New Jersey Adult-Use Cannabis Bill Clears Major Hurdle

On November 26, the New Jersey Senate Budget and Appropriations Committee and Assembly Appropriations Committee approved the latest version of Senate Bill 2703, which would legalize the possession and non-medical personal use of cannabis for people age 21 and older.

New Jersey Cannabis Regulatory and Expungement Aid Modernization Act

Senate Bill 2703, which would be known as the New Jersey Cannabis Regulatory and Expungement Aid Modernization Act if enacted, is 147 pages long and continues to evolve. Below are some of the key components in the current version of the bill:

• Tax Rate: The tax rate on cannabis sales will be set at 12%.
• Local Oversight: Once the bill becomes law, each municipality will have 180 days to determine whether to prohibit cannabis businesses within its limits. The municipality will be allowed to prohibit certain types of facilities while allowing others. If the municipality does not affirmatively “opt-out” by the 180-day deadline, cannabis establishments will be allowed in the municipality for the succeeding five years. At that point, the municipality will have another opportunity to prohibit the opening of any additional facilities.
• Municipal Taxes: Municipalities will be empowered to directly assess, collect and retain a 2% tax on sales occurring within their boundaries.
• Licensing: The bill establishes four classes of licenses: Class 1 Cannabis Grower (permitting the holder to grow, cultivate or produce cannabis); Class 2 Cannabis Processor (a permitting the holder to process, compound, or convert “raw” cannabis into finished products); Class 3 Cannabis Wholesaler (permitting the holder to  operate and maintain buildings where cannabis is warehoused); and Class 4 Cannabis Retailer (permitting the holder to  sell cannabis products to consumers).
• Market Regulation: For a period of 18 months after cannabis retail sales begin retailers will not be permitted to also hold a grower, processor or wholesaler license.   After that 18-month period, a license holder may concurrently hold no more than one of each license. The restriction does not apply to currently operational alternative treatment centers (ATCs) licensed under New Jersey Compassionate Use Medical Cannabis Act.
• Delivery: The bill allows retailers to apply to deliver cannabis items and supplies to consumers.
• Home Grow: The bill does not allow residents to grow their own cannabis.
• Consumption Areas: Retailers may have a consumption area on the premises, provided that they obtain a license and the consumption area is approved by a municipal ordinance.
• Regulatory Oversight: The five-member “Cannabis Regulatory Commission” (CRC) will regulate both the adult-use and medical cannabis industries in New Jersey.  The CRC will be established in but not of the New Jersey Department of Treasury. The CRC will also decide how many licenses to issue, with the bill specifying retailer licenses be given “to meet the market demands of the State, and regard to geographical and population distribution.”
• Priority to Women, Minorities and Veterans: An “Office of Minority, Disabled Veterans, and Women Cannabis Business Development” will be established within the CRC to support the goal of issuing 30% of licenses to businesses owned by members of these groups.
• Social Impact Zones: A total of 25% of the total licenses issued may be awarded to people who have lived in an impact zone for three or more consecutive years at the time of making the application, regardless of where the cannabis establishment is or is intended to be located. Social impact zones are defined as municipalities that rank in the top 15% in unemployment, bottom 33% in medium income and have a crime index total of 1,000 or higher based on the most recently issued annual Uniform Crime Report.
• Micro-Licenses: At least 10 percent of each type of license will be issued to microbusinesses, which are cannabis establishments that operate on a smaller scale. Among other requirements, a microbusiness must be 100% owned by persons who have resided in New Jersey for at least two consecutive years immediately preceding submission of the license application, employ no more than 10 employees, and abide by restrictions regarding the volume of cannabis or cannabis products handled or sold per month.
• Expungement: The legislation requires the Administrative Office of the Courts to establish an electronic filing system for expedited expungements for low-level cannabis convictions within six months of the bill’s enactment. No fees would be charged for the expungements, and the Judiciary Ombudsman would be required to submit the expungement petition to the proper court and provide legal assistance. A separate bill is expected to further detail the expungement process.

The bill cleared the Senate budget committee by a vote of 7-4 with two abstentions. The Assembly budget committee advanced the measure by a vote of 7-2, with one abstention. 

What’s Next?

While a formal bill has been introduced and is working its way through the Legislature, it is likely to be amended before coming to a floor vote. Several issues — notably the tax rate issue — remain to be resolved. 

The Murphy Administration has also yet to sign off on the bill. "It's too early to tell," Gov. Phil Murphy said. "We haven't commented on specifics, but I am very happy that this is moving." According to Sen. Stephen Sweeney, sponsors plan to secure Gov. Murphy’s support before moving to a final vote.

The last time the full Legislature will meet this year is December 17. If Senate Bill 2703 is passed by both houses on that date it will go to Governor Murphy, who previously set January 1, 2019, as a self-imposed deadline for enactment of legalization legislation.

The Scarinci Hollenbeck Cannabis Law Practice group will be continuously tracking the status of the legislation. We encourage current and prospective members of the New Jersey cannabis industry to check back regularly for updates.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, at 201-806-3364.

This article is a part of a series pertaining to cannabis legalization in New Jersey and the United States at large. Prior articles in this series are below:

• Industrial Hemp Farming Poised for Growth Under New NJ Hemp Law
• New Jersey ATCs Can Now Post Medical Marijuana Prices
• Ten Things to Know About Industrial Hemp in New Jersey

Disclaimer: Possession, use, distribution, and/or sale of cannabis is a Federal crime and is subject to related Federal policy. Legal advice provided by Scarinci Hollenbeck, LLC is designed to counsel clients regarding the validity, scope, meaning, and application of existing and/or proposed cannabis law. Scarinci Hollenbeck, LLC will not provide assistance in circumventing Federal or state cannabis law or policy, and advice provided by our office should not be construed as such.