Massachusetts Governor Charlie Baker (R) just signed a sweeping new bill that will overhaul the state’s cannabis regulations in order to boost social equity in the adult-use industry.
First and foremost, the new law establishes a Social Equity Trust Fund that will offer grants and loans to prospective cannabis entrepreneurs who have been disproportionately impacted by the War on Drugs. Lawmakers are hoping that this fund will increase diversity in the state's legal weed industry, which is largely dominated by wealthy, white-owned corporations. Seed money for these grants will come from the state Marijuana Regulation Fund, which pools state weed tax revenue, application fees, and industry fines.
The state's original adult-use law already includes provisions that reserve a specific number of adult-use licenses for minority- and veteran-owned businesses. These provisions haven't proved to be much of a success, though, because most minority entrepreneurs lack the vast sums of capital needed to launch a legal weed business. Lawmakers hope that the new trust fund will help level the playing field by helping smaller companies cover their startup costs.
“This bill is an important step forward in undoing the harms of prohibition and over-policing and will provide an important path for families of color to create jobs in their community and generate generational wealth,” said Shanel Lindsay, co-founder of Equitable Opportunities Now, in a statement reported by The Berkshire Eagle.
The legislation also includes a tax reform provision that will finally allow licensed cannabis businesses to write off business-related expenses on their state taxes. Pretty much every American business receives tax deductions for staff salaries, business losses, equipment purchases, and other relevant expenses, but federal law prohibits legal weed businesses from taking these same deductions.
Most state tax laws copy these restrictions to the letter, so legal weed businesses can't write off expenses on their state taxes either. New Mexico and New York have made steps to allow cannabis businesses to take state-level business deductions, but Massachusetts is the first state to offer this tax reprieve to existing adult-use companies.
The new law also includes provisions that will stop local municipalities from imposing excessive fees and restrictions on pot companies. Under the current law, licensed cannabis companies are required to enter into “host community agreements” with municipal governments in the towns or cities where they want to do business. Some local governments have forced pot businesses to cough up huge sums of cash in exchange for signing off on these agreements, though, and one local mayor was even arrested for extorting entrepreneurs who hoped to set up shop in his town.
Under the new law, the “community impact fees” charged by local municipalities will be capped at 3 percent of a company’s total gross sales. The state Cannabis Control Commission has been granted additional oversight powers to ensure that these fees are genuinely linked to cannabis-related expenses that a municipality actually incurs. Host community agreements will also be limited to a maximum of eight years.
“This law will rebalance the playing field, where so far wealthy corporations have been able buy their way through the licensing process and too many local, small business owners and Black and brown entrepreneurs have been locked out,” said Sen. Sonia Chang-Díaz, co-chair of the Legislature’s Cannabis Policy Committee, to The Berkshire Eagle. “The reforms and funding we fought so hard for will be game changers, putting Massachusetts back among the leading states for racial justice in our economic policy on cannabis.”
Last but not least, the new law also sets up regulations that will allow cities and towns to open cannabis consumption lounges. Public cannabis smoking is still prohibited in Massachusetts, so these new cafes will give pot tourists and locals a chance to sample the state's legal weed without running afoul of the law.
Lawmakers managed to send the bill to the Governor's desk just hours before they wrapped up this year's legislative session. The state House approved the bill with a 153-2 vote, and the Senate approved it unanimously. Gov. Baker signed off on nearly every element of the bill, but he did veto one provision that would have required the state to explore allowing students to possess and use medical marijuana on public school grounds.
Cover image via