California Approves Regulations for License Fee Waivers for Equity Applicants
By Lauren Mendelsohn
December 22, 2021
California’s Office of Administrative Law (OAL) has approved the latest emergency regulations proposed by the Department of Cannabis Control (DCC), which pertain to license and renewal fee waivers for equity applicants. The DCC will begin accepting requests for such fee waivers on January 1, 2022. You can read the full text of the Equity Fee Waiver Regulations here.
Under the regulations, now codified as Section 15014.1 of the DCC’s regulations (4 Cal. Code of Regs. §15014.1), one request for a fee waiver per 12-month period may be submitted by a cannabis business with at least one “qualified equity applicant or licensee.” The qualified equity applicant or licensee must own, either by themselves or with other qualified equity applicants or licensees, at least 50% of the business applying for the waiver. Additionally, the applicant cannot have (or expect to have) an annual gross revenue that exceeds $1,500,000. There are other requirements as well, which are detailed in the regulations.
A “qualified equity applicant or licensee” can either be a “locally verified equity applicant or licensee in a jurisdiction with a local equity program,” or, if they are from a jurisdiction that does not have a local cannabis equity program, they can meet one of the criteria listed in subsection (d):
(1) The qualified equity applicant or licensee was convicted of an offense related to the sale, possession, use, manufacture, or cultivation of cannabis, prior to November 8, 2016. Proof of conviction shall be demonstrated by copies of federal or state court records indicating the disposition of the criminal matter; records reflecting the post-conviction dismissal or expungement of a conviction, including records reflecting relief under Health and Safety Code section 11361.5; or any other court or law enforcement record that shows proof of conviction.
(2) The qualified equity applicant or licensee was arrested for an offense related to the sale, possession, use, manufacture, or cultivation of cannabis, prior to November 8, 2016. Proof of arrest shall be demonstrated by copies of federal or state court records indicating the disposition of the criminal matter, records of expungement documentation, or any other law enforcement record that shows proof of arrest.
(3) The qualified equity applicant or licensee resides in a household with a household income less than or equal to 60 percent of the area median income for the local jurisdiction they reside, as reported in the most recent United States decennial or special census. Proof of income shall be demonstrated using copies of at least one of the following records with an address in the local jurisdiction, dated within the last two years from the date of the fee waiver request:
(A) Individual federal tax returns, state tax returns, and W-2s;
(B) At least two consecutive paystubs;
(C) Proof of eligibility for a general assistance program that provides financial aid to adults without sufficient income or resources, including but not limited to CalFresh, MediCal/CalWORKS, supplemental security income, or social security disability.
(4) Proof that the qualified equity applicant or licensee has resided for at least five years between 1980 and 2016 in an area with a population that was disproportionately impacted by past criminal justice policies implementing cannabis prohibition during their period of residency.
(A) For the purposes of this subsection, “an area with a population that was disproportionately impacted by past criminal justice policies implementing cannabis prohibition for at least five years” means the following areas:
(i) A county within California with a per capita drug related arrest rate higher than the state’s per capita drug related arrest rate between 1980 and 2016; these counties are : Alameda, Alpine, Contra Costa, Del Norte, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Lake, Los Angeles, Mendocino, Merced, Riverside, Sacramento, San Bernardino, San Diego, San Francisco, San Joaquin, Santa Cruz, Sierra, Solano, Stanislaus, Tehama, Trinity, Tulare, Yolo, and Yuba;
(ii) Census tracts that are among the top 25 percent for civilian unemployment and poverty in the state based on the U.S. Census Bureau’s 2013-2017 American Community Survey;
(iii) Census tracts that are among the top 25 percent for 1-parent or nonfamily households in the state based on the U.S. Census Bureau’s 2013-2017 American Community Survey;
(iv) Census tracts that are among the top 25 percent for non-high school graduation rates in the state based on the U.S. Census Bureau’s 2013-2017 American Community Survey; or
(v) Census tracts that have been designated in California as an Opportunity Zone by the Governor’s Office of Business and Economic Development (Go-Biz).
(B) Proof of residence shall be demonstrated by providing copies of at least two of the following records with an address in the local jurisdiction:
(i) California Driver’s License or State Identification Card;
(ii) Property tax billing or payment, or evidence that the qualified equity applicant or licensee is otherwise exempt from property tax payment by law;
(iii) Signed residential lease agreement, or deed or title to residential real property;
(iv) Copies of state or federal tax returns;
(v) School records;
(vi) Banking or credit card records;
(vii) Voter registration; or
(viii) Utility, cable, or internet billing or payment.
4 CCR §§ 15014.1(d)(1)-(d)(4).
The availability of fee waivers is dependent on available funding, so the DCC warns that not all applicants who qualify will receive a waiver. For more information, read the DCC’s press release here.
We are glad to see the State take this step, which will help those most impacted by the War on Drugs to participate in the legal cannabis industry. In particular, the fact that the regulations include alternative ways for someone located in a jurisdiction that has not approved a local cannabis equity program to qualify for fee waivers is important, since very few cities and counties statewide have adopted such programs. Our office looks forward to continuing to advise clients, including equity applicants, on how to obtain cannabis licenses and operate in compliance with California law.
This information is provided as a public educational service and is not intended as legal advice. For specific questions regarding cannabis licensing in California, please contact the Law Offices of Omar Figueroa at 707-829-0215 or info@omarfigueroa.com to schedule a confidential legal consultation.