New York State Cannabis/Marijuana Regulation & Taxation Act

On March 31, 2021, New York Governor Andrew Cuomo signed legislation—the New York State Cannabis/Marijuana Regulation & Taxation Act—legalizing adult-use cannabis in the State of New York. In addition to legalizing adult-use cannabis, the law also expands New York State's existing medical marijuana and cannabinoid hemp programs. Additionally, the legislation establishes a new Office of Cannabis Management that will implement a comprehensive regulatory framework that covers medical and adult-use marijuana and cannabinoid hemp. The legislation provides licensing for marijuana producers, distributors, retailers, and other actors in the cannabis market, and also creates a social and economic equity program to assist individuals disproportionately impacted by cannabis enforcement that want to participate in the industry.

New York State projects that there will be significant economic opportunities from this legislation, including an anticipated $350 million annually in tax collections from the adult-use cannabis program and the potential for this newly legalized industry to create 30,000 to 60,000 new jobs in New York.

The new law contains the following important provisions:

• The Office of Cannabis Management
  The new law establishes of the Office of Cannabis Management (the “OCM”). Governed by a five-member board—with three members appointed by the Governor and one appointment by each house of the New York legislature—the OCM will enforce a comprehensive regulatory framework governing medical and adult-use marijuana and cannabinoid hemp.
• Medical Cannabis
  The new law expands the types of medical conditions permitted to access medical marijuana, increases the number of caregivers allowed per patient, and permits home cultivation of medical cannabis for patients.
• Adult-Use Cannabis
  The new law creates a tiered licensing structure to establish licensees at all levels of the production, distribution and sale of adult-use cannabis.
  
  As presently written, the law restricts the ability of licensees to be engaged in vertically integrated businesses, except in certain circumstances. For example, the law will prohibit growers and processors from also owning retail stores. The legislation creates licenses for producers, processors, distributors, retail outlets, delivery and on-site use, among others, and includes measures for strict quality control, public health and consumer protections.
  
  There will be an additional social and economic equity program that will facilitate individuals disproportionately impacted by cannabis enforcement, with a goal of 50% of licenses going to minority- or women-owned business enterprises, distressed farmers and/or service-disabled veterans.
• Cannabinoid Hemp
  The new law permits the sale of hemp flowers in the cannabinoid hemp program, and allows for smokable forms only when adult use retail stores are operational.
• Adult-Use Cannabis Tax Revenue
  The new law also implements a new cannabis tax structure that will replace a weight-based tax with a tax per milligram of tetrahydrocannabinol (THC), the active chemical in cannabis, at the distributor level with different rates depending on final product type.
  
  The wholesale excise tax will be moved to the retail level with a 9% state excise tax. The local excise tax rate will be 4% of the retail price.
  
  Counties will receive 25% of the local retail tax revenue, and 75% will go to the municipality.
  
  All cannabis taxes will be deposited in the New York State cannabis revenue fund. Revenue covers reasonable costs to administer the program and implement the law, with the remaining funding to be split three ways: 40% to the state Education Fund, 40% to the state Community Grants Reinvestment Fund, and 20% to the state Drug Treatment and Public Education Fund.
• Municipal Opt-Out
  Under the new law, cities, towns and villages may opt-out of allowing adult-use cannabis retail dispensaries or on-site consumption licenses by passing a local law by December 31, 2021 or nine months after the effective date of the legislation; however, they cannot opt-out of adult-use legalization.
• Traffic Safety
  The new law includes additional funding for drug recognition experts and law enforcement to ensure safe roadways. The use of cannabis by drivers will remain prohibited and will carry the same penalties as it does currently.
• Personal Possession and Home Cultivation
  The new law provides the following with respect to growing cannabis at home and personal possession of cannabis outside the home:
  • personal possession outside of the home: up to three (3) ounces of cannabis and 24 grams of cannabis concentrate;
  • home possession: amends limits of what is permitted in the home, which must be kept in a secure location away from children; and
  • home cultivation: 18 months after first adult-use sales begin for adult recreational use, permitted subject to possession limits and subject to regulations of the Medical Program being promulgated no sooner than six (6) months: (i) three (3) mature plants and three (3) immature plants for adults over 21, and (ii) six (6) mature plants and six (6) immature plants maximum per household.
• Criminal Justice and Record Expungement
  Under the new law, the cannabis penalty framework will be restructured to avoid the criminalization seen in prohibition. Reduced penalties will be implemented for possession and sale.
  The new law also creates automatic expungement or resentencing for anyone with a previous marijuana conviction that would now be legal under the new law.
• Environmental
  The new law adds cannabis to the Clean Indoor Air Act, which establishes a baseline for where cannabis can be smoked or vaped. Municipalities and local governments are permitted to make laws that are more restrictive with respect to environmental issues.
  The new law also contains various provisions to ensure that cannabis is treated as a lawful substance and to prevent discriminatory enforcement.
• Protections for the Use of Cannabis and Workplace Safety
  Under the new law, unlawful discrimination will be prohibited, and workplace safety protections will be implemented.
• Public Health and Education Campaign
  Under the new law, OCM will establish a robust public health and education campaign and work with neighboring states and associations to coordinate actions and policies to protect regional health and safety.

For more information about NYS regulations and licensing, do not hesitate to reach out to Paul Marino (Partner and Co-Chair of our Financial Services and Corporate Groups) or Eliott Frank (Partner in our Regulatory and Compliance Group).

We will be hosting a webinar on April 21 to discuss the same. Participants will receive the recording after the webinar is completed.