San Francisco Cannabis Licensing & Equity Program

Posted by Xochilt Gama on October 4, 2018

San Francisco’s Golden Gates have opened for those interested in running their cannabis business in the City and County of San Francisco. Although the San Francisco Office of Cannabis is currently accepting applications, not everyone is welcomed to apply just yet.

Currently, the San Francisco Office of Cannabis is accepting applications only for applicants who are applying through the Equity Program or as an Equity Incubator. Those who do not meet the criteria to apply under the Equity Program or as an Equity Incubator, will need to wait to apply after the San Francisco Office of Cannabis opens applications, which they expect will open before 2019.

In order to apply as an Equity Applicant, there are numerous requirements the applicant needs to satisfy. First, the equity applicant must:

  • Apply as a person, which means that a company cannot apply under the Equity Program
  • Have net assets below established limits for each household (click here for more details)
  • Be one of the following:
  1. The business owner
  2. Own at least 40% of the business and be the CEO
  3. Own at least 51% of the business
  4. A board member of a non-profit cannabis business where most of the board also qualify as Equity Applicants
  5. An individual with a membership interest in a cannabis business formed as a cooperative.

Additionally, the equity applicant must meet 3 out of the following 6 equity conditions:

  1. Have a household income below 80% of the average median income in San Francisco for 2017. This amount is calculated based on how many people are in your household (click here for more details.)
  2. Have been arrested for or convicted of the sale, possession, use, manufacture, or cultivation of cannabis (including as a juvenile) from 1971 to 2016
  3. Have a parent, sibling or child who was arrested for or convicted of the sale, possession, use, manufacture, or cultivation of cannabis (including as a juvenile) from 1971 to 2016
  4. Lost housing in San Francisco after 1995 through eviction, foreclosure or subsidy cancellation
  5. Attended school in the San Francisco Unified School District for a total of 5 years from 1971 to 2016
  6. Have lived in San Francisco census tracts for a total of 5 years from 1971 to 2016 where at least 17% of the households had incomes at or below the federal poverty level. To determine whether you satisfy this condition, please click here to see a map showing areas of significant poverty in San Francisco. 

Those who satisfy the criteria to be an Equity Applicant will not have to pay the $5,000 permit fee for this year. However, equity applicants will have to pay for renewals.

Equity Incubators will also provide Equity Applicants with rent free space for 3 years or technical assistance to help Equity Applicants run their business. Once the Equity Applicant has satisfied the eligibility criteria, the San Francisco Office of Cannabis will help equity applicants partner with an equity incubator business. The Office of Cannabis will send a list of verified equity applicants, which will help equity applicants and incubator businesses find one another.

To find out more about the Equity Incubator program, click here.

Equity Applicants can apply for the following licenses:

  • Cultivation
  • Distribution
  • Manufacturing (volatile or non-volatile)
  • Retail (medical and adult use)
  • Delivery only retailer (medical and adult use)
  • Medicinal cannabis retailer (medical only)
  • Testing Laboratory
  • Microbusiness (can conduct up to 4 activities: cultivation (less than 10,000 sq. ft.), manufacturing (non-volatile only), distribution, and retail.

More information about the application process and requirements can be found on the San Francisco Office of Cannabis website.

New Cannabis Legislation

Posted by Margolin & Lawrence on October 1, 2018

Allison Margolin, founder and partner of Margolin & Lawrence, spoke on Wednesday about dosing regulations at the State of Cannabis conference in Queen Mary, Long Beach. The maximum dosage is 100 mg of THC for packaged edible products, and each serving can contain no more than 10 mg. This was established in the final re-adoption of the emergency regulations (CCR, Title 17, Division 1, Chapter 13, §40305), and while these limits may frustrate consumers with a higher tolerance, larger doses of concentrated cannabis products are allowed in non-edible forms. Under §40306 of the regulations, topical products, concentrates and other non-edible products (including tinctures and capsules) may be sold in amounts up to 1,000mg per package. a special recommendation to get a larger dose (up to 1,000mg) without medical prescription. Up to 2,000mg per package is also permitted under this provision, but only for medicinal-use customers and with appropriate labelling.

