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Legislative Analyst’s Office calls for taxing marijuana based on potency and dropping cultivation taxes.

California’s struggling cannabis industry didn’t get the recommendation many hoped for — a call to sharply lower the industry’s tax rate — but a long-awaited state report did suggest a marijuana tax overhaul.

The report from California’s nonpartisan Legislative Analyst Office, released Tuesday, Dec. 17, says lawmakers should ditch the way the state currently taxes marijuana and, instead, tax cannabis at different rates based on its potency. Such a tax structure, the report said, would result in stable revenue and discourage cannabis abuse.

To read more about the report, click here

Demand to increase the pace of research in connection with the effectiveness of medicinal cannabis has been put forward by a group of 30 bipartisan U.S. lawmakers in accordance with the Federal authorities. The representatives have yet again decided to reach out to Attorney General William Barr and Acting Administrator Uttam Dhillon for urgent enforcement.

Previous attempts

The representatives have expressed their discontent with the Justice Department’s delaying of this process. They have repeatedly made claims and proportionate arguments in respect of the “tremendous evidence” showcasing all the medicinal benefits marijuana has. They also argue why 33 states, alongside the District of Columbia, have passed all the necessary laws legalizing cannabis for medicinal purposes. They have been pointing out the flaws and why much more research is needed in this area. They only want effective cannabis products legalized and making them easily available in the market, just the way Epidiolex is, at the federal level. They claim that the federal government has been blocking the way.

Other claims

The members have yet to place a claim on the application process and called the process “arduous and long”. This is due to the process including a consultation from the DEA, the Food and Drug Administration and the National Institute on Drug Abuse. They also convey the tremendous frustration people, who wish to carry on the research process of medicinal marijuana, feel. These people have to wait for months and sometimes years just to get the application approved.

The letter has been signed by a group of 3 presidential nomination candidates from the Democratic Party and several other advocates. They commended the DEA to change the research prospect for good and also claimed the order does not reach far enough. They are urging a speedup of the application process in respect to the research.

But this time, voters in states that typically lean Republican will be the ones weighing legalization measures at the ballot box.

A number of red communities in California, from the Inland Empire town of Hemet to rural El Dorado County, also will join dozens of blue communities in voting during the midterm elections on whether to allow commercial marijuana businesses.

Republican candidates — and incumbent Democrats who haven’t traditionally supported marijuana reform — are talking about their support for regulated cannabis, too.

It’s all in response to a simple trend: support for marijuana legalization has never been higher.

“In some of these tight races, marijuana is more popular than the people who are running,” said Michael Collins, interim director for the Office of National Affairs at Drug Policy Action, the political arm of the advocacy group Drug Policy Alliance.

Marijuana reform could see a boost if predictions prove true of higher-than-normal voter turnout among young people in particular, who support legal cannabis at by far the highest rate of any voting bloc.

Either way, the surge in interest from candidates and communities that have otherwise been conservative on drug policy seems to be yet another sign of just how mainstream cannabis has become — and, some experts say, the inevitability of federal legalization.

“The momentum is very much on our side,” Collins said. “It’s not about should we legalize marijuana, it’s about when and how.”

Federal legalization at play

There are federal bills on the table to legalize hemp, to open banking to the marijuana industry, to reform tax laws that penalize cannabis businesses, to expand marijuana research and more. And the future of all of those bills hinges on the result of 470 seats in Congress that are being contested Nov. 6.

In the unlikely event that both the House and Senate flip to Democratic control, Collins believes there’s a good chance that the United States could follow the course charted this week by Canada and legalize marijuana, probably in the next two years.

More than six in 10 Americans now support legal marijuana, according to a Pew Research Center poll released Oct. 8. Support has doubled since 2000, the poll shows, with 62 percent now favoring legalization.

Those statistics seem to be pressuring candidates who’ve been either on the fence or standing firm against cannabis to start backing reform.

Sen. Dianne Feinstein, for example, who’s favored to beat fellow Democrat Kevin de Leon on Nov. 6, has long opposed cannabis legalization. But Collins said, “I think she’s seen the political winds shift in the past couple years.”

