A New Deal? Massachusetts Enacts Cannabis Reform Law that Limits Community Impact Fees and Clarifies Licensing Guidelines

Cannabis Blog Aug 12, 2022 Chicago, IL

By: Irina Dashevsky, Partner and Jordan Wilson*

The Massachusetts cannabis market has not been an ideal place for operators as of late. The once dominant and premier adult-use market of the East Coast has been hit with price compression, and is no longer alone as exciting new adult-use markets are emerging in New York, New Jersey, and Connecticut. One of the biggest criticisms that Massachusetts has faced recently is the difficulty incurred with respect to Host Community Agreements (HCAs), and the time and expense associated with actually becoming operational in the state.

In an attempt to redress the disparate impact that HCAs impose on cannabis businesses, the Massachusetts State legislature passed Senate Bill 3096 earlier this month. The bill, signed into law by Governor Charlie Baker yesterday on August 11, 2022, proposes new limitations on community impact fees and aims to promote greater access to capital for emerging cannabis entrepreneurs.

Under Massachusetts’ Governing Adult Use Marijuana Act, Marijuana Establishments (MEs) and Medical Marijuana Treatment Centers (MTCs) had to execute HCAs with the municipalities in which they planned to operate in. The Act also allowed municipalities to impose an optional local tax, up to 3%, as part of the HCA, in addition to the mandatory 6.25% sales tax and 10.75% excise tax on marijuana and marijuana products. Between the heavy taxation at the state level (and of course 280E at the federal level), the burden and costs associated with compliance in the legal cannabis industry, and price compression, many cannabis companies began reaching a breaking point.

Indeed, in the recent case of Mederi Inc. v. City of Salem, the Massachusetts Supreme Court chastised municipalities that required prospective licensees to make payments beyond the 3% community impact fee described in the Act. The Court also raised questions about the purpose of HCAs and highlighted statutory ambiguities that frustrate efforts to promote diversity, equity, and inclusion in the adult-use industry.

In response to these issues, the state legislature proposed new limitations on community impact fees in S.B. 3096. The bill includes the following:

Requirements for cities and towns to prioritize equity applicants in their local licensing process;
A technical amendment that will allow municipalities to incorporate Social Consumption Marijuana Establishments into their communities for the first time since the Commission incorporated the license type into its regulations in 2019;
A provision that codifies Massachusetts’ first-in-the-nation Social Equity Program programming into law;
A state-administered Social Equity Trust Fund capitalized at 15% of the annual Marijuana Regulation Fund and;
A provision invalidating all fees based on percentage of sales.

This is a significant development that puts the regulatory landscape in Massachusetts’ into somewhat of a state of flux as the Cannabis Control Commission is likely to put out guidance/regulations covering these changes. Licensees will need to take a close look at their HCAs and any new guidance to determine what, if any, options they have, including implications on license renewals.

*Not an attorney.

About Greenspoon Marder

Greenspoon Marder LLP is a full-service law firm with over 225 attorneys and more than 20 office locations across the United States. With operations from Miami to New York and from Denver to Los Angeles, our firm attracts some of the nation’s top talent in key markets and innovation hubs. Our core practice areas include Real Estate, Litigation, and Transactional Services, complemented by the capabilities of a full-service firm. Greenspoon Marder has maintained a spot on The American Lawyer’s Am Law 200 as one of the top law firms in the U.S. since 2015, and our goal is to provide exceptional client service by developing a thorough understanding of each client’s business needs and objectives in order to provide strategic, cost-effective solutions.

MEDIA CONTACT

Natalie Villanueva, Director of Marketing
954.333.4308 | [email protected]

This Greenspoon Marder LLP Client Alert is issued for informational purposes only and is not intended to be construed or used as general legal advice nor a solicitation of any type. Please contact the author(s) or your Greenspoon Marder LLP contact if you have any questions regarding the currency of this information. The hiring of a lawyer is an important decision. Before you decide, ask for written information about the lawyer’s legal qualifications and experience.

Previous Next

Cannabis Blog

A New Deal? Massachusetts Enacts Cannabis Reform Law that Limits Community Impact Fees and Clarifies Licensing Guidelines

Share

News & Events

News & Events