What Should I Know for My Cannabis Business?

Posted by Margolin & Lawrence on September 18, 2018

The logistics of running a legal cannabis operation involve many questions that may seem surprising or daunting to both current and aspiring business owners. As a California cannabis law firm, here are a few of the issues that we’ve seen cannabis businesses need answers for. If you’ve found yourself asking any of these questions about your own operation, our lawyers may be able to help.

How much can I expect to spend?

At present, the capital requirements to start a cannabis business are very high; on top of the normal costs of starting a business, like buying real estate and hiring employees, the industry is very tightly regulated, and it’s not possible to get an outside loan. That means your business has to be privately fundraised, so it’s important to figure out exactly how much money you have and how much you’re willing to spend.

The application fees alone for cannabis licensing are often several thousand dollars, and many jurisdictions require both proof of funding and a detailed business plan before they consider a cannabis licensing application complete. A cannabis lawyer can help you find this information in order to start your licensed operation.

Is my property in an eligible location for cannabis business?

Zoning requirements vary widely based on your jurisdiction and which type of cannabis activity you’re interested in, so it’s not always easy to tell whether a given property or address is eligible for a particular activity. In addition to restrictions on which zones a given activity can be located in (for instance, cannabis cultivation might be banned in commercial zones but allowed in industrial ones), many municipalities have setback restrictions that prevent cannabis businesses from being located within a certain distance of schools, parks, residential areas, or other cannabis businesses.

Interpreting the local zoning regulations to determine for what activities your business is eligible is another service that cannabis lawyers can provide.

What information do I need to apply for a cannabis business license?

Applying for a cannabis business license isn’t just a matter of filling out an application form – most state and local licensing authorities will require a large amount of information about the business and its owners, including a complete operating plan describing how your establishment will meet all legal requirements for cannabis business activity.

On top of this information, you’ll also need to have business documents such as a seller’s permit, federal employer ID number, and certificate of good tax standing in order. On top of that, most applications will require you to provide accurate financial information, insurance documentation, and enough personal documentation for each member of your business to pass a full background check.

Finding these documents and preparing them for your final application is just one service that cannabis lawyers can provide for your business.

Should I get a license for medical-use or adult-use cannabis?

At the present moment, many states and municipalities have separate regulatory regimes for medical-use and adult-use cannabis, often with very different legal requirements. For your cannabis business to succeed, you’ll need to decide which license (or combination of licenses) is best for your business, then master the licensing and compliance processes for the type of cannabis business you choose. A cannabis lawyer can help guide you through this process, from choosing the right activity to applying for a license to remaining in compliance with the law once your business is operational.

What cannabis activity should I apply for?

In addition to medical-use and adult-use, cannabis business licenses are broken down into different activities, such as cultivation, manufacturing, and retail. Additionally, many of these categories are split into subcategories such as indoor and outdoor cultivation or storefront and non-storefront retail. As with medical and adult-use cannabis, these different types of cannabis activities often have very different requirements.

Some jurisdictions also offer boutique categories with special requirements such as Microbusiness, impose restrictions on how many licenses can be granted, or limit which types of licenses a single business can hold simultaneously. For your cannabis business to succeed, you’ll need to optimize which activities to apply for – another task that a cannabis lawyer can help with.

How can I ensure that my business is licensed as quickly as possible?

Given that legal cannabis licensing is a complex, highly regulated bureaucracy currently receiving a large number of applications, it can be difficult for a cannabis business owner to predict how long it will take their business license application to be approved, or to optimize their application in order to be licensed and operational as soon as possible.

Some areas offer a fast track to licensing under their Social Equity Program, in order to ensure that business owners who are disadvantaged or disproportionately affected by the War on Drugs have a quicker path to licensed operation than other applicants. Our cannabis lawyers can help you find out whether you qualify for one of these programs.

Whether or not you qualify for a Social Equity Program, the best way to ensure that you’re licensed as soon as possible is to choose the right license for your business and make sure that the information in your application is complete and correct.

What license should I apply for if I plan to expand my operation?

