Summary of AB 141’s Changes to Existing Cannabis Laws

This entry was posted on Friday, September 17th, 2021 and is filed under Cannabis Law.

On July 12, 2021, California Governor Gavin Newsom approved Assembly Bill No. 141 (AB-141), an act amending, adding, and repealing various sections of the state’s legal codes to implement provisions of the Budget Act of 2021. 

The bill’s most notable updates to existing law include explaining the function of the new Department of Cannabis Control (DCC), setting state provisional license sunset guidelines, and establishing a cannabis trade sample scheme, among other changes. 

While there is surely more to come in the way of implementation, the following provides a snapshot of changes as expressed in the final version of the bