Broad Cannabis Omnibus Bill Fails; Relief Provided to Conditional Dispensaries

May 31, 2023

Hopes for significant, broad-reaching reform of the Illinois Cannabis Regulation and Tax Act (CRTA) have been dashed as the Illinois cannabis omnibus bill was not brought to a vote at the end of the legislative session. And although a few reforms did pass in the State’s budget bill, the lack of broader change will be disappointing to many.

There were three changes that did pass, and we will start there. First, the State Treasurer is going to transfer $40,000,000 from the Compassionate Use of Medical Cannabis Fund to the Cannabis Business Development Fund (CBDF). This is a significant sum that the CBDF can deploy to provide loans and grants to social equity applicants and to conduct other projects to advance social equity and the Illinois cannabis market more generally. Second, Illinois cannabis companies will be permitted to take state tax deductions for deductions that are not allowed under Section 280E of the federal tax code. This is being permitted in an effort to mitigate the serious adverse impact Section 280E has on operating cannabis companies and reflects the lack of action on that issue at the federal level. Third, conditional dispensary license holders are given an extra 360 days to secure their locations without the risk of losing their licenses. Prior to the amendment, the CRTA gave conditional dispensary licensees 360 days (180 days plus one 180-day extension) after receiving the conditional license to identify a suitable location. The 360-day deadline was rapidly approaching, and still, many conditional licensees had not yet secured their locations. The amendment changes the deadline to 720 days (180 days plus one 540-day extension). This provides conditional dispensary license holders with significant breathing room as they look to become operational.

While these three changes are progress on key issues, a larger number of issues were unfortunately tabled for the moment. Some significant items that were discussed as part of the omnibus bill but did not pass include:

Immediately allowing craft growers to cultivate 14,000 square feet of flowering canopy. Currently, craft growers are capped at 5,000 square feet and can apply for 3,000 square foot increases at certain times.
Allowing drive-through or curbside dispensary operations. Currently, all such operations (and home delivery) are prohibited in Illinois.
Authorizing transport depots so that cannabis transporters can, among other things, store cannabis overnight at depot locations. Currently, transporters must complete all deliveries by the end of the day, which makes providing statewide transport coverage extremely difficult. This reform would have been a significant boost for the struggling independent cannabis transport industry.
Allowing dispensary license holders to move BLS regions more easily and efficiently. This would have been a significant step forward for the market as it would allow cannabis dispensary license holders to move into underserved areas where the market will bear them.
Placing a moratorium on additional transport licenses. Currently, the CRTA requires a yearly transport application process, but given the struggles the existing transport companies have had in developing business, there is not a significant need for more licensed transporters.
Standardizing the employee badging process. Employee badging has been a point of consternation for existing operators and the omnibus bill would have provided needed reforms.

The omnibus failure is definitely disappointing, as many of the proposed reforms are needed. We suspect (and hope) that Illinois legislators will continue to work on these issues and come back in the next session with a plan to pass some or all of these reforms. In the meantime, we will continue to monitor all cannabis-related developments in Illinois and throughout the country. Feel free to reach out to the author at [email protected] if you would like to discuss this.

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Broad Cannabis Omnibus Bill Fails; Relief Provided to Conditional Dispensaries

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