Recent Changes to MMFLA May Affect Recreational Applicants in the Future

Since recreational marijuana use has been legalized there have been attempts made by those in office to amend the newly passed initiative as well as the existing medical marijuana laws.

A recent House Bill was proposed and struck down that took aim at home cultivation and marijuana micro-businesses. House Bill 1243 was proposed by Republican Senator Arlan Meekhof on November 29. This Bill aimed to ban home cultivation by adults, which was approved by Michigan voters as part of Prop 1. Prop 1 provided in part that those over the age of 21 that are residents of Michigan may legally grow up to 12 marijuana plants in their home. In addition, HB 1243 attempted to derail micro-business licenses altogether. Marijuana micro-businesses are allowed to cultivate up to 150 marijuana plants, process marijuana, and conduct retail sales of marijuana to individuals 21 years or older.

The proposed bill also attempted to lower the excise tax on retail sales of marijuana products from 10% down to 3%, change how the tax revenue would have been distributed and create a licensing board similar to that used in medical marijuana facility licensing. This bill died on December 13, 2018.

Following the failed bill, Senator Meekhof then proposed amending the Medical Marihuana Facilities Licensing Act. Senate Bill 1262 was passed by exiting governor Rick Snyder on December 28, 2018, allowing minor investors in medical marijuana businesses to no longer have to undergo financial scrutiny during the application process. Prior to this bill passing, any investors involved in a medical marijuana business holding 1% or more equity were subject to a criminal and financial background check completed by LARA. This bill now allows an investor with a less than 10% ownership interest in the business, and who does not exercise control over any management aspects of the company to not have to complete a financial check. However, a criminal background check is still required.

Additionally, this bill amended the definition of who is considered an applicant during the application process. The MMFLA previously required that a person with any direct or indirect ownership interest in the business must go through a background check, the results of which could then disqualify the applicant. The passed bill no longer considers anyone with a less than 10% ownership interest in the company an applicant. Applicants still include spouses of each partner, limited partners, member or shareholder holding a substantial ownership interest.

The definition was further amended to allow transfers of ownership interest in the company so long as it is approved by the licensing board prior to the transfer and the transferee is considered an applicant under the new definition. This change would allow publicly traded corporations to operate more efficiently when shares are publicly traded so long as the traded amount is less than 10%.

Another notable change in the newly passed bill includes the added crimes related to operating a marijuana facility without a valid license. Beginning June 1, 2019, if a person violates that section by operating a marijuana facility without a license or on a revoked, suspended or lapsed license may be found guilty of a misdemeanor and face a fine not less than $10,000 or more than $25,000, or imprisonment of not more than a year, or both. If the violation of this section results in the death or serious injury of someone then the violator may be charged with a felony punishable by a fine or imprisonment for not more than 4 years.

A minor change made by the bill also allows a licensee to not be required to use a third party inventory system only if the statewide monitoring system is capable of allowing a licensee to access and enter information themselves.

All the aforementioned changes only apply to those applicants that submit an application for a medical marijuana license on or after January 1, 2019. If an applicant has already filed their application before this date these changes do not affect them.

While this bill focuses on medical marijuana sales in the state, its effects do reach into recreational marijuana in Michigan as well. The first recreational licenses to grow, manufacture and sell marijuana, excluding class A grows and micro-businesses, will be awarded to those who already have an operational medical facility license. The impact of these changes will be felt throughout the Michigan marijuana industry as more licenses are approved.

The Michigan Cannabis Lawyers are excited about the prospects of marijuana micro businesses and the niche markets that will develop in Michigan. If you’re interested in starting a marijuana microbusiness or have questions about how the new laws may affect you, call the Michigan Cannabis Lawyers at 517-512-8364.