Pro Bono Efforts by Senior Associate Lauren Mendelsohn Gain Attention of California Governor’s Office

As the State of California considers additional guidance and direction to contain the spread of coronavirus (COVID-19), we urge you to direct the State’s cannabis licensing agencies — including the Department of Consumer Affairs’ Bureau of Cannabis Control, the California Department of Food & Agriculture’s CalCannabis Cultivation Licensing Branch, and the Department of Public Health’s Manufactured Cannabis Safety Branch — to temporarily suspend the deadlines for renewing licenses and for paying annual license renewal fees that are due, as specified in MAUCRSA and its implementing regulations.

We appreciate the efforts taken by various state departments and offices, including your own, to assist small businesses during this difficult time. However, while cannabis licensees have been deemed “essential” by the State, they are unable to benefit from many of the resources available to other businesses, and face a heavier financial and regulatory burden than most to begin with. For example, cannabis operators are not eligible for the SBA loans or other federal aid being offered to other businesses in light of this pandemic, despite being tax-payers just like other businesses. In addition, most cannabis businesses will not be able to take advantage of the California-specific funding recently announced by your office intended to benefit businesses unable to qualify for federal programs, because the banks participating in the loan program will not deal with cannabis operators due to Internal Revenue Code §280E and banking regulations. As a result, cannabis licensees have a higher tax burden and a harder time accessing banking and traditional funding sources compared to other businesses and still are largely shut out from emergency funding intended to help.

These businesses are having to make rapid modifications to how they operate in response to the current public health crisis, which requires time and resources. In addition, some aspects of the license renewal process may be hindered by workforce disruptions or other factors that are out of a licensee’s control. Many cannabis operators are now caring for loved ones, homeschooling their children, or are quarantined themselves. Local and state regulatory licensing burdens are even more costly to comply with under these circumstances. Relief from license renewal fees and deadlines will be greatly appreciated, and is necessary for many of these businesses to weather this storm.

For each licensee that is forced to close its doors, whatever the reason, jobs are lost and the local economy suffers further. Given the record number of unemployment claims filed in the past few weeks, it is in the State’s interest to do whatever possible to help the cannabis supply chain stay afloat from seed to sale. ​Please consider granting the authority to the cannabis licensing agencies to waive or delay renewal fees due similar to the grant made by you in Executive Order N-40-20 to the Director of Alcohol Beverage Control. While cannabis, like the alcohol supply chain, remains an essential business, the indelible impact of this pandemic and the measures necessary to implement safety procedures greatly impacts the financial viability of cannabis businesses. ​This action, while seemingly small in the grand scheme of things, would provide much-needed immediate relief for the state’s cannabis industry.

We deeply appreciate all the work the State of California is doing to keep the population safe and prevent the spread of the coronavirus. Please provide licensed operators some relief from having to worry about renewal deadlines and fees during this emergency, so they can focus on keeping their employees and communities safe while continuing to provide an essential service. Additional aid, such as reductions of cannabis tax rates or making CDTFA’s small business relief payment plans available for cannabis tax liabilities, would also help these businesses survive.