Until recently marijuana was illegal in California, and of course it is an illegal controlled substance everywhere in the United States, which includes California. Before that date (which was the day after the passage of Prop 64, Californians relied on the limited protections and defenses for medical cannabis cultivation, transport, possession and usage via 1996's landmark Proposition 215 and then subsequent laws, court rulings, and legal guidelines published by the state. Some of the more important ones are referenced below.
Prop 64 simplifies things by eliminating the need for individuals to have a medical marijuana recommendation as a legal protection for possessing (or growing) small amounts of cannabis. If you are a casual consumer of marijuana, you probably don't need to know more than your possession limits and that under California law you cannot consume in public and that driving under the influence remains illegal. However if you are planning on building a cannabis-related business or investing in one then it is highly advised that you work through an attorney with expertise in California's marijuana laws as well as tax accountants with cannabis business experience as you navigate through the patch quilt of local, state and federal laws. (We are happy to refer you to the best in each category.)
Proposition 64 (2016): On November 8th, 2016, California voters passed the Adult Use of Marijuana Act ("AUMA"). This comprehensive initiative spanned 65 pages (the entire text can be found here). The bill had a few areas of impact but the bigger impact will be in 2018 when the MCRSA licensing process (see below) which was set up to regulate medical marijuana to also regulate adult use (sometimes referred to as "recreational use"). [Link to Prop 64 text]
Proposition 215: Prop 215, the "California Compassionate Use Act," was passed by California voters and took effect on Nov. 6, 1996 as California Health & Safety Code 11362.5. The law provided medical marijuana patients (and their designated primary caregivers) a limited immunity defense to prosecution from the state laws against possession (HS 11357) and cultivation (HS 11358) of marijuana for their personal medical use given the recommendation or approval of a California-licensed physician. [Link to Prop 215]
SB 420: SB420 is a legislative statute that went into effect on January 1, 2004 as California H&SC 11362.7-.83. SB420 (which is also known as the "Medical Marijuana Program Act") broadened Prop. 215 to include transportation as well as allowing patients to form medical cultivation “collectives” or “cooperatives." It also established a voluntary state ID card system. Finally, and most controversially, it established possession and cultivation limits. [Link to SB 420]
California Attorney General’s Guidelines. One of the requirements of SB 420 was to call on the California Attorney General to develop and adopt adopt “guidelines to ensure the security and non-diversion of marijuana grown for medical use.” On Aug. 25, 2008, the then-California Attorney General Jerry Brown issued a non-binding 11-page document clarifying the state's laws including that cannabis cooperatives and collectives should operate as non-profit organizations, verify that members are qualified patients and maintain membership records and applications. Brown's document also states that officers should verify the information on the state identification cards, but if no card is presented and the officer doubts the validity of the medical marijuana claim, then the suspect may be arrested and will have to prove his or her medical claim in court. [Link to CAGG].
MAUCRSA (Repeals MCRSA). MAUCRSA (the Medicinal and Adult-Use Cannabis Regulation and Safety Act) is the successor to MCRSA and reconciles it with Prop 64's AUMA. In short, it is the set of laws that will govern California's medical and adult use markets. [Link to SB 94]
MCRSA (formerly "MMRSA"). On January 1, 2016, the Medical Cannabis Regulation and Safety Act (MCRSA), a California state law, went into effect however state officials have stated it will take at least until 2018 before they will be able to start issuing state licenses. MCRSA consists of three separate bills: AB 243, AB 266, and SB 643 that Governor Jerry Brown signed in September 2015. Together these bills direct state agencies to license and regulate commercial medical cannabis cultivation, manufacturing, distribution, transportation, sales, and testing. Importantly it puts California into compliance with the Federal guidelines set forth in the Cole Memo (the specifics of what the federal government will place their attention on in the state marijuana markets), which specifies how the industry can function without intervention by the Federal government. [Link to our summary of MMRSA]. [Link to AB 266]
If the above leaves you with more questions than answers, here is a California NORML summary of medical marijuana laws in California. You can also contact us and we will put you in touch with expert attorneys in this field. [Link]
26 U.S. Code § 280E - [Link to 280E] IRS Sec. 280E, enacted 14 years before the concept of legal marijuana on the state level prohibits the deduction of expenses incurred in a business of trafficking in a controlled substance. In the eyes of the U.S. Federal Government, marijuana is a Schedule 1 Controlled Substance and thus any businesses selling marijuana generally cannot deduct their expenses. The only exception is that businesses may reduce their gross income by the costs of goods sold (since it is a reduction and not a deduction). That said, businesses that sell marijuana which also engage in other activities that do not involve the sale of marijuana may be able to take all otherwise allowable deductions for these other activities. However, such accounting can be tricky and requires the help of an accountant with experience in dealing with this section of the tax code. You can contact us and we will happily put you in touch with accountants with this experience.
California State Board of Equalization [Link to BOE Tax Guide]. The BOE considers the sale of medical marijuana to be taxable (even though most foods and medicines are not subject to sales tax). Prior to October 2005, the BOE did not issue seller's permits to sellers of property that could be considered illegal. However, a policy change was issued in October 2005 and the Board directed BOE staff to issue seller's permits regardless of the fact that the property being sold may be illegal, or because the applicant for the permit did not indicate what products it sold.
California Cannabis Ventures proudly supports the following organizations who are fighting for the end of cannabis prohibition and the rights of cannabis users.
Americans for Safe Access (Link): has the mission of ensuring safe and legal access to cannabis (marijuana) for therapeutic uses and research. ASA works with our grassroots base of over 50,000 members to effect change using public education and direct advocacy at the local, state, and federal level.
California NORML (Link) is a non-profit, membership organization dedicated to reforming California's marijuana laws.
Law Enforcement Against Prohibition (Link) was founded in 2002. LEAP is made up of current and former members of the law enforcement and criminal justice communities who are speaking out about the failures of our existing drug policies.
Marijuana Policy Project (Link) has the mission of changing federal law to allow states to determine their own marijuana policies without federal interference, as well as to regulate marijuana like alcohol in all 50 states, D.C., and the five territories.
Women Grow (link) was created to connect, educate, inspire and empower the next generation of cannabis industry leaders by creating programs, community and events for aspiring and current business executives.