New California Cannabis Laws: Taxes, Hemp, Hospitals, Low-Income Access

Several marijuana-related bills were signed into law by Gov. Gavin Newsom recently. Among them:

A measure to allow legal marijuana businesses to take advantage of more tax deductions – in a departure from IRS policy.
A measure to provide free medical marijuana to low-income patients – and exempting those products from state-level taxes.
A measure directing California regulators to provide the U.S. Department of Agriculture with a program plan for industrial hemp in accordance with the 2018 Farm Bill, which legalized the non-THC crop and its derivatives (which include CBD).

In addition to passing these laws, the governor vetoed a bill that would have allowed medical marijuana to be used in hospitals and other health care facilities.

Our Los Angeles marijuana lawyers are committed to helping our clients navigate the ever-changing legal landscape of California cannabis law and regulation. With so much at stake, marijuana businesses cannot afford to ignore these changes.

Tax Law Changes

Federal tax law – specifically section 280E – prohibits those who grow, process and sell marijuana from being allowed to deduct taxes, due to the fact that the business profits from marijuana, which is illegal under federal law. Up until this point, California tax law closely matched U.S. tax law.

Now, AB 37 changes that, departing from Internal Revenue Service Policy under 280E. The measure will allow cannabis companies to take state-level deductions just like any other business – from Jan. 1, 2020 to Jan. 1, 2025. The bill takes effect immediately as a tax levy.

Greater Access for Low-Income Residents

Another measure gives greater access to medical marijuana for low-income patients. SB 34 changes the law with regard to “cannabis donations.” Existing administrative law bars licensed cannabis retailers from providing free cannabis to anyone at a licensed premises. There is a narrow exception for licensed medical marijuana retailers and those with micro-business licensees that are providing medical marijuana to patients who struggle to afford it.

SB 34 authorizes all licensed cannabis shops to offer free or reduced-cost marijuana or related products to medical marijuana patients who meet certain medical and income requirements. The bill further exempts marijuana businesses from being taxed on these “donations.”

No Cannabis in Hospitals

One measure that failed was SB 305, which would have required some health care facilities to allow medical marijuana access to terminally ill patients on site. In a veto message, the governor said he “begrudgingly” declined to make the measure law – for fear it would have jeopardized Medicaid and Medicare funding for those facilities. Those programs are subsidized by federal tax dollars, and using that money for an outlawed Schedule I narcotic could have cost the healthcare industry dearly.

The governor called it “inconceivable” that the federal government continues to treat cannabis as if it has zero medicinal value. Still, groups like California NORML criticized the governor’s decision, noting there were exemptions in the bill if where federal agencies held or notified hospitals that they were in violation of the law. The original version of the bill covered more than just terminally ill patients, as the final version did.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

California Governor Signs Marijuana Tax Fairness Bill But Vetoes Cannabis In Hospitals, Oct. 13, 2019, Forbes