Especially for new cannabis businesses, the size of a cannabis business at the time of initial licensing might not be the same as the size of the business you hope to run in two or three year’s time. However, cannabis license application fees often vary based on the size of the operation in question, and applications often require businesses to provide details that depend on the size of their operation, including what types of equipment they plan to use, their planned hours of operation, and how many employees they’ll hire (including their labor practices and management structure).

Our cannabis lawyers can help you figure out how to reflect your long-term growth plans in your licensing application, including the multi-year pro forma budgeting and income documents that many municipalities require.

Will I need to apply for additional licenses or permits?

For many businesses, the cannabis license itself is only one of a number of licenses you’ll need for a fully licensed operation. To begin with, new cannabis businesses will need to apply for their tax registrations and seller’s permits. Additionally, depending on your activity, you may need to apply for Conditional Use Permit or Land Use Permit from your local planning department before you can apply for a cannabis business license.

For some activities, like outdoor cultivation, this may require further permits, such as for diversion of water, tree removal, or environmental review. On the other hand, businesses located in cities may be required to apply for enrollment in local Social Equity or community benefits programs. Our cannabis lawyers can help you find out what additional permits you need and help you apply for them.

Why You Should Consider Hiring an Attorney for Your Cannabis Business

Posted by Jenna Rompel on August 27, 2018

California is well underway in the business of commercial cannabis, and now the state has
opened its golden doors to licensing. The state is actively reviewing applications for annual state
licenses. Those who have successfully triumphed over their local jurisdiction are quickly
realizing that was only half the battle and are in process of applying for a state license. The
industry is experiencing some growing pains as it continues to transition into a regulated market,
and if you’ve felt the hurt, here are some things to consider on whether it’s time to hire a law firm
to represent your cannabis business.

Depending upon the activity applied for, the relevant agency regulating commercial cannabis at
the state level – the Bureau of Cannabis Control (BCC), California Department of Public Health
(CDPH), or California Department of Food and Agriculture (CDFA) – will contact the city or
county to verify the validity of the local license and that the business is in compliance with or exempt from the California Environmental Quality Act (CEQA), as required by state law. This should be an easy
tick off the checklist. However, we are finding the state is returning responsibility to the applicant
to provide evidence of CEQA. The language in the local ordinances, particularly in the smaller,
rural jurisdictions, can be vague and up to interpretation. Failure to provide evidence of
compliance with the CEQA, or with any of the regulations under state law and associated
governmental bodies, is subject to denial of the state license. As a result, all operations will be
forced to cease. Any operations occurring without a valid local and state license are subject to
heavy fines, as recently seen in Humboldt County, and could result in criminal prosecution. An
attorney will advise in navigating through all local and state requirements to protect your
business from shutting down.

A common issue aggravating many are problems arising due to incorrect zoning that can lead to
costly consequences. Before you sign a lease or purchase a property, verify the zoning. For
example, for those in the market for the City of Los Angeles during its second phase of
licensing, you may have noticed the maps to check zoning against sensitive use areas in each
of the 15 districts are no longer available. At the request of the Department of Cannabis
Regulation (DCR), the maps have been removed due to numerous issues arising from incorrect
zoning. Applicants were relying on the maps not realizing there may have been a school, EMMD,
or other sensitive use within the area. The city is allowing applicants the opportunity to find
another location that is in the correct zoning until at least September 13th , when this phase of
licensing closes. Finding a location in the correct zoning is no easy feat. Have the property
professionally mapped and consider hiring an attorney to negotiate the terms of the lease or
purchase contract, ensuring the property complies with all zoning and land use requirements
under the ordinance, and reducing the chance your license is denied.

If you are an investor looking to buy an existing license, beware of fraudulent deals and false
licenses. Does the license comply with CEQA? Is it in the correct zoning? What is the licensing
authority’s policy on transferring of cannabis licenses? Having an attorney do the due diligence
will help reduce the risk of your investment.

As the industry evolves, there is going to be more need for legal protection for entrepreneurs and
investors, so consider a business investment into a law firm well educated in the field of
cannabis law and protect your success.

