D.C. Council Approves Bill To Eliminate Medical Marijuana License Caps, Promote Equity, Provide Tax Relief And More

Washington, D.C. lawmakers approved a bill on Tuesday that would make fundamental changes to the medical marijuana program in the nation’s capital—including by eliminating cannabis business licensing caps, providing tax relief to operators, further promoting social equity and creating new regulated business categories such as on-site consumption facilities and cannabis cooking classes.

It would also provide a pathway for current “gifting” operators that sell non-cannabis items in exchange for “free” marijuana products to enter the licensed market, while empowering officials to crack down on those who continue to operate illegally.

The full D.C. Council passed the legislation, which was amended by the Committee of the Whole earlier in the day, in a 7-4 vote. It must still receive a second reading vote by the Council at a later date before heading to the mayor’s desk.

The measure faced some pushback from lawmakers who support reform but feel that the latest version contains changes that could negatively impact social equity objectives while giving existing medical cannabis dispensaries outsized prioritization.

The Medical Cannabis Amendment Act would also codify that adults can self-certify as medical marijuana patients. The bill was carried by Council Chairman Phil Mendelson (D) on behalf of Mayor Muriel Bowser (D).

The Committee of the Whole released a memo ahead of the meeting that says the latest print “retains a majority of the alterations and additions made by” the Committee on Business and Economic Development (CBED), which passed the measure last week. It previously advanced out of a separate panel as well.

However, the latest version makes “substantive changes in three areas: the definition of social equity applicant, setting aside all new licenses for social equity applicants for three years, and the timeline for enforcement against unlicensed establishments,” the new memo says.

Lawmakers have gone back and forth over how to most effectively revise D.C.’s licensing rules, with the as-introduced version of the legislation proposing a higher cap on dispensaries than is allowed under current law, with an amended version instead seeking a full elimination of the business license caps.

As passed by the full Council, the bill would still remove the cap, while also giving regulators discretion to set limits.

A change made in the prior committee concerns tax policy for the cannabis industry. The revised bill contains language that says marijuana businesses can deduct taxes under local statute that they’re prohibited from making under the federal Internal Revenue Services (IRS) code known as 280E.

Additionally, the legislation codifies that people 21 and older can self-certify as medical cannabis patients who can buy marijuana from dispensaries without receiving a doctor’s recommendation.

Under the temporary self-certification law that the mayor signed this year, medical marijuana patient registrations have continued to surge—with the program adding about 1,500 more patients in September alone.

The measure also gives city officials authority to take enforcement action against anyone who “knowingly engages or attempts to engage in the purchase, sale, exchange, or any other form of commercial transaction involving cannabis that is not purchased, sold, or exchanged” under the gifting provision of the District’s marijuana law.

However, the timeline for when enforcement action can be taken has shifted back and forth, with the original version requiring regulators to wait 180 days, last week’s committee-approved version calling for 225 day and this enacted version significantly narrowing the window to 30 days after regulators have made a determination about a licensing application for a currently unlicensed business.

The bill aims to promote social equity in the industry by prioritizing business licenses for people who’ve been disproportionately impacted by the drug war. But the relevant provisions have been similarly revised throughout its legislative journey.

Initially, the legislation stipulated that 50 percent of certain licenses needed to be set aside for equity applicants and existing medical cannabis operators in perpetuity. The previously amended version required 100 percent to be set aside for those groups for a certain number of years, depending on the license type.

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The Committee of the Whole said that latter proposal could run afoul of the U.S. Constitution’s Commerce Clause, so it reverted it to 50 percent of licensed for social equity applicants. The panel’s memo said that members believe “this set aside will withstand legal scrutiny for several reasons.”

It further describes amendments to the definition of who qualifies as a social equity applicant, removing and revising certain criterion like those related to income that would likely broaden the pool of eligibility.

