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How Some California Localities Are Putting Cannabis Businesses Out Of Business.

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Medical marijuana is now legal in 29 states plus the District Of Columbia and recreational marijuana is legal in 8 states plus the District Of Columbia. In 2000, 70% of Americans believed marijuana should be illegal. Attitudes have since dramatically changed with a complete flip as a 2017 Yahoo News/Marist Poll survey showed that 83% support legalization.

Key State Of California Legal Developments

California was the first state in the country to legalize medical marijuana in 1996. Over the following two decades, a thriving medical marijuana industry became firmly rooted in the state despite frequent overhauls to California’s legal and regulatory framework for medical marijuana. State lawmakers addressed the confusion in the 2016 Medical Cannabis Safety and Regulation Act, an expansive piece of legislation that overhauled California’s licensing processes and regulations for patients, dispensaries, growers, manufacturers, and transporters of medical cannabis. Then on November 8, 2016, California voters passed Proposition 64, or the Adult Use of Marijuana Act (AUMA) which now starting January 1, 2018 makes it legal to engage in the recreational marijuana business.

Local Enabling Legislation Still Required

Despite this expansive mandate by the State Of California, legally going into the marijuana business still requires local enabling legislation which through county/city zoning and public safety laws permits local governments to make it easy or hard for marijuana businesses to operate in their areas. Many California counties and cities have yet to enact these local laws and for those who have, many have been issued on a temporary basis.

Two years ago, the Calaveras County Board of Supervisors saw marijuana farming as an answer to the agriculture industry devastated by the massive wildfires that occurred in the Sierra foothills. The Board Of Supervisors passed laws to encourage marijuana growers to relocate to that county. But that now all appears to have changed as a new Board Of Supervisors has voted to ban commercial cannabis cultivation. This decision that will affect about 200 permitted growers and others that have permits pending with the county.

Calaveras County is not the only county government in the Sacramento Area now banning cannabis business but so are Placer County and El Dorado County. Such a move will likely prompt lawsuits but most businesses will likely move to other counties like Sacramento County and Yolo County where cannabis commercial cultivation is still legal.

But The Feds Can Still Close You Down

Marijuana though is still illegal under Federal law. The Cole Memo which came out of the Department Of Justice (“DOJ”) under the Obama administration in 2013, directed U.S. Attorneys to use discretion to prioritize certain types of violations in prosecuting cannabis operators, but, strictly speaking, it did not make operations in cannabis legal.

The Cole Memo included eight factors for prosecutors to look at in deciding whether to charge a medical marijuana business with violating the Federal law:

  • Does the business allow minors to gain access to marijuana?
  • Is revenue from the business funding criminal activities or gangs?
  • Is the marijuana being diverted to other states?
  • Is the legitimate medical marijuana business being used as a cover or pretext for the traffic of other drugs or other criminal enterprises?
  • Are violence or firearms being used in the cultivation and distribution of marijuana?
  • Does the business contribute to drugged driving or other adverse public health issues?
  • Is marijuana being grown on public lands or in a way that jeopardizes the environment or public safety?
  • Is marijuana being used on federal property?

But now that as of January 4, 2018 Attorney General Jeff Sessions rescinded the Cole Memo, federal prosecutors in cannabis legal states including California will now be free to decide how aggressively they wish to enforce federal marijuana laws.

What Should You Do?

Level the playing field and gain the upper hand by engaging the tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles County (Long Beach) and other California locations. We can come up with solutions and strategies to these challenges and protect you and your business to maximize your net profits.

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