Update on Diversion for Mental Health Treatment

Posted by Tom McMahon on July 11, 2018

Governor Brown signed Assembly Bill 1810 [Insert link: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB1810]  this past week and it is immediately effective. SB 1810 is incorporated through Penal Code section 1001.36, which creates a discretionary pre-trial diversion procedure for any defendant that suffers from most mental disorders listed in the Diagnostic and Statistic Manual [Insert link: https://psychcentral.com/disorders/ ].  PC 1001.36 diversion is available where the mental disorder can be treated, and it played a significant role in commission of the crimes alleged. The diversion program is available only “pretrial,” so it is important to explore this option early. Diversion takes place for less than two years, and can be done either in a residential setting in the community or an outpatient program.

Don't Be Intimidated by LA's Social Equity Program - All are welcome to Apply

Posted by Margolin & Lawrence on July 9, 2018

Through the Social Equity Program, Drug War Victims Will Help Build LA’s Green Economy

LA Phase II – July 2nd Update

Posted by Margolin & Lawrence on July 2, 2018

As of July 2nd, here is the latest news on Phase 2 of cannabis licensing for the City of LA:

  • Phase 2 will open August 1st and will be open for 30 business days. This phase is for existing cannabis cultivators, manufacturers, and distributors who were operating in the City of LA before 2016 and were suppliers to an EMMD (a pre-ICO medical marijuana collective in compliance with Proposition D) before 2017.
  • Detailed instructions for Phase 2 applications will be released on July 18th, and the full Phase 2 application will be released on August 1st.
  • Proof of participation in social equity program, and passing a pre-licensing inspection, will not be required for the provisional approval for Phase 2.
  • The City will create a process where Phase 2 delinquent taxpayers can pay their taxes for past years at the same time as they are applying for licensing.

Among the other recent changes to the LA ordinance that take effect today and July 23rd:

  • Both Tier 1 and Tier 2 social equity applicants will now receive priority processing for new retail applications on a 2:1 ratio with all non-social equity applicants (i.e., 2 out of 3 new retail licenses will go to Tier 1 and Tier 2 social equity applicants).  Previously, only Tier 1 social equity applicants received this priority for new retail licenses.
  • Eligibility for Tier 1 of the Social Equity Program is expanded to include applicants with a prior California cannabis arrest, but not a conviction.  Previously, the ordinance appeared to require a conviction. The new definition makes anyone eligible for Tier 1 Social Equity who is both low income and has “an arrest or conviction in California for any crime under the laws of the State of California or the United States relating to the sale, possession, use, manufacture, or cultivation of Cannabis that occurred prior to November 8, 2016” (excluding arrests or convictions for violating Proposition D).
  • Social equity program “incubators,” which will include everyone applying in Phase 2 who is not a Tier 1 or Tier 2 social equity applicant, will now be given the option to pay into a fund instead of providing 10% of their space to a social equity partner.

Final Release of California Cannabis Regulations

Posted by Margolin & Lawrence on June 7, 2018

After numerous iterations, the final regulations officially went into effect on June 6, 2018 and are set to expire on December 4, 2018. These amended emergency regulations were initially released to the public on May 18, and then filed with the Office of Administrative Law on May 25, 2018. The state’s regulatory agencies proposed changes to certain provisions in order to provide greater clarity to licensees and address issues that have arisen since the emergency regulations went into effect. The re-adoption of the emergency regulations have extended the effective period for an additional 180 days. After the California Office of Administrative Law (OAL) posted the proposed emergency regulations on their website, there was a five-day public comment period on the finding of emergency.

[UPDATE] WHERE CAN I GET A DISTRIBUTION LICENSE IN CA?

Posted by Margolin & Lawrence on May 18, 2018

Back in September, we published a blog post titled “Where Can I Get a Distribution License in California.” Now that the ordinances for the majority of jurisdictions in California have been reviewed and somewhat solidified, Margolin and Lawrence presents an updated list on the viable locations for distribution licenses in California.

The History of Cannabis by Margolin & Lawrence

Posted by Margolin & Lawrence on April 20, 2018

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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.