Manzuri Law Firm : California Summer 2022 Update

It’s been quite an active summer for California’s commercial cannabis industry. Governor Newsom signed AB-195 into law, which came with sweeping changes specific to the cannabis sector — including changes to cannabis tax & relief, compliance, and oversight. Additionally, the state released its first-ever applications for manufacturing commodities from industrial hemp. But wait! That’s not all… The California Legislature recently returned from Summer Recess and is expected to deliberate over more than a dozen pending cannabis-specific bills.

Read more about these developments below.

JUNE 30, 2022 – Upon approving the 2022-23 state budget, Governor Newsom signed AB-195 into law — a “trailer bill” which implements the fiscal appropriations within the $308 billion specific to the state’s cannabis industry.

The bill implements significant cannabis tax changes such as the suspension of all cultivation tax and freezing excise tax at 15% for the next 3 years. It also allows high-road operators who meet certain workplace standards related to employee compensation and benefits to be rewarded with rebates. Equity operators are also eligible for rebates under the new law.

In addition to substantial tax policy reform, AB-195 imposes new compliance requirements for operators including those related to Labor Peace Agreements (LPAs) and delivery trips in METRC. The bill also provides increased state oversight of the cannabis industry and establishes a task force aiming to bridge the communication gap between local and state licensing agencies.

JULY 5, 2022 – California Department of Public Health’s Food and Drug Branch (FDB) recently released the long-awaited applications for Industrial Hemp Enrollment and Oversight (IHEO) Authorization. The IHEO Authorization debuts as part of the implementation of AB-45, which was signed into law nearly a year ago.

California law now requires industrial hemp manufacturers of particular products to register with the state and obtain IHEO Authorization. Applicants must designate one or more of the following commodity types depending on the nature of their business:

Extract Manufacturer
Human Food Manufacturer
Human Food Manufacturer with Cannery License
Processed Pet Food Manufacturer
Cosmetics Manufacturer
Industrial Hemp Inhalable Authorization (*Out of state sales only)

IHEO Authorization is required to manufacture, package, or hold these commodities. Failure to comply with this requirement may result in public health advisory warnings, civiil penalties, or the recall, seizure, or embargo of products.

AUGUST 1, 2022 – The California Legislature has just returned from a month-long Summer Recess. Now, the Senate and Assembly are making their final push to pass outstanding legislation before the 2022 legislative session closes at the end of the month. This includes many of the 37 cannabis-related bills that were introduced in the 2022 California Legislative Session.

A number of Senate and Assembly bills that remain outstanding would have significant implications for commercial cannabis operators. These range, in substance, from bills that propose stricter packaging, labeling, and advertising guidelines, to those that would open the door for California entities to trade with licensed cannabis industries in other states.

Legislation related to the use and consumption of cannabis is also pending in the current session. If passed, these bills could codify increased protections for parents, employees, and patients who use cannabis into California state law.