Maryland officials are now accepting applications for grants to help existing medical marijuana businesses change over to dual licensees, which can serve the adult-use market when legalization takes effect on July 1, 2023. In this first round of assistance, the Department of Commerce (DOC) stated it is accepting applications for Medical License Conversion Fee grants, which will cover application costs for existing medical marijuana dispensaries, processors and growers to convert to dual licensees per the draft regulations released by the Marijuana Cannabis Administration (MCA) last week. Eligible businesses could receive grants ranging from $25,000-$50,000, depending on the license type. Applications will be approved on a rolling basis through June 30. Businesses that qualify, but already paid the fee, could apply for reimbursement. To qualify, the applicant must be a small business with no more than 50 employees as of May 1, and be 51 percent “owned by individuals whose personal net worth does not exceed $1.7 million.”
The Department of Commerce (DOC) also announced that, starting on August 1, it will be accepting applications for grants and loans to support market participation from social equity licensees by providing startup capital and covering operational costs. In this second round of assistance, the state will distribute grants for social equity businesses that received pre-approval before October 1, 2022, and which “have resources available to become operational and participate in the medical and adult-use cannabis industry.” Assistance in the form of startup capital and operating expenses will be available as conditional grants or loans. Applicants must be able to demonstrate that with the requested amount of funding they will become operational in a period of time “to be announced.”
The Cannabis Business Assistance Loan/Grant Fund (CBAF), established under a cannabis regulations bill Gov. Wes Moore signed last month, also provides grants to Historically Black Colleges and Universities (HBCUs) for “cannabis-related programs” like business development and training initiatives. “The Cannabis Business Assistance Fund will help ensure more equitable footing as our medical cannabis license holders transition to recreational marijuana use in Maryland,” Moore said in a press release. “The fund promotes equitable economic growth and will empower our small, minority, and women-owned businesses to have a greater stake in this growing industry.”
The funding “will also be available to train and assist small businesses, including minority and women business owners and entrepreneurs who are seeking to become licensed to participate in the adult-use cannabis industry. DOC Secretary Kevin Anderson said the fund “is an important step in reducing barriers and offering equitable opportunities for our small, minority, and women-owned businesses in the medical cannabis industry.”
The draft emergency regulations that Maryland marijuana regulators released last week must still be reviewed by the Joint Committee on Administrative, Executive, and Legislative Review (AELR). The rules must also be published in the Maryland Register before they’re enacted. The 41-page draft sets definitions, codifies personal possession limits, lays out responsibilities for regulators, explains licensing protocol—including for social equity applicants—clarifies enforcement authorities and penalties and outlines packaging and labeling requirements. Meanwhile, Moore also recently allowed a bill to become law that prevents police from using the odor or possession of cannabis alone as the basis of a search. He additionally signed a measure last week to make it so the lawful and responsible use of marijuana by parents and guardians will not be construed by state officials as child neglect.
As a reminder, on May 4, 2023, Maryland passed legislation and joined the list of 22 other states that legalized the recreational use of marijuana. Beginning July 1 of this year, adults 21 and older may grow up to two cannabis plants at their home and possess up to 1.5 ounces of marijuana flower, 12 grams of concentrated cannabis, or a total amount of cannabis products not exceeding 750 mg THC. Per the legislation, a new independent Maryland Cannabis Administration is responsible for regulating and enforcing the program under Maryland’s Alcohol and Tobacco Commission, which is now aptly renamed the Alcohol, Tobacco and Cannabis Commission.
Maryland has permitted the use of medicinal marijuana since 2014, and the legislation enables existing medical marijuana retailers to upgrade their license to sell recreational marijuana by July 1. However, the legislation sets a maximum cap of licenses available to 300 dispensaries, 100 processors, and 75 growers; for smaller microbusinesses the limits are 10, 100, and 100, respectively. The law also permits medical cannabis patients to grow up to four plants for personal use.
Notably, while medical marijuana sales are exempt from the tax, recreational cannabis will be taxed at 9%. The legislation establishes a framework for the revenue generated by the cannabis sales tax with 35% going toward a community reinvestment fund, and 5% going to counties, a Cannabis Public Health Fund, and a Cannabis Business Assistance Fund.
Racial and social equities played a motivating role in passing this legislation, and the new law provides a benefit to those disproportionately impacted by the past criminalization of marijuana. Applicants meeting certain criteria are given priority in obtaining licenses to effectuate the social equity goals of the legislation. The law creates a Capital Access Program to promote opportunities in the recreational cannabis industry and low-interest loans for these social equity applicants. Additionally, beginning in 2025, $5 million in grant funding will be set aside annually for existing medicinal dispensaries that have “meaningful partnerships” with social equity applicants.
Additionally, the new law establishes a process for expunging criminal cases where the only charge is possession of less than 10 grams of cannabis and increases the amount one may possess that is subject to a civil fine from 10 grams to 2.5 ounces. Although federal law permits states to regulate adult use of cannabis within their respective jurisdictions, use, possession, and interstate transport of cannabis are still illegal under the Federal Controlled Substances Act of 1970.
For any additional questions, you can reach out to Carr Maloney’s Cannabis Law Team Leader, Tina Maiolo, Esq. at tina.maiolo@carrmaloney.com.
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