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A Look Back at 2022 in California Cannabis, Hemp & Psychedelics

By Lauren Mendelsohn

December 29, 2022

CA shape with pot leaf

2022 was a significant year for cannabis, hemp, and psychedelics policy in California. We’ve summarized some of the key events below.

 

CANNABIS

Legislative Victories in Sacramento

A number of cannabis-related bills were adopted in 2022 by the State legislature, which will bring about significant changes that will benefit employees, patients, and consumers alike. These include, among things:

  • Preventing employers from firing an employee for off-duty cannabis use by prohibiting workplace drug testing for inactive metabolites of THC, with some exceptions (AB-2188).
  • Protecting patients and their physicians from being discriminated against or penalized for the use of other pain medications in addition to cannabis (AB-1954).
  • Allowing for interstate cannabis commerce through agreements with other states that have enacted similar measures once one of the following occurs: interstate cannabis commerce is allowed under Federal law, the DOJ issues a memo saying this is acceptable, or the Attorney General issues a written opinion stating that interstate cannabis commerce does not result in significant legal risk to the State (SB-1326).
  • Sealing old cannabis-related convictions (AB-1706). 
  • Allowing veterinarians to recommend the use of medical cannabis for pets (AB-1885)
  • Preventing local jurisdictions from banning delivery of medical cannabis to patients and caregivers within their borders (SB-1886). 
  • Allowing terminally ill patients to use medical cannabis in healthcare facilities (SB-988).

You can read about these and other legislative developments on the California NORML website. 

DCC Adopts Comprehensive Regulations

After years of emergency regulations and changing agencies, in November 2022 the California Department of Cannabis Control (DCC) adopted comprehensive (non-emergency) regulations to govern all cannabis license types. 

Highlights from the regulations include, but are not limited to:

  • Cultivation using light deprivation but not artificial light is now classified as outdoor cultivation rather than mixed-light cultivation (§16202).
  • An increase in the amount of product that a delivery retailer can drive around with to $10,000 regardless of whether orders have been placed for those goods (§15418).  
  • New rules for non-retail licensees participating in licensed cannabis events (§15603.1).
  • Clarification on ownership and financial interest holder definitions (§§15003, 15004).
  • Allows certificates of analysis to be provided electronically (§15306).
  • Addresses the use of shipping containers (§§15000.3, 15000.7).
  • Creates a new process for dealing with returns of cannabis or cannabis products (§15052).
  • Allows storefront retailers to use curbside delivery on a non-emergency basis (§15402).
  • Modifies requirements for the secured storage area within transportation and delivery vehicles (§§15311, 15417).
  • Allows consumption lounges to serve, and to allow customers to bring in or receive, prepackaged non-alcoholic food and beverages if acceptable with the local jurisdiction (§15407).
  • Provides for a 10% deviation between the amount of THC and/or CBD listed on the label and in the certificate of analysis (§15724).
  • Modifies the list of prohibited additives and delivery devices by removing caffeine, and adding (i) injectable cannabis goods; (ii) metered-dose or dry-powder cannabis inhalers;  and (iii) cannabis goods delivered through the nasal passages (§17300 et. seq.).

In addition, the DCC adopted non-emergency regulations regarding equity fee waivers and deferrals (§15014.1), and approved emergency regulations for track and trace requirements for delivery of cannabis goods (§§15049.3, 15418). Furthermore, new regulations dealing with “large” cultivation licenses – which will be available beginning January 1, 2023  – and conversion of medium to large cultivation licenses, as well as new regulations for a standard cannabinoids test method and standardized operating procedures, are expected to be adopted soon.

These rules will continue to evolve; you can keep up with the changes on the DCC’s website.

Launch of Equity Fee Waiver Program

2022 saw the launch of the DCC’s equity fee waiver program, which provides a way for businesses where at least 50% ownership is held by individuals who qualify as an “equity applicant” and which has a gross revenue of less than a certain amount (initially  $1,500,000 but recently increased to $5,000,000) to apply for a waiver or deferral of their annual license or renewal fee. Participation in a local cannabis equity program satisfies the equity criteria, but businesses located in a jurisdiction without any such program can also satisfy the equity criteria by way of a past cannabis conviction or arrest, their household income, or past residence in an area disproportionately impacted by criminal justice practices related to cannabis prohibition.

More details about the requirements for DCC’s equity fee waiver program, as well as a map tool to identify disproportionately impacted areas, are available here.

Sweeping Changes to Cannabis Cultivation and Excise Taxes

Assembly Bill 195, a cannabis “trailer bill” adopted by the state legislature and signed by the Governor this summer, made major overhauls to the state’s cannabis cultivation and excise taxes, which were originally imposed after Proposition 64 as part of MAUCRSA. 

As of July 1, 2022 the cultivation tax was permanently eliminated. Previously, the cultivation tax was assessed directly on licensed cultivators based on the weight of harvested material. For several years there have been efforts to reduce or eliminate the cultivation tax as a way to help small farmers, and it’s largely thanks to the efforts of groups representing these operators that AB-195 passed. However, as of the date of this post, it seems that many cultivators aren’t seeing much benefit from this change, and that more must be done by the State and local jurisdictions to help smaller operators compete in the legal marketplace. 

