THE MASSACHUSETTS HOUSE took a major step Wednesday toward improving equity in the cannabis industry, passing a bill similar to one previously passed by the Senate that would create a new grant and loan fund for diverse entrepreneurs. The bill would better regulate host community agreements and ease the process of getting marijuana-related criminal records expunged.
Five years after marijuana legislation, Rep. Dan Donahue, House chair of the Committee on Cannabis Policy, said it was time to address some nagging issues. “It is time to revisit the original legislation to provide clarity on the intent of the Legislature and work to ensure we continue to remove barriers to entry to this unique industry for those communities who were disproportionately harmed by the prohibition on marijuana,” he said.
The bill passed by a vote of 153-2, with Rep. Jeffrey Turco, a Winthrop Democrat, and Rep. Marc Lombardo, a Billerica Republican, casting the dissenting votes.
Differences in the House and Senate bills will have to be reconciled before the bill reaches Gov. Charlie Baker.
Both the bill the Senate passed in early April and the House bill respond to many concerns that industry advocates and state regulators have raised about Massachusetts’ young marijuana industry.
The biggest problem is while state law requires the state to encourage industry participation by people disproportionately affected by the war on drugs, the industry remains dominated by large companies and White business owners. The Cannabis Control Commission set up a licensing structure that benefits people living and working in disproportionately affected communities, those with drug records, and Black and Latino individuals, but those are the same entrepreneurs who struggle to obtain start-up capital and reach agreements with host communities. Donahue noted that of 346 cannabis businesses given permission to open, only 20 are part of state programs aimed at helping individuals harmed by marijuana prohibition.
The House bill adopts most of the same policy solutions that the Senate did.
The House bill would take 1 percent of the marijuana excise tax paid by social equity businesses (companies owned by people disproportionately affected by prior drug laws) and give it to their host community, providing an incentive to municipalities to host social equity businesses.
The bill ensures that host community agreements do not demand any financial payments beyond a community impact fee of 3 percent of gross sales for up to five years, which must be directly related to costs imposed by the marijuana business. While a cap is currently enshrined in state law, communities have found ways around it, for example by requiring donations to local charities. There is currently no mechanism for enforcing the cap, something the bill would fix by giving authority to the Cannabis Control Commission.
The bill establishes a Social Equity Trust Fund, overseen by a new advisory board, to make grants and loans to social equity entrepreneurs. The initial House bill would have funded this with 15 percent of marijuana tax revenues, and representatives adopted an amendment on the floor to increase that to 20 percent.
Rep. Chynah Tyler, a Boston Democrat who sponsored the amendment, said since starting a marijuana business costs at least $1 million, “If we really want to bring social equity into the industry, we have to put our money where our mouth is, and we have to invest real dollars.”
The bill also sets up a mechanism for communities to vote to allow social consumption sites, like marijuana cafes. Social consumption was authorized in the marijuana legalization law with no mechanism for communities to vote to allow it.
There are some significant differences that will need to be ironed out by House-Senate negotiators. The Senate version would fund the social equity trust fund with 10 percent of tax revenues, compared to the House’s 20 percent. The Senate bill lets host community agreements be renewed in perpetuity, while the House bill sunsets the agreements after five years, after which businesses no longer have to pay community impact fees.
The Senate bill gives the Cannabis Control Commission 120 days to approve host community agreements and requires the commission to approve the agreement before considering a license application. That concerned industry advocates who worried about delaying license approvals. The House bill shortens the time frame to 45 days, while letting regulators consider the host community agreement concurrently with a license application.
The House bill would also make it easier for individuals to get old marijuana convictions expunged, by requiring a judge to grant an expungement petition within 30 days for conduct relating to possession, cultivation, or distribution of marijuana that has since been legalized.
House Judiciary Committee chair Rep. Michael Day said while hundreds of thousands of residents have expungable offenses, only 17 petitions were granted between January 2019 and June 2021. Day said many people do not know about expungement, and decisions are left to the judge’s discretion, so many petitions are denied.
Day said the bill would improve that in three ways: by requiring the court to grant an expungement any time the underlying conduct was legalized; by clarifying that distribution of marijuana and possession with intent to distribute are expungable offenses if the amount of marijuana involved is under the current legal limit; and by allowing petitioners or prosecutors to call for a hearing and receive a written finding by a judge if facts in the case raise concerns.
One significant amendment the House adopted on the floor would change the tax treatment of marijuana businesses. Now, the IRS considers income from state-legal marijuana businesses illegal income, since marijuana is federally illegal. Marijuana businesses are taxed at a high rate and cannot write off business expenses. The state tax code is tied to the federal tax code, so marijuana businesses must also pay a higher state tax rate.
Revenue Committee Chair Mark Cusack introduced an amendment to treat legal marijuana businesses like other businesses for state taxes. A separate adopted amendment would clarify that marijuana vaping products are not subject to a tobacco vaping product excise tax.
State regulators have been pushing lawmakers for years to give them authority to regulate host community agreements and to establish a social equity loan fund. Cannabis Control Commissioner Ava Concepcion recently told reporters that the legislation is necessary. “It will change a lot about the dynamics of this industry,” she said.
Cannabis Control Commission executive director Shawn Collins said in a statement that he is grateful to the House for passing the bill. “This legislation takes another significant step towards achieving equity in our Commonwealth’s legal marketplace by addressing key issues such as host community agreements, social consumption, and the creation of a social equity fund,” Collins said.
The House vote came the same day the Cannabis Control Commission announced that the legal marijuana industry hit a milestone of $3 billion in gross sales since the first recreational shops opened in November 2018. There are now 216 adult-use retail shops and 11 delivery businesses selling products statewide.