   31030.  This part shall become operative on or after the first day
of the first calendar quarter commencing more than 270 days after
adequate funding has been received by the board to implement and
administer this part. The board shall post a notice on its Internet
Web site when this condition has been satisfied.
   31031.  Funds for the establishment and support of the activities
required pursuant to this part shall be advanced as a General Fund or
special fund loan, and shall be repaid by the board from the initial
proceeds from taxes collected pursuant to this part, no later than
six months after the operative date specified in Section 31030. 
   31032.  (a) Except as provided in subdivision (b), this part shall
become inoperative on January 1, 2018, if the Secretary of State
Initiative Number 1762, also known as the Control, Regulate and Tax
Adult Use of Marijuana Act, is approved by the voters at the November
8, 2016, statewide general election and takes effect.
   (b) The provisions of this part relating to the collection of the
tax, refunds, allowance for credits, disposition of moneys deposited
into the Cannabis Production and Environment Mitigation Fund, and the
commencement of an action or proceeding shall remain operative with
respect to taxes for which the liability accrued before January 1,
2018. 
      CHAPTER  6.    NO PREEMPTION OF LOCAL TAXATION
AUTHORITY 


   31035.  The tax shall be in addition to, and shall not limit, any
taxes or fees imposed by a county or city and county. 
  SEC. 2.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.