This week, Senate Majority Leader Chuck Schumer, Senate Finance Committee Chairman Ron Wyden, and Sen. Cory Booker presented a primary draft of their 163-page cannabis legalization bill, the Cannabis Administration and Opportunity Act. Now that the much-anticipated Senate bill to federally legalize cannabis has been released, its sponsors are soliciting the public for input on improving the drafted legislation before being formally introduced for a vote.
Each of the bill’s sponsors had plenty of optimism to share about the proposed legislation.
Wyden led with acknowledgment of the injustices on the War on Drugs, stating, “Cannabis prohibition, a key pillar of the failed war on drugs, have caused substantial harm to our communities and small businesses, and especially for communities of color. It’s as simple as this: Senators Booker, Schumer, and I want to bring common sense to the federal government, end prohibition and restore the lives of those hurt most and set them up for opportunity.”
Schumer followed and echoed Wyden’s sentiment, saying, “The War on Drugs has too often been a war on people, and particularly people of color. Not only will this legislation remove cannabis from the federal list of controlled substances, but it will also help fix our criminal justice system, ensure restorative justice, protect public health, and implement responsible taxes and regulations.”
Booker hailed the bill as an opportunity to right the wrongs of the past and bring the federal government into to 21st century in terms of stance on the contentious plant, offering, “Our federal government has waged a War on Drugs that has unfairly impacted low-income communities and communities of color. While red and blue states across the country continue to legalize marijuana, the federal government continues to lag woefully behind. It is time for Congress to end the federal marijuana prohibition and reinvest in communities most impacted by the failed War on Drugs.”
Among the provisions included in the bill are how taxes derived from cannabis sales will be collected and spent, as well as which enforcement agencies would have a hand in regulatory authority.
Grant programs for communities most impacted by the War on Drugs would receive a portion of taxes derived from cannabis sales. Those community members who wish to participate in the legal cannabis industry would be the chief benefactors of such grants.
Legal authority over cannabis would be transferred from the Drug Enforcement Administration (DEA) to the Food and Drug Administration (FDA), the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), and the Alcohol and Tobacco Tax and Trade Bureau (TTB).
While the proposal is in its infancy, the public has an opportunity to weigh in on how the law should take shape. Citizens are invited to deliver their thoughts, concerns, and suggestions for the bill during the public comment period, which remains open until September 1, 2021.
In a summary of the bill, all three sponsors contributed in a statement, “The War on Drugs has been a war on people—particularly people of color. The Cannabis Administration and Opportunity Act aims to end the decades of harm inflicted on communities of color by removing cannabis from the federal list of controlled substances and empowering states to implement their own cannabis laws. Descheduling cannabis is a critical step towards achieving justice for those targeted and hard-hit by the War on Drugs. But that alone is not enough.”
This 163-page bill is an extensive piece of legislation and covers an array of topics relating to cannabis sales and regulation, social equity, taxation, and more. This section will cover some of the more prominent aspects of the bill.
The cannabis legalization movement has been working towards federal legalization for decades. Those advocates will be pleased to learn that, should this bill come into law, cannabis will be removed completely from the Controlled Substances Act within 60 days of ratification.
That said, this does not mean that cannabis will be legalized in all states. The bill specifically contains language that provides for the states to make their own determinations as to the legality of cannabis within their borders.
It is also important to note that cross-border sales or transportation of cannabis from a legal region to a non-legal one, as a destination, will remain federally illegal. Businesses transporting from one legal region to another, while traveling through a non-legal jurisdiction, will be permitted.
Traditionally, cannabis has fallen under the oversight of the DEA. With the passage of this bill, the FDA would be “recognized as the primary federal regulatory authority with respect to the manufacture and marketing of cannabis products, including requirements related to minimum national good manufacturing practice, product standards, registration and listing, and labeling information related to ingredients and directions for use.”
Tax and trade would be overseen by the TTB. This includes the collection of cannabis tax revenue, tax law enforcement, and the tracking and tracing of marijuana products.
The bill states that “The agencies would have dual jurisdiction related to certain aspects of cannabis product labeling and packaging, advertising, and other consumer information.”
States that have already gone ahead and legalized cannabis have made social equity programs a pronounced part of their legalization legislation.
It’s no secret that the War on Drugs has disproportionately impacted communities of color. As a result, this bill would make a significant push to advance social justice for those who’ve been disproportionately affected by the War on Drugs.
The bill’s summary of findings section states “Communities that have been most harmed by cannabis prohibition are benefitting the least from the legal marijuana marketplace,” further acknowledging the “legacy of racial and ethnic injustices, compounded by the disproportionate collateral consequences of 80 years of cannabis prohibition enforcement, now limits participation in the industry. Historically disproportionate arrest and conviction rates make it particularly difficult for people of color to enter the legal cannabis market- place, as most States bar these individuals from participating.”
A key initiative of the bill aims to undo the harm visited on these communities by directing federal districts to expunge arrest and conviction records for non-violent marijuana offenses within one year of ratification. Furthermore, those currently incarcerated for non-violent cannabis convictions will be entitled to a resentencing review hearing.
As part of the proposed Senate bill, three grant programs would be established. Each will fund nonprofits, empower disadvantaged individuals in the cannabis industry, and support licensing programs.
The first grant listed in the bill would be distributed by the Cannabis Justice Office under the Justice Department. The grant will “fund nonprofits that provide services to individuals adversely impacted by the War on Drugs, such as job training, reentry services, and legal aid, among other services.”
