Establishing Foundation

[dropcap class=”kp-dropcap”]O[/dropcap]ne of the provisions of the Michigan Regulation and Taxation of Marijuana Act (Section 8.1(j)) requires the State of Michigan to promulgate rules for “a plan to promote and encourage participation in the marihuana industry by people from communities that have been disproportionately impacted by cannabis prohibition and enforcement and to positively impact those communities.”

On July 18, the Michigan Department of Licensing and Regulatory Affairs (LARA), through its Marijuana Regulatory Agency (MRA), announced details of the Social Equity Program.

The MRA designated 19 Michigan communities which they determined have been disproportionately impacted by cannabis prohibition and enforcement: Albion, Benton Harbor, Detroit, East Lansing, Ecorse, Flint, Highland Park, Hamtramck, Inkster, Kalamazoo, Mount Morris, Mount Pleasant, Muskegon, Muskegon Heights, Niles, Pontiac, River Rouge, Saginaw and Ypsilanti. These communities were determined through the use of the amount of cannabis-related convictions in those communities, and the poverty rate. All the identified communities have at least 30 percent of the population living below the federal poverty level.

There are three possible fee reductions. Twenty-five percent for those who have been a resident of one of those 19 communities for at least the past five years, an additional 25 percent reduction if the majority owners have been a resident of one of those communities for at least five years and have a cannabis-related conviction, and an additional 10 percent reduction if the majority owners are residents of one of those communities for at least the past five years and were registered as primary caregivers for at least two years between 2008 and 2017.

In addition to the fee reductions, the state is making available personnel from several other agencies who offer services relevant to those who plan to participate in the adult-use cannabis industry. That assistance includes the Department of Treasury explaining tax and payment requirements, and environmental laws explained by the Department of Environment, Great Lakes and Energy, a description of pre-licensure inspections from the Bureau of Fire Services, employee wage and benefit requirements from the Wage & Hour Division of the Michigan Department of Labor, business registration options from the Corporations Bureau, information regarding safe use and compliance from the Department of Health and Human Services, and safety and health education training from the Michigan Occupational Safety and Health Administration.

“All 19 designated communities are slated to host at least one educational session, with representatives from the state available to assist individuals with completing the social equity application.”

The MRA also will be providing education and mentorship including consultations with accountants and attorneys for those who are just seeking to enter the adult-use market.

All 19 designated communities are slated to host at least one educational session, with representatives from the state available to assist individuals with completing the social equity application.

To date, none of the identified communities have opted-in with a local ordinance allowing the licensing of adult-use cannabis businesses. Individuals meeting the qualifications can establish businesses in any of the listed communities to be eligible for the discounts. They do not have to open a business in the community where they live, but in order to be eligible for the discount, the business must be located in one of those communities.

The fees for the adult-use licenses are much lower than the fees for medical cannabis facilities licenses, but except for the 100 plant cultivation license and 150 plant microbusiness license, all licensees first must obtain a medical cannabis facility license before applying for an adult use license until the end of 2021.

The licenses for adult use cost between $3,000 and $50,000 per year, depending on the license (see Emergency Rule 10), and renewal fees will be adjusted for the bottom, middle and top producers as determined by the gross weight transferred by the licensee.

If any criticism of this program can be made, it likely would be based on the fact that mere residence in one of the designated communities for five years or more makes a person eligible for a 25 percent discount on fees for a facility in any of those communities. Regardless, those places do need jobs and other opportunities which in the past, have seemed to pass them by. It will be interesting to watch how this program plays out, and whether the design is an effective one in accomplishing the objective of benefitting those people who have been disproportionally impacted by cannabis prohibition.