HIGH TIMES AHEAD OF ILLINOIS – CANNABIS REGULATION AND TAX ACT
On June 25, 2019, Illinois became the 11th state to legalize recreational cannabis and the first state to do so via its legislative body (without using a public referendum). The Cannabis Regulation and Tax Act provides for the production, sale, regulation, testing, decriminalization and taxation of recreational cannabis in addition to providing for social equity and criminal justice reforms.
LAWS ABOUT CANNABIS ARE ALSO REFERRED TO AS “MARIJUANA LAW, POT LAW OR WEED LAW”
PURCHASING, POSSESSING AND USING RECREATIONAL CANNABIS
As of January 1, 2020, Illinois residents, who are 21 years old and older, can purchase and possess up to 30 grams of raw cannabis, 5 grams of cannabis concentrate products and cannabis infused products containing up to 500 milligrams of THC. Non-residents of Illinois can purchase and possess approximately half the amount that Illinois residents can.
Those who wish to purchase cannabis and cannabis products must do so in person at licensed dispensaries. Once purchased, an individual cannot consume cannabis (or any cannabis products) while out in public or in certain other locations, such as by schools or anyplace where cigarette smoking is not allowed; consumption must occur within a private location, such as the purchaser’s home or a smoking lounge designated for cannabis consumption.
RECREATIONAL CANNABIS LICENSES
The Cannabis Regulation and Tax Act establishes five (5) different types of licenses for the production, sale and delivery of cannabis.
Dispensary licenses are to be issued by the Illinois Department of Financial and Professional Regulation (the “IDFPR”). These licenses allow for the purchase and acquisition of cannabis from cultivation centers, craft growers, processors and other dispensaries. Each licensed dispensary will be allowed to sell cannabis, cannabis–infused products, paraphernal, cannabis seeds (for medical users only) and related items.
Processor licenses will be issued by the Illinois Department of Agriculture (the “IDOA”). Processors are allowed to purchase to purchase and process cannabis for the purpose of extracting the chemicals and other compounds needed to produce cannabis concentrates and to produce cannabis-based products
Transporter licenses will also be issued by the IDOA and are required for the transportation of cannabis, including transportation on behalf of other cannabis businesses.
Craft Grower Licenses
Craft Grower licenses will be issued by the IDOA. Craft growing licenses are required for the growth, cultivation, drying, curing and packaging of cannabis products for sale to dispensaries and processors
Cultivation Center Licenses – Cannabis
Cultivation Center licenses will be issued by the IDOA. Those holding cultivation center licenses will be allowed to cultivate, process and transport cannabis and cannabis-infused products to cannabis businesses in addition to other production-related activities.
Local Cannabis Regulations
The Cannabis Regulation and Tax Act grants certain control to individual municipalities within the State of Illinois. Municipalities are allowed to restrict and limit the location of cannabis-related business in addition to restricting the total amount of cannabis that each business is allowed to possess (provided that the restrictions do not conflict with the Act).
Approved Cannabis Facilities
All of Illinois’ existing medical dispensaries and cultivators currently authorized under the Compassionate Use of Medical Cannabis Pilot Program Act can apply for early approval to enter into the recreational cannabis market as of January 1st. Existing medical dispensaries are allowed up to two (2) recreational-use related licenses.
The IDFPR can issue up to seventy-five (75) conditional licenses by May 1, 2020. These conditional licenses can convert to dispensary licenses after specific pre-established criteria are met. The IDFPR can then issue an additional one hundred and ten (110) conditional licenses after January 1, 2021. In January 2022, the IDFPR can increase the number of available licenses to no more than five hundred (500).
The Cannabis Regulation and Tax Act also places restrictions on the number of cultivation centers, craft growers and infusers that the IDOA can license. In addition, it requires record-keeping, laboratory testing, and the regulatory enforcement of requirements placed on cannabis business, including the manufacturing, advertising, and destruction of products.
Financial Protections for Cannabis-related Business
In order to provide cannabis-related businesses the ability to use Illinois financial institutions (and to protect same), the Cannabis Regulation and Tax Act indicates that financial institutions which provided services to cannabis-related business are exempt from Illinois criminal laws as long as they follow all other applicable state laws. These financial institutions are required to keep the cannabis-related business’ information private and they may not make it available to anyone other than the cannabis-related business or a legal representative.
Monetary Matters – Tax Sales of Cannabis and Cannabis-related Products
The potential revenue to be earned by the State of Illinois due to the legalization of cannabis has been a hotly debated topic for many years. As a result, Illinois has developed a multi-tier taxing plan to address this new revenue source.
The State of Illinois has the ability to tax sales of cannabis and cannabis-related products by cultivators, craft growers, infusers and dispensaries. At the current time, the state’s cultivation tax is seven percent (7%) and retail excise taxes ranging from ten percent (10%) to twenty-five percent (25%); the amount of tax charged is dependent upon the THC level within the cannabis or cannabis-product.
All of the counties and municipalities may apply a retailer occupation tax to dispensary sales. Cook County is authorized to levy a three percent (3%) tax and certain other countries are allowed to impose up to a three percent (3%) retail tax on dispensary sales.
Employment Issues – Drug Free / Zero-Tolerance Policies
The Cannabis Regulation and Tax Act allows employers to establish drug-free or zero-tolerance policies in addition to being able to discipline and terminate impaired employees and those operating under the influence of cannabis while at work. Employees are prohibited from working or being on call while impaired. The Right to Privacy in the Workplace Act has been amended to protect employees who lawfully use cannabis-based products while on their personal time.
Social Justice Issues – Cannabis Convictions
In an attempt to make reparations for prior harm caused by cannabis laws, the Act offers financial assistance and certain benefits related to the license application process to those individuals who have been directly and adversely affected by the prior cannabis laws and enforcement of same. In addition, the Act establishes a fund that will provide low-interest loans and grants to those who have suffered emotional, psychological, and financial harm as a result of arrests, prosecutions and incarcerations related to cannabis.
The Act provides further relief to those negatively affected by the prior cannabis laws by providing a route for the expungement of records for those with minor cannabis offenses and, provided the Governor grants a mass pardon, for those with cannabis convictions as well. If an individual’s record was created before the Act but on or after January 1, 2013 must get expunged by 2021. Records created between 2000 and 2012 must be expunged by 2023. Law enforcement is given until the end of 2024 to expunge those records which were created before 2000. Individuals who were convicted of more serious offenses related to cannabis can petition a court for expungement.
To further level the playing field, the Act provides outreach activities, studies and other assistance to minorities, women, veterans, and those with disabilities who are interested in becoming equity owners of cannabis businesses.
Should you have any questions about recreational cannabis or any other laws that may affect your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.
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