In May, Feinstein told reporters that she no longer opposed legalization. And in September, Feinstein signed on as a cosponsor to the STATES Act, which would make marijuana federally legal in states where voters or the legislature approve it.

As the ranking Democrat on the Senate Judiciary Committee, which is a first stop for many marijuana-related bills, Feinstein will likely became chair of that group if the Senate flips to Democratic control. That role is now held by Senator Chuck Grassley, R-Iowa, who has blocked a number of cannabis bills from even getting hearings.

The odds are stacked against Democrats taking control of the Senate on Nov. 6. But they’re looking more favorable when it comes to flipping the House, with several key races to watch in Southern California.

Perhaps the most intriguing battle for marijuana advocates is the deadlocked race for the 48th District in Orange County between longtime GOP Rep. Dana Rohrabacher and Democrat Harley Rouda.

Though he largely aligns with President Donald Trump on issues such as immigration and the environment, Rohrabacher has been one of the nation’s most vocal advocates for medical marijuana, acknowledging he’s used topical products himself to ease arthritis. And he said earlier this month that Trump has assured him medical marijuana will be federally legalized in the next legislative session.

In the wake of that news, Rep. Earl Blumenhauer, D-Oregon, released a memo Oct. 16 laying out a “blueprint to legalize marijuana” by the end of 2019 if Democrats win big on Election Day.

“If we fail to act swiftly,” Blumenhauer wrote, “I fear as the 2020 election approaches, Donald Trump will claim credit for our work in an effort to shore up support — especially from young voters. Democrats must seize the moment.”

State marijuana measures

The number of states that permit recreational marijuana is expected to reach double digits on Nov. 6, but not just because of blue states.

Michigan and North Dakota, which both went for Trump in 2016, already permit medical marijuana, but will vote on whether to join the nine states that have already legalized recreational marijuana for adults.

Michigan would be the first Midwest state to legalize recreational cannabis. Its ballot measure calls for rules that would be largely similar to what Californians approved two years ago, though Michigan residents would be able to grow twice as many plants at home and taxes would be 5 percent lower.

Michigan’s legalization measure is polling high and is expected to pass.

If North Dakota approves legalization, it will be the second solidly red state in the nation to do so. The first was Alaska, which approved legal cannabis in 2014.

North Dakota’s ballot measure is unusual in that it doesn’t establish a tax or lay out specific regulations for the industry, leaving that work to future legislators. Polls are showing mixed results, but opponents have raised substantially more moneythan supporters.

Two other red states, Missouri and Utah, will vote Nov. 6 on whether to join the 31 states that have legalized medical marijuana.

While polls show strong support for legalizing medical marijuana in Missouri, efforts may be hampered by the fact that three competing measures will be on the ballot. There are significant differences between the three measures, though, with home growing banned by one and proposed taxes that range from 2 to 15 percent.

Utah’s ballot measure would tightly regulate medical marijuana, with smoking banned and home growing only allowed if patients live 100 miles or more from a licensed dispensary. The proposition is polling high. But even if it doesn’t pass, Gov. Gary Herbert has said he will push to legalize medical marijuana through the legislature.

Local marijuana measures

Though Californians voted to legalize recreational cannabis in 2016, Proposition 64 gave cities and counties power to regulate commercial cannabis activity in their borders, meaning the makeup of the marijuana industry in the state is far from settled.

Only around a third of California cities and counties so far permit any sort of marijuana business to set up shop, according to a database of local policies compiled by Southern California News Group.

“It’s just not enough to sustain a healthy market,” said Jackie McGowan, a licensing and business development specialist with Sacramento-based K Street Consulting who’s been tracking local marijuana policy in California since early 2016.

Leaders of local jurisdictions don’t have to ask voter permission to ban or welcome marijuana businesses, though some do. And voter approval is required if they want to tax marijuana businesses on top of the state tax of 15 percent and regular sales tax that averages 8 percent.

There are 81 cannabis-related measures in 69 jurisdictions on the ballot Nov. 6, McGowan’s records show.

In Los Angeles County, Malibu is asking voters whether it should permit recreational cannabis businesses and tax them at 2.5 percent. Maywood and Pomona also have cannabis tax measures on the ballot.

