California Senate Passes Bill To Delay Marijuana Tax Hike That Already Cleared Assembly In Earlier Form

The California Senate has approved an Assembly-passed bill put a pause on a
recently enacted tax hike on marijuana products.

About a week after the Senate Appropriations Committee cleared the
legislation from Assemblymember Matt Haney (D), the full chamber passed it
on Wednesday.

Because it was amended, the measure must return to the Assembly for
concurrence before it’s potentially sent to the governor’s desk.

If enacted into law, the bill would pause the tax increase for five years.
Lawmakers have until September 12 to give final passage to legislation
before the end of the session, and the governor will have until October 12
to take action on any measures sent to his desk.

Sen. Christopher Cabaldon (D) said ahead of the Senate vote that the
marijuana legalization law approved by California voters had several goals,
including to “shut down the illicit market” and “support a wide variety of
environmental, social and educational programs” with tax revenue.

“That deal is fraying because the market is collapsing,” he said. “Today,
legal businesses in California capture just 40 percent of the cannabis
market. Sixty percent is in the illicit market, subject to no protections
for consumers or for the environment.”

“California is losing ground other states,” Cabaldon said. “Michigan,
Oregon and others are raking in much more tax revenue and are doing a much
better job at stopping illicit sales. And so this isn’t the time to be
raising the tax by 25 percent.”

Sen. Jerry McNerney (D) added that “we want to control and contain and
reduce the illegal market.”

“Raising taxes right now is going to have an opposite effect,” he said.
“It’s going to drive people into the illegal black market on cannabis,
which is a bad outcome.”

An amendment adopted during a prior Senate panel stop would make it so the
effective date would be in October, rather than immediately. The tax hike
itself officially took effect last month.

State officials announced in June that the cannabis excise tax rate would
increase from 15 percent to 19 percent on July 1, and advocates held out
hope that pending budget legislation would be amended to mirror Haney’s
standalone bill. That didn’t come to fruition.

The passage of an earlier budget bill that Haney’s measure responds to came
despite Gov. Gavin Newsom’s (D) support for including a tax freeze in the
trailer bill. 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. Advocates wanted
to see it included in the separate, recently enacted budget legislation
because it would’ve taken effect upon enactment.

Before arriving at the Senate Appropriations Committee last month, the
legislation’s pause of the cannabis tax increase would have been in effect
until June 30, 2030. After that, on a biennial basis, regulators would
adjust the tax rate “by a percentage that will generate an amount of
revenue that would have been collected pursuant to the cultivation tax
imposed prior to its discontinuation, as specified, not to exceed 19
percent,” according to a summary.

The Appropriations Committee, however, moved to “shorten the period that
the 15 percent tax rate would be in effect, and add a reporting
requirement,” according to the chair. It’s not clear what the new timeline
would be, however, as revised bill text is not yet available.

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.

The department would need to “estimate the amount of revenue that would
have been collected in the previous fiscal year pursuant to the
weight-based cultivation tax” and “estimate this amount by projecting the
revenue from weight-based cultivation taxes that would have been collected
in the previous calendar year based on information available to the
department.”

“The specific goal of the cannabis excise tax rate reduction is to provide
immediate tax relief to the cannabis industry,” the measure states. “The
efficacy of this goal may be measured by the Legislature by the amount of
gain or loss in cannabis excise tax revenues resulting from the cannabis
excise tax rate reduction allowed by this act.”

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 last week also unanimously passed
legislation to integrate hemp-derived cannabinoid products into the state’s
medical and adult-use marijuana program, while banning synthetically
derived cannabinoids. The panel adopted amendments to the bill “to delete
excise tax provisions, to revise and change definitions, to create a
pathway for topical hemp salves and clarify and change requirements and
prohibitions regarding industrial hemp and hemp-derived cannabinoids,”
according to the 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.

Legalization in California has created a number of new grant programs aimed
at addressing the consequences of marijuana prohibition and attempting to
nurture a strong, well-regulated legal 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.

The post California Senate Passes Bill To Delay Marijuana Tax Hike That
Already Cleared Assembly In Earlier Form appeared first on Marijuana Moment.