The second would be overseen by the Small Business Administration (SBA) and “provide funding to eligible states and localities to make loans to assist small businesses in the cannabis industry owned by socially and economically disadvantaged individuals,”
The third grant, named the Equitable Licensing Grant Program, will “provide funding to eligible states and localities to implement cannabis licensing programs that minimize barriers for individuals adversely affected by the War on Drugs.”
States and localities will be required to satisfy certain criteria to qualify for these SBA grants, which includes “taking steps to create an automatic process to expunge criminal records for cannabis offenses and violations for individuals under criminal supervision for cannabis offenses.”
While federal and states’ stances on legalized cannabis may not align following the passage of this bill, certain consumer rights and protections will be afforded to the individual in any case.
Among these protections is the right to be free from denial of any federal benefit based on cannabis use, possession, or conviction for a marijuana-related offense. The preservation of security clearance for federal employees is one such example outlined in the bill. That said, the bill provides that federal agencies are still allowed to include cannabis as part of federal employee drug testing.
In that same vein, Veteran’s Affairs (VA) doctors will be granted authority to issue recommendations of medical cannabis to their patients.
States are already imposing significant tax rates on recreational cannabis sales, while many medical cannabis sales are not subject to those same taxes.
According to the proposed legalization bill, the federal government will impose a scaling sales tax rate over four years. The tax rate would begin at 10 percent and increase 5 percent annually to reach a maximum of 25 percent. After that point, according to the bill, the tax would be based “per-ounce or per-milligram of THC amount determined by the Secretary of the Treasury equal to 25 percent of the prevailing price of cannabis sold in the United States in the prior year.”
Small businesses will enjoy a tax credit of 50 percent on sales less than $20 million annually. Larger producers will be eligible for the same 50 percent tax credit, though only on their first $20 million in sales per year. All sales following that will be subject to the full rate. Additionally, the bill states, “Similar to the reduced rates for alcohol producers, certain anti-abuse rules would limit the tax benefit only to products produced or substantially modified by the small producer, in order to limit the benefit received by large producers and to prevent a double-benefit.”
Marijuana business permitting and licensing are also outlined in the bill. Approval and regulation will be different for companies selling taxable marijuana products and those selling at the wholesale level. However, both would require approval from the US Treasury Department. Furthermore, cannabis producers would need to be registered with the FDA.
Permitting will be relatively strict and producers must maintain facilities in line with the statutes described in the bill. If producers fail to abide by these rules, their permit “may be denied or revoked if the premises are inadequate to prevent tax evasion or diversion, operation of the premises do not comply with federal or state law, or an applicant fails to disclose material information or makes a false statement. In addition, a cannabis permit application may be denied if the applicant has been convicted of a disqualifying offense. For these purposes, a disqualifying offense is a felony criminal offense that occurred after the confirmation of this Act and within the preceding three years related to cannabis diversion or cannabis tax evasion. An applicant may apply to the Cannabis Products Advisory Committee for a waiver concerning a disqualifying offense if the Committee finds that the applicant has established sufficient evidence of mitigation or rehabilitation and fitness to maintain cannabis operations in compliance with state and federal law.”
The consumer rights and protections section of this overview touched on interstate commerce relating to cannabis, authority over which is wielded by the FDA. As part of that oversight, the Center for Cannabis Products and a Cannabis Products Regulatory Advisory Committee will be created.
The FDA will further task “owners and operators of establishments that are engaged in the manufacture, preparation, compounding, or processing of a cannabis product to register their establishments with FDA upon first engaging in such activities and annually thereafter.”
Track and trace operations for medical products, supplements, and other consumables manufactured by producers or processors will be overseen by the Treasury. In that same vein, the Consumer Product Safety Commission will have the authority to regulate and stipulate standards for cannabis product packaging.
Lastly, the banking activities of cannabis businesses are addressed indirectly through the bill. NO language specifically stipulates how such activities are to be regulated, but language is provided to ensure that any penalties that financial institutions currently potentially face as a result of working with licensed cannabis businesses would be removed, as those activities would cease to be federally illegal.
Several research topics are outlined in the bill to better identify constraints, inequalities, and impacts of cannabis legalization across the country.
The Government Accountability Office (GAO) will be tasked with facilitating the majority of these efforts.
As part of its mission, the GAO will undertake a “review of federal laws, regulations, and policies, to identify additional areas in need of change, including a study on replacing the term ‘marijuana’ and ‘marihuana’ with ‘cannabis’ through the U.S. Code and regulations.” Included in that review are stipulations to study the demographics of federal cannabis convictions and the “societal impact of legalization in states that already have enacted legal marijuana laws.
The Bureau of Labor Statistics (BLS) will be responsible for collecting and compiling demographic data relating to “business owners and employees in the cannabis industry.” The intent is to inform social justice efforts and advocates’ reported lack of diversity throughout the cannabis industry.
Finally, the U.S. Department of Health and Human Services (HHS) will team with the National Institutes of Health (NIH) to promote research focused on the health impacts of cannabis. Additionally, HHS will work with the U.S. Department of Transportation (DOT) to research cannabis-impaired driving data to develop “an impairment standard for driving under the influence of cannabis.”
While many states and citizens are clearly in favor of legalization, the Biden administration remains opposed.
President Biden has taken a reserved stance, opting for cannabis decriminalization and leaving the states to make up their own minds on the issue. However, President Biden has voiced his approval of expunging prior conviction records and respect states’ legalization laws.