Los Angeles is asking residents to decide whether it should explore creating a first-of-its-kind municipal bank, in part to expand financial services for its massive marijuana industry. The measure is one sentence long and doesn’t mention cannabis. The lack of information about how much such an endeavor would cost and how it would work has led the Los Angeles Times and others to oppose the measure.

In the Inland Empire, seven cities will vote on marijuana-related measures Nov. 6. That includes two right-leaning communities: Hemet and Hesperia.

San Bernardino residents are suffering from whiplash, having already approved two cannabis initiatives in 2016. But a judge threw the winning measure out, so the city council is asking voters to approve a plan they’ve drafted for regulating the industry.

In Orange County, residents of left-leaning Santa Ana — the only city in the county that permits all types of cannabis ventures — will vote on taxing recreational cannabis businesses at up to 10 percent plus from 25 cents to $35 per square foot. The city taxes medical marijuana businesses at 6 percent, but has been relying on an 8 percent “operating agreement fee” to recoup costs from recreational businesses since sales started Jan. 1.

Residents in other parts of the state — from Kern County to Emeryville — will also vote on local marijuana measures. But the future of the industry hangs in the balance even in some communities where the issue isn’t on the ballot.

In Montebello, for example, the city council already voted to allow some marijuana businesses in town. But they haven’t yet approved any licenses and have been deadlocked since Mayor Vanessa Delgado resigned to become a state senator. Now, three city council seats are up for grabs Nov. 6.

McGowan founded a political action committee called Californians for Sensible Regulation of Adult Use to support candidates who favor regulating marijuana in communities that voted yes on Prop. 64 but where “the will of the people is being thwarted.”

The group hoped to back candidates on the ballot Nov. 6, but McGowan said they ran out of time after it took the PAC seven tries to find a bank that would give them an account. Now they’re focused on raising funds to support marijuana-friendly measures and candidates in the 2020 presidential election, when McGowan expects more communities to consider welcoming commercial cannabis.

“I feel that this trend will continue upward as we see the market stabilize and as we see local jurisdictions collect tax money.”

A White House drug office official has offered assurances that a marijuana policy panel will be objective and dispassionate as it examines the impact of legalization in some states, a Colorado senator said.

The vow came after BuzzFeed reported in August that the panel intended to portray marijuana as a national threat and criticize state efforts to legalize it drug.

Democratic U.S. Sen. Michael Bennet disclosed the assurances Monday after he asked the Executive Office of the President’s Office of National Drug Control Policy to respond to the report.

BuzzFeed said the committee had asked 14 federal agencies and the Drug Enforcement Administration to submit “data demonstrating the most significant negative trends” about marijuana and its national “threats.”

The online news site based its reporting on documents it had obtained.

James Carroll, deputy director of the drug office, told the senator the committee would use scientific data in its study of the drug, which is broadly legal in Colorado, Bennett said.

The drug office’s media relations representatives didn’t respond to an email seeking comment late Tuesday.

Colorado was one of the first two states to legalize marijuana and it now has a growing cannabis industry.

“In Colorado, we’ve made a deliberate effort to ensure fact-based data informs our marijuana policies,” Bennet said. “Government-sponsored propaganda shouldn’t undermine that effort.”

But even if the legalization provisions in the 2018 farm bill pass, hemp will remain a tightly regulated crop facing plenty of regulatory and legal challenges.

As the more than 30 states that operate hemp pilot programs have discovered, it’s not easy to oversee a plant that’s used to make everything from car parts to hand cream and that, except for the chemical that produces a high, is identical to marijuana — which the federal government still classifies as a dangerous drug.

It could take one or two years for federal officials to craft regulations for hemp, said Tim Gordon, president of the Colorado Hemp Industries Association. “Just because the farm bill passes doesn’t mean hemp is suddenly legal and everything’s great.”

In Congress, House and Senate lawmakers are working to finalize this year’s farm bill, which is expected to fund farming and nutrition programs, agricultural research and other related policy areas for the coming five years. They have less than a week to reach an agreement before the 2014 farm bill expires.