In addition to eliminating the cultivation tax, AB-195 modified the excise tax (which is paid by retail customers) by changing the point of remittance from the distributor to the retailer and setting the excise tax rate at 15% of the retail purchase price (with the potential to increase up to 19% starting in 2025-2026), beginning January 1, 2023. Licensed retailers will need to obtain a cannabis tax permit from CDTFA, and make sure the State is receiving the tax money they collect from customers. New enforcement provisions have also been added. Previously, licensed distributors were responsible for remitting and reporting cannabis excise taxes, who will need to file their final cannabis tax return by January 31, 2023.

The measure also allows retailers who are eligible for an equity fee waiver from the Department of Cannabis Control to apply to the California Department of Tax and Fee Administration to retain 20% of the excise tax collected as vendor compensation until December 31, 2025. Unlike the changes to the cultivation tax which were effective immediately when this bill passed over the summer, the changes to the excise tax are effective January 1, 2023.

Tax Credits and Other Benefits for Licensees

Assembly Bill 195, discussed above, created new state tax credits for businesses that have received DCC approval for an equity fee waiver, as well as for licensed retailers and microbusinesses that offer certain benefits to their employees (including employment compensation for full-time employees; safety-related equipment, training, and services; and workforce development and safety training for employees). Both of these tax credit programs end on January 1, 2028.

New Proposition 65 Warnings for Cannabis Smoke and THC

Earlier this year, the Office of Environmental Health Hazard Assessment (OEHHA) – the agency that oversees implementation of California’s Proposition 65, which requires that the public receive clear and reasonable warnings before being exposed to potentially toxic chemicals – adopted new regulations related to warnings for cannabis products. 

The new regulations, which we previously discussed here, are currently being phased-in and will fully replace the “short form” warning as an acceptable form of safe harbor warning in October 2023. These differ from the current warnings used by most operators since there will now be slightly different language required for different types of products.

Proposition 65 applies to all goods, not just cannabis, and any company that sells products to consumers in California regardless of where the company is located. Thus, hemp companies, ancillary product manufacturers and service providers, and other businesses should be aware of this law and its requirements. Thankfully for small operators, businesses with fewer than 10 employees are exempt (but note that “employees” in the Prop. 65 context includes part-time and seasonal workers).

Cannabis Included in the California State Fair

In 2022, for the first time ever, cannabis was featured in the California State Fair with its own pavilion, a competition (the California Cannabis Awards), numerous featured speakers, and a larger-than-life educational exhibit. The audience’s reaction to the exhibit was extremely positive, and the California State Fair has already announced that the cannabis exhibit will be back again in 2023. 

Our Founder and Principal Attorney Omar Figueroa serves as an official Ambassador for the California State Fair Cannabis Exhibit and Awards, and both Omar and our Senior Associate Attorney Lauren Mendelsohn spoke at this year’s event. More information is available here.

 

HEMP  

State’s Industrial Hemp Plan Approved by USDA

In January 2022, the United States Department of Agriculture (USDA) approved California’s Hemp Production Plan. Additionally, the California Department of Food and Agriculture (CDFA), the lead State agency regulating industrial hemp licensing and production, adopted additional regulations governing industrial hemp operations.

Industrial Hemp Manufacturing Licensing Begins with CDPH

In October 2021, the state legislature adopted Assembly Bill 45, a monumental piece of legislation governing the hemp manufacturing industry in California. AB-45 made the California Department of Public Health (CDPH) the lead agency for regulating hemp manufacturing, and created the Industrial Hemp Enrollment and Oversight (IHEO) authorization. This year, CDPH adopted regulations in furtherance of various parts of AB-45, including regulations related to license fees and requirements; published the industrial hemp manufacturing license application materials; and began accepting industrial hemp manufacturing applications. They also created new pages on their website pertaining to the IHEO.

IHEO licensees must use industrial hemp from licensed, Farm Bill-compliant hemp sources, and must comply with applicable statutes and regulations. “Industrial hemp” or “hemp” is currently defined under State law as agricultural product, whether growing or not, that is limited to types of the plant Cannabis sativa L. and any part of that plant, including the seeds of the plant and all derivatives, extracts, the resin extracted from any part of the plant, cannabinoids, isomers, acids, salts, and salts of isomers, with a delta-9 tetrahydrocannabinol concentration of no more than 0.3 percent on a dry weight basis. Since hemp that meets the foregoing definition is not considered a controlled substance under Federal or State law, manufacturers and retailers of hemp products can sell their goods to consumers in other states, provided that any applicable restrictions are followed (for example, certain states limit the types of industrial hemp products that can be sold there). This contrasts with licensed manufacturers and retailers of cannabis products, which can only be sold within the state.

 

PSYCHEDELICS

Earlier this year, the City of San Francisco voted to make the adult use of plant-based psychedelics among the lowest law enforcement priority, following in the footsteps of neighboring Oakland and Berkeley which have already taken similar measures. (Technically, none of these local measures can “decriminalize” psychedelics, which still carry criminal penalties under state and federal law.) 

A bill, Senate Bill 519, that would have decriminalized various psychedelic drugs –  at least under State law – was defeated earlier this year, but only after making significant progress  in Sacramento. Its author, Senator Scott Weiner (D-San Francisco), has already introduced a new (albeit more limited) bill, Senate Bill 58, which would decriminalize certain plant-based psychedelics. We’ll be keeping a close eye on SB 58 in 2023.

 

This information is provided as a public educational service and is not intended, nor should be construed as, legal advice. For specific questions regarding cannabis, hemp or psychedelics laws in California, contact the Law Offices of Omar Figueroa at 707-829-0215 or info@omarfigueroa.com to schedule a confidential consultation.

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