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Massachusetts Legislature approves marijuana industry reforms

By Dan Adams | Aug 01, 2022

Massachusetts lawmakers early Monday approved a package of significant changes to the state’s booming marijuana industry, answering longstanding calls for reform from advocates and entrepreneurs.

The bill would crack down on steep local fees charged to marijuana operators, steer 15 percent of the state excise tax on recreational pot sales into a fund for disenfranchised cannabis entrepreneurs, make it easier to wipe away records of old marijuana convictions, and green-light a cannabis café pilot program.

The bill was sent to Governor Charlie Baker, who has signaled he is receptive to its broad strokes.

A legislative conference committee — charged with reconciling differences between bills approved by the state House and Senate earlier this year — released its final version of the measure on Sunday shortly before midnight. The late-night compromise was part of a frantic scramble by lawmakers to finish important bills before their formal legislative session ended on July 31.

State Senator Sonia Chang-Díaz, a cosponsor of the cannabis measure, said lawmakers were sending Baker “a great bill.”

“It will rebalance the playing field, where so far wealthy corporations have been able to buy their way through the licensing process and too many local, small business owners and Black and brown entrepreneurs have been locked out,” she said in a statement, adding that the reforms would “put Massachusetts back among the leading states for racial justice in our economic policy on cannabis.”

Massachusetts voters legalized the recreational use of marijuana in 2016. Lawmakers rewrote that law eight months later. But it soon became clear that the statute undergirding a new, multibillion-dollar industry had some holes.

Proponents had spent years lobbying for a rewrite, arguing a few straightforward fixes would address glaring problems. Chief on their list of complaints: An onerous municipal approval process that has been implicated in two federal corruption investigations, and a lack of institutional financing that has allowed larger corporations backed by wealthy private investors to dominate at the expense of smaller, locally owned businesses with more diverse ownership.

“Legislators tonight made history with this vital — and overdue — grant and loan fund,” said Shanel Lindsay, a cannabis attorney and the cofounder of advocacy group Equitable Opportunities Now. “This bill is an important step forward in undoing the harms of prohibition and over-policing and will provide an important path for families of color to create jobs in their community and generate generational wealth.”

The initial Senate bill had set aside 10 percent of the state’s 10.75 percent tax on recreational marijuana sales for the fund, while the House measure pegged the proportion at 20 percent. The final legislation will see 15 percent of the levy go toward the fund, which is meant to benefit equity and economic empowerment applicants.

Former and current regulators at the state Cannabis Control Commission, Massachusetts’ pot regulator, threw their weight behind the fund and other key provisions of the bill, warning that officials are running out of tools to fulfill their statutory mandate of creating an equitable and diverse marijuana industry after decades of racially disproportionate drug arrests.

“This law — codified in the context of many years of racial inequality — now stands to serve the very participants who are most in need of the financial resources to open their doors, kickstart their business, and maintain equity and control of their companies,” Nurys Camargo, one of the agency’s five commissioners, said in a statement.

Besides endorsing the loan fund, the commission has repeatedly sought authority to crack down on excessive “impact” fees charged by municipalities to prospective cannabis operations. Critics say the payments far exceed any actual costs the facilities impose on their host communities and serve as a barrier to entry for smaller firms.

The Massachusetts Municipal Association — which represents city and town leaders — had lobbied strenuously against greater enforcement of the nominal limits on such fees, saying that doing so would interfere with voluntarily negotiated agreements and remove the incentive to host marijuana companies. But it appears those concerns did not ultimately sway legislators — the earlier versions passed the House and Senate nearly unanimously, with just two state representatives dissenting.

David O’Brien, the president of the Massachusetts Cannabis Business Association, said small marijuana companies will be thrilled the measure is moving forward.

“We applaud the conference committee for passing long-awaited reform of the onerous fees that municipalities have been extorting from small cannabis businesses for the past five years,” he said. “This change will finally send a clear message to municipalities: It’s time to show the receipts.”

O’Brien said his association also welcomed a provision in the legislative package easing the tax burden of marijuana companies by allowing them to deduct expenses from their state returns like all other businesses. (Because the drug is illegal under US law, state-licensed cannabis operators cannot deduct typical expenditures from their federal returns.)

Baker has 10 days to either sign the bill into law, veto it, or send it back to lawmakers with revisions.

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"It’s going to be a game changer," Chang-Díaz said. "I know it's going to take time for the MCAD to fill the staffing shortages that they've been experiencing in recent years, but this is a huge step forward."

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