California cannabis priority licensingAs part of our series on the initial rules implementing California’s Medical Cannabis Regulation and Safety Act (“MCRSA”), this post will break down the issue of “priority” in licensing – meaning, whose state medical cannabis license applications will be processed first once the licensing window opens early next year. Under the MCRSA, and pursuant to AB 266, at Article 4, Section 19321:

“In issuing licenses, the licensing authority shall prioritize any facility or entity that can demonstrate to the authority’s satisfaction that it was in operation and in good standing with the local jurisdiction by January 1, 2016.”

This language left us with a couple of questions, including how to define “operation” and “in good standing with the local jurisdiction.” But the Bureau of Marijuana Control provided answers to these questions in the proposed text of the regulations applicable to all medical marijuana license applicants and licensees. In keeping with, and expanding upon, the above statement from the MCRSA, the proposed rules state:

“Priority review of the application shall be given to applicants that were in operation and in good standing with the local jurisdiction by January 1, 2016, and whose business ownership or premises are currently the same as they were on January 1, 2016. Priority applications shall be processed for review in the order in which they are received.”

The rules define “operation” as the date on which the applicant began actively conducting the same commercial cannabis activity as the license type for which the applicant is applying. And for purposes of the rule, “actively conducting” means “engaging in the transportation, distribution, testing, or sale of medical cannabis goods as authorized by the local jurisdiction.” So if you merely had an entity formed by January 1, 2016, or were operating in contravention of local law, you will not qualify for priority review under the proposed rules.

To prove the date on which an applicant began actively conducting commercial cannabis activity, the applicant must attest to the date under penalty of perjury, and must provide evidence of the date operations began, which may include:

  1. Articles of incorporation;
  2. Certificate of stock;
  3. Articles of organization;
  4. Certificate of limited partnership;
  5. Statement of partnership authority;
  6. Tax form;
  7. Local license, permit, or other written authorization;
  8. Receipts; or
  9. Any other business record.

The proposed rules also provide clarification as to what an applicant will need to provide to show “good standing” with their local jurisdiction. Proof of good standing must be evidenced by a document issued or signed by the local jurisdiction that contains the following:

  1. Name of the applicant;
  2. Address of the premises to be licensed;
  3. License type that the applicant is applying to the bureau for;
  4. Name of the local jurisdiction;
  5. Name of the local jurisdiction office that issued the license, permit, or other authorization for the applicant to conduct commercial cannabis activity in the jurisdiction as required by Business and Professions Code section 19320;
  6. Name and contact information for the person authorized by the local jurisdiction to sign on its behalf;
  7. Signature of the person authorized to sign on behalf of the local jurisdiction; and
  8. A statement to the effect of: “The above named party has been issued a license, permit, or other authorization from this jurisdiction to conduct commercial cannabis activity. The above named party began operation and was in good standing in this jurisdiction on or before January 1, 2016.”

Of course, the proposed rules wouldn’t be complete without at least some ambiguity. The rules not only state that an applicant must have been operating and in good standing with the local jurisdiction prior to January 1, 2016, but also that the applicant’s “business ownership or premises are currently the same as they were on January 1, 2016.” We are still seeking clarification from the BMCR on this one, as it is unclear whether the entity structure and ownership must be exactly the same, whether a board member of a non-profit mutual benefit corporation could apply on behalf of that company, whether ownership doesn’t matter so long as the premises are currently the same as they were on January 1, 2016, etc. This provision leaves room for interpretation, and we anticipate having a better idea of what this requirement will entail by the time the rules are finalized.

Even though there is some ambiguity in the proposed rules, if you think you may qualify for priority review in licensing, now is the time for you to begin gathering your documentation to prove the date on which you began operating, as well as proof that you were in compliance with local law.