Senate Majority Leader Mitch McConnell, a Republican, is from the hemp-rich state of Kentucky and a strong supporter of legalizing the crop.

The amount of hemp grown in the United States has steadily increased since 2014, when Congress gave states permission to set up pilot programs focused on researching the plant and its commercial potential.

Nineteen of the states that allow hemp cultivation reported a crop last year, from a single acre grown in Hawaii and in Nevada to more than 9,000 acres in Colorado, according to Vote Hemp, a nonprofit that advocates for hemp legalization. Over 25,000 acres were planted nationwide.

Although legalization will solve many of the industry’s problems, such as by allowing farmers to get crop insurance for their hemp, there are several challenges officials running a hemp program — and people running a hemp business — will continue to face.

For instance, there are no national standards for how to test hemp for tetrahydrocannabinol, or THC, the psychoactive compound that, under federal law, cannot exceed 0.3 percent concentration in hemp plants.

There are also conflicting state rules for cannabidiol, or CBD, a cannabis compound with alleged healing qualities that’s sold as a natural remedy and ingredient in foods, drinks and lotions. “That will be the other real mess that will need to be cleaned up,” said Duane Sinning, director of the plant industry division at the Colorado Department of Agriculture.

Hemp and marijuana aren’t genetically distinct plants. The difference is legal: the 2014 and 2018 farm bills define “industrial hemp” as cannabis plants that have a THC concentration of 0.3 percent or less. The Controlled Substances Act of 1970, which the 2018 farm bill would explicitly override, defines hemp as the mature stalk, sterilized seeds and products made from stalk and seeds of the cannabis plant.

Under the guidelines for hemp pilot programs and the proposed rules for regulating fully legal hemp, states must destroy crops that test above the 0.3 percent threshold — known as “hot” hemp plants.

But the testing rules that determine whether a farmer will have a crop to sell aren’t the same across states. That can mean “drastically different” THC results, Sinning said.

For instance, he said, some states require testing of samples that are predominantly made up of flower material, and others on samples that blend more parts of the plant. Because flowers generate the most cannabinoids, including THC, samples heavy on flowers generate higher THC results.

Colorado tests the top two inches of a plant — so the flowers, leaves and buds, but not the seeds or stem.

State agriculture commissioners are now banding together to come up with a common standard. A working group convened by the National Association of State Departments of Agriculture is expected to start meeting next month, according to Amanda Culp, the association’s communications director.

It doesn’t help matters that some farmers have an incentive to push their crops to as close to the 0.3 percent THC limit as they can get.

Kentucky grain farmer Joseph Sisk and his business partner have planted 200 acres of hemp this year, which will be processed to extract CBD oil. Sisk said growing hemp isn’t easy, and making sure plants reliably test under the THC limit is one of the difficulties.

“I think that challenge would be the same no matter where you put the level,” he said, at least for farmers like him. That’s because growing plants to maximize CBD inevitably increases the levels of other cannabinoids, including THC.

Colorado state Sen. Don Coram, a Republican who runs a hemp CBD business in the rural western part of the state, said he thinks some hemp growers try to game state THC tests to push up their cannabinoid yield. “I think there’s some cheating,” he said, another issue that may merit more attention from lawmakers.

A decade ago, few people had heard of hemp-derived CBD. But four years from now, it’s expected to dominate sales of hemp in the United States, generating some $646 million, according to the Hemp Business Journal, a publication that tracks the hemp industry.

People across the country, from Brooklyn hipsters to middle-aged Kentucky dads, take hemp CBD as a pill, swallow spoonfuls of hemp CBD oil or rub CBD-infused creams onto their bodies to soothe aches, pains and anxiety. Patients who suffer from seizure disorders — and their parents — have successfully lobbied states for access to hemp or low-THC marijuana-derived CBD oils as a medical treatment.

The fast-growing hemp product has raised several regulatory issues. The U.S. Food and Drug Administration has maintained that CBD oil cannot be marketed as a dietary supplement and has been going after companies for making outlandish health claims.

Laws and regulations that define the hemp extract, who can use it and who can sell it, differ from state to state. In Colorado, where voters in 2012 amended the constitution to legalize cannabis, marijuana-derived CBD products are sold in dispensaries and hemp-derived CBD products are sold in health food stores, coffee shops, smoke shops and spas.

