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Legal Corner

Imminent Expansion




2018 was certainly a tumultuous time for the California cannabis industry as it withstood several drafts of regulations, each with new nuances and wrinkles. Thankfully, as of Jan. 16, the Office of Administrative Law certified all three California cannabis agencies’ final regulations. While we still anticipate changes to regulations in the future, this year, most of the change and advancement of the industry will be made by legislation from the California state legislature. While the 2019-2020 legislative session has only just begun, we are already seeing many bills being introduced that are worthy of highlighting.


Assembly Bill 37

Introduced by Assemblymember Reginald Jones-Sawyer on Dec. 3, 2018, AB-37 allows cannabis businesses to deduct business-related expenses from their personal income tax. Essentially, this bill would allow licensed cannabis business to deduct business expenses they are denied under the IRS Tax Code Section 280E because they are conducting business with a Schedule I substance. This bill would provide a major relief for businesses in San Diego and elsewhere throughout the state that face massive barriers to entry due to the high tax bills.


Assembly Bill 228

Introduced by Assemblymember Cecilia Aguiar-Curry on Jan. 17, AB-228 would state that a food, beverages, or cosmetics are not adulterated by the inclusion of industrial hemp products, including CBD derived from industrial hemp. Furthermore, AB-228 would prohibit restrictions on the sale of food, beverages, or cosmetics that include industrial hemp products or CBD derived from industrial hemp based solely on the inclusion of industrial hemp products or CBD. This bill is a direct response to the California Department of Public Health (CDPH)’s guidance memo issued this summer that stated CBD food and beverage products were prohibited for human and pet consumption. The CDPH was following guidance provided by the FDA. However, since the CDPH offered this guidance, the federal government legalized hemp and hemp-derived CBD nationally. If this bill passes, consumers will quickly see many new and innovative hemp products coming from San Diego businesses anxious to offer their goods.


Assembly Bill 286

Introduced by Assemblymembers Rob Bonta, Ken Cooley, Reginald Jones-Sawyer and Tom Lackey on Jan. 27, AB-286 cuts the state excise tax on cannabis sales from 15 percent to 11 percent for a period of three years until 2020. Licensed retailers in San Diego greatly welcome this bill as it may offer some relief for businesses competing with the illicit market.


Senate Bill 34

Introduced by Sen. Scott Wiener on Dec. 3, 2018, SB-34 allows for the donation of cannabis products to medicinal cannabis patients for compassionate care. Current law states that licensed retailers are strictly prohibited form giving away cannabis for free. This bill would allow retailers to provide medical cannabis to patients so long as they adhere to specific requirements.


Senate Bill 51

Introduced by Sen. Hertzberg on Dec. 4, 2018, SB-51 provides for the licensure and regulation of cannabis limited charter banks and credit unions for the purpose of providing banking services to cannabis businesses. The cannabis industry remains a cash-heavy industry. This reality is a massive safety concern for companies having to transact in cash. Likewise, the headache of not having access to banking is a logistical nightmare for business trying to pay vendors, employees and conduct business as if they were in any other industry.

“If this bill passes consumers will quickly see many new and innovative hemp products coming from San Diego businesses anxious to offer their goods.”


We have certainly made progress over the past year but now is the time to rally support and smooth all the pain points we have come to understand under the current cannabis regulations. It is always encouraged to call your representatives and ask them to support the passage of cannabis bills such as these.