Cannabis Regulation and Tax Act

In May 2019, the Illinois General Assembly passed the Cannabis Regulation and Tax Act (the “Act”). With the Act’s passage, Illinois became the first state legislature to pass a bill that legalized both the sale and possession of recreational marijuana. The Act passed the Senate on Wednesday, May 29th and was approved by the House by a bipartisan vote of 66-47 on Friday, May 31st.  While the Act is robust, below is a highlight of important sections.

Effects on Individuals

The Act expands upon the Compassionate Use of Medical Marijuana Pilot Program Act and legalizes the recreational use, possession, consumption, purchase, and transfer of marijuana for individuals over the age of 21. As is typical in other states that have legalized the recreational use of marijuana, there are certain limitations on the amount of cannabis an individual can possess.

Social Equity Component

Similar to California, the Act contains a social justice component. In addition to the expungement of criminal records and dedication of revenues to address economic development, violence prevention and youth development in impacted communities, the Act also contains provisions that allow individuals who qualify as “Social Equity Applicants” to obtain low-interest loans and grants as to fund a marijuana operation as well as waivers for licensing fees. In order for a Social Equity License holder to transfer the license to an individual that does not meet the Social Equity qualifications within 5 years of the date of issue, the new license holder must pay the cannabis business development fund any fees that were waived in the original application, any outstanding amount owed on a social equity loan, and the full amount of any grants that the Social Equity Applicant received.

Regulatory Authority

The Act provides a scheme of shared authority that will oversee the use, production, and regulation of marijuana. The enforcement authority is primarily made up of three government departments: the Department of Agriculture, the Department of Financial and Professional Regulation, and the Department of the State Police. The Department of Agriculture is charged with the administration of the portions of the Act that govern cultivation centers, craft growers, infuser organization, and transporting organizations including the issuance of ID cards, the limitation on potency and serving size for cannabis products, and the issuance, renewal, and discipline of licenses. The Department of Financial and Professional Regulation will oversee the registration of a dispensaries and the licensing process that accompanies both the dispensary and the individuals who operate it. The Department of Financial and Professional Regulation will also oversee license renewals and transfer licenses for dispensaries.

Within the Department of Financial and Professional Regulation, the Act creates the position of the Illinois Cannabis Regulation Oversight Officer. The Cannabis Regulation Oversight Officer will serve as the liaison between departments to ensure coordination and compliance with the Act. The Officer may collect necessary data pertaining to cannabis and make recommendations for policy, statute, and rule changes. Importantly, the Cannabis Regulation Oversight Officer does not participate in the issuance or dispute resolution of business licenses. Finally, the Department of State Police is tasked with conducting a criminal records check of the prospective principle officers, board members, and agents of any cannabis business establishment applying for a license under the Act.

In addition to the enforcement authorities, the Department of Public Health and Department of Human Services will participate with the regulation of cannabis. The Department of Public Health will provide opinions and recommendations to the other enforcement departments in regard to the appropriate health warnings, advertising, and labeling requirements. The Department of Human Services will serve as the public education body and will identify educational programs for ailments such as mental health and addiction.

Number of Licenses

The Act provides for the issuance of licenses beginning January 1, 2020. Any medical cannabis dispensary that is properly licensed pursuant to the Compassionate Use of Medical Marijuana Pilot Program Act will be able to apply for and Early Approval Adult Use License within 60 days of the signing of this Act. Additionally, individuals can begin the application process to obtain a Conditional Adult Use License in October 2019. The Department of Finance and Professional Regulation will issue up to 75 licenses before May 1, 2020 and up to 110 licenses by December 2021.

Purchasing and Transferring a License

The application for a Conditional Adult Use Dispensing Organization License requires that an applicant provide a variety of information and pay a nonrefundable fee of $5,000.00 for each license applied for. Significantly, the applicant must detail a plan for community engagement. The community engagement portion is significant because it affects the transfer of a regular dispensing organization license.

License transfers are subject to the approval of the Department of Financial and Professional Regulation. The regulations detailing approval have not yet been finalized, but the Act does specify that the Department may withhold approval if the person to whom the license is being transferred does not commit to the same community engagement plan that was agreed to in the original license application. The Department will not issue an Adult Use Dispensing Organization License until the Department has inspected the dispensary site for compliance with the Act, the holder has paid the registration fee, and they have met all the requirements and rules under the Act.

Written with the assistance of Lindy Martinez, a summer associate in the Husch Blackwell LLP Denver office.