“The Committee supports criteria prioritizing returning citizens and their families, as this has a direct nexus to the harms caused by the War on Drugs. Additionally, the Committee supports criteria that will prioritize low-and-middle income residents of the District,” the memo says. “The Committee finds that the other criteria included in the CBED are either unnecessary or would not enhance social equity within the medical cannabis industry in the District, however.”

The proposal further calls for the creation of a new license category for internet retailers that would be able to sell marijuana without having a physical storefront.

“While some external stakeholders have raised concerns that this license category runs afoul of the law, the Committee is not convinced,” the memo says. “Currently, several medical cannabis dispensaries in the District already allow for online pre-ordering, delivery, or pick-up.”

The legislation was also previously changed to rename the key regulatory agency, from the Alcoholic Beverage Regulation Administration (ABRA) to Alcoholic Beverage and Cannabis Administration (ABC).

CBED Chair Kenyan McDuffie (D) came out strongly against the latest revised version at Tuesday’s meeting, arguing that the changes—particularly the regulatory enforcement provisions—could jeopardize equity goals.

“To be clear, we do not have to proceed with this bill today,” he said. “There’s a false sense of urgency around this.”

The advocacy organization the i-71 Committee also opposes the legislation, saying in a Facebook post that it “lacks robust social equity language.”

In a press release, the group added that it is “disappointed” that the bill advanced.

“We take issue with multiple elements of the current version of the bill, which drastically reduces the number of social equity licenses, misrepresents the ability of i-71 stores to apply for those licenses, and fails to account for the need for new cultivation centers to supply a potential $600 million-a-year industry,” it said, adding that members plan to work with lawmakers on potential revisions ahead of an expected December 20 second reading vote.

Without the immediate prioritization of additional licenses for new cultivation centers, this bill is setting up social equity applicants for failure,” the group said.

While many advocates have welcomed the legislative efforts to expand cannabis access in the District, they also continue to push for an end to the federal blockade that’s prevented D.C. from establishing a regulated market, despite voters approving an initiative to legalize possession and personal cultivation in 2014.

After President Joe Biden issued a proclamation in October pardoning Americans who’ve committed federal marijuana possession offenses, as well as people who’ve violated the law in D.C., U.S. Rep. Eleanor Holmes Norton (D-DC) called on the president to go further by federally legalizing cannabis and letting the District establish a commercial cannabis market and grant clemency on its own.

The congresswoman said the ongoing local ban, which was maintained in Biden’s first two budget proposals, represents a “shocking violation of D.C. home rule by a Democratic administration.”

At Tuesday’s meeting before the Committee of the Whole, one member thanked her colleagues for their “hard work on this legislation to at least try and solve the mess that Congress has created for us, barring us from regulating and taxing recreational use of cannabis as a majority of other states have been able to do.”

A coalition of local, state and national advocacy organizations recently asked the U.S. attorney general to formally adopt a policy of non-enforcement to allow Washington, D.C. to legalize marijuana sales even in light of the ongoing congressional ban.

A poll released in September found that D.C. voters strongly support marijuana legalization and oppose a crackdown on the cannabis “gifting” market that’s emerged in the absence of regulated sales.

D.C. lawmakers also recently sent letters to House and Senate Appropriations Committees leadership, imploring them to remove the rider preventing local cannabis sales as part of Fiscal Year 2023 spending legislation.

The House passed the relevant spending bill for FY 2023 in July, excluding the D.C. marijuana prohibition language. In the Senate, the legislation that’s currently on the table from the Democratic Appropriations Committee chairman also omits the rider.

Bowser, Norton and other elected officials in the city have routinely criticized Congress for singling out the District and depriving it of the ability to do what a growing number of states have done without federal interference.

Norton told Marijuana Moment in a phone interview in July that she’s “fairly optimistic” that the rider will not be included in the final spending package. She added that the D.C. self-certification policy is an “effective workaround” until then.

Meanwhile, the mayor signed a bill in July that bans most workplaces from firing or otherwise punishing employees for marijuana use.

The reform is designed to build upon on a previous measure lawmakers approved to protect local government employees against workplace discrimination due to their use of medical cannabis.