In Ohio, where medical marijuana is legal but no state hemp program exists, hemp- and marijuana-derived CBD oil must be sold by licensed dispensaries. And in Wyoming, which is setting up an industrial hemp program, patients with intractable epilepsy are allowed to take hemp CBD oil for seizures.

Right now, state policies are all over the place, said Patrick Goggin, a San Francisco-based attorney for the Hoban Law Group. That’s not a problem federal legalization will solve. “It really is going to be left to the states,” he said.

Under the 2018 farm bill, states would still need to track where hemp is produced and come up with a procedure for testing, inspecting and getting rid of hot hemp, as they do under hemp pilot programs today. States may need to make a few tweaks to conform their programs to the proposed legislation.

In Colorado, lawmakers are looking even further ahead — to the possibility that the federal government might one day change the THC concentration limit for hemp. The 0.3 percent limit is written into the state constitution. If the federal limit increased, or decreased, that could make Colorado products less competitive or harder to sell across state lines.

So Colorado lawmakers placed a referendum on the November ballot that asks voters whether they want to change the constitutional definition of hemp to a more easily changed statutory one.

Last but not least, states face the ongoing challenges of managing an industry that generates new products constantly.

Gordon of the Colorado Hemp Association said that, for instance, he’s come across hemp-CBD-infused gummies — a non-psychoactive version of the pot candies state lawmakers banned last year, fearing that they were tempting to children.

Coram said a close partnership between various state officials, from agriculture regulators to law enforcement, has been key to Colorado’s program, and that he’s sharing that approach with colleagues in other states. “We’re trying to give them the Colorado solution,” he said.

For Sinning’s office, one aspect of the partnership involves fielding calls from local police or sheriffs who have passed a field of cannabis and want to know if they’re looking at a licensed hemp crop. “We’re getting calls all the time from law enforcement,” Sinning said, “because now hemp is everywhere.”

©2018 Stateline.org. Visit Stateline.org at www.stateline.org. Distributed by Tribune Content Agency, LLC.

Canopy Growth Corp. is prepared to enter the U.S. market if new legislation forces the federal government to respect state laws on marijuana, according to its chief executive officer.

The STATES Act, which stands for Strengthening the Tenth Amendment Through Entrusting States, is a bipartisan bill that would clear up the uncertainty created when Attorney General Jeff Sessions revoked the Obama-era policy that allowed states to set their own pot policies.

“The U.S. has had a history of, ‘When we can’t agree, let’s just allocate the authority to the state, and if they say it’s OK, it’s OK,”’ Bruce Linton said in a question-and-answer session at the MJBizCon marijuana conference in Toronto Thursday. “That would be an outcome which would allow us to move ahead.”

Canopy announced a $3.8 billion investment by alcohol giant Constellation Brands Inc. Wednesday, a move that will allow the company to finance its international growth plans, including expansion into the U.S.

Canopy, based in Smiths Falls, Ontario, doesn’t currently have any operations south of the border, where marijuana is illegal federally. Both companies said they have no plans to sell pot products in any market unless it is permitted at all applicable government levels.

Pot Google

Linton may have secured the biggest investment yet in the cannabis industry, but he predicted survival won’t be so easy for some of the smaller players in Canada, where recreational pot will be legalized on Oct. 17.

Cannabis growers that haven’t secured sales agreements are in a precarious position, he said Thursday.

“I get asked all the time, is there going to be consolidation? And I think there’s going to be disintegration,” he said. “Disintegration will happen when people make promises at valuations they can’t possibly meet.”

He predicted that there will be one “Google-like company” in the cannabis industry and a battle for the top five spots. There will also be an opportunity for smaller “craft players” who can take advantage of consumer demand for bespoke products, he said.

So far, that Google-like company may be Canopy, whose shares surged 31 percent after the Constellation deal on Wednesday, giving the company a market value of C$9.3 billion ($7.1 billion), more than C$3 billion higher than it’s nearest competitor Aurora Cannabis Inc.

Linton’s not so worried about his legal competitors; his main competitor is the black market, he said.