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new california cannabis laws 2021
October 1, 2020

New California cannabis laws for 2021

2021 is here and after all that the industry (and everyone else) endured in 2020, there’s a lot to be hopeful for this year. But there are also several cannabis-related laws and changes California operators need to be aware of. In any case, happy 2021! Here’s what what you need to know.

New California Cannabis Laws for 2021 (Prop. 65 and more!)

  • Changes to Prop. 65: This is a big one for the entire industry and it goes into effect on January 3, 2021. Changes to Prop. 65 that we covered initially back in the summer of ’20 are going to be critically important for operators to be aware of and to make adaptations to quickly. By all means read that entire blog post; but even before doing that, review the state’s Prop. 65 website with your legal counsel. Here’s the gist:
    • Since cannabis smoke is now listed as a carcinogen and reproductive toxin, smokable cannabis products will require Prop 65 warnings for both cancer and developmental toxicity from cannabis smoke. If the warning isn’t on the physical product, retailers will need to ensure that proper signage is posted on site.
    • Since THC is now listed as a cause of developmental toxicity, both smokable and certain non-smokable cannabis products (e.g., edibles, vape cartridges, and even CBD products with trace amounts of THC) will require Prop 65 warnings for developmental toxicity from THC.
    • For emphasis, CBD operators need to be just as aware of this as operators handling THC. Why? It’s because there is no safe harbor exposure level for THC in CBD products. This is a critical vulnerability that CBD operators need to address.
    • Also, all license holders along the supply chain should look into safe harbor warnings, as utilizing them is an effective way to protect your business against Prop 65 enforcement.
  • AB 1872 (The Tax Freeze one): Newsom technically signed this one last week, but it’s still critically important and covered by this legislative session. 1872 suspends the California Department of Tax and Fee Administration’s (CDTFA) power to raise the excise tax or adjust wholesale mark-up rate for one year. Here’s more on how it will work, and here’s the gist:
    • Prohibits the California Department of Tax and Fee Administration from adjusting the markup amount during the period beginning on or after the operative date of the bill, and before July 1, 2021.
    • Prohibits the cultivation tax rates that are imposed in the 2021 calendar year from being adjusted for inflation unless the adjustment is for an inflation rate that is less than zero.
    • Provides that beginning January 1, 2023, the rates imposed for the previous calendar year shall be adjusted by the department annually for inflation.
    • Prohibits the Board of State and Community Corrections from making grants to local government that ban both indoor and outdoor commercial cannabis cultivation or that ban the retail sale of cannabis or cannabis products.
  • SB 67 (The Appellation of Origin one): This one is significant and will substantially impact cultivators, manufacturers and anyone else that is concerned about cannabis packaging compliance.  You can get our whole take on it here, here are some takeaways:
    • SB 67 stipulates that operators are allowed to list in advertising or marketing of a product the city or county of origin only if 100% of the cannabis was produced in that city or county. Ie: An operator cannot slap “Mendocino Grown!” on a product if the product was grown in Los Angeles.
    • Appellation of origin is a way for cultivators to tell the story of the area where they are growing. There are a lot of very specific requirements to detail what the area is known for, how a specific geographical feature is “considered intrinsic to the identity or character of the area,” and how cultivation practices might reflect the distinctiveness of a given area.
  • AB 1458 (Testing Variance one): This bill raises the label variance threshold for edible products from plus or minus 10% to plus or minus 12% until January 1, 2022, giving edible manufacturers much needed breathing room as production technology catches up to California’s rigorous testing standards.
  • AB 1525 (The Financial Information one): This bill authorizes the State or a local government to share certain financial information, upon the express consent of a cannabis licensee. AB 1525 will help financial institutions better comply with federal reporting requirements and avoid having to file costly and burdensome reports that discourage these entities from providing services to cannabis licensees altogether. The governor included a signing message directing the licensing entities to promulgate regulations to protect the privacy and confidentiality of licensee data.
  • SB 1244 (The Testing one): This bill aids local agencies in enforcing against illicit cannabis activities by making clear that cannabis testing laboratories may receive and test samples from any local or state law enforcement agency or regulatory body.

In addition to these bills which Newsom passed into law, the Governor also vetoed one piece of legislation that came to his desk: AB 1470. 1470 would have amended the definition of “final form” for a product as it relates to product testing. As currently set up, there’s a lot of product and packaging waste associated with testing and this would have eliminated a lot of waste. Newsom did not necessarily disagree with the spirit of the bill, he just felt as though it were “premature” in the face of a regulatory consolidation of the three governing entities for California cannabis. Maybe next year in other words.

Have questions about staying compliant with the new cannabis laws in California? Want to apply for appellation of origin? Get in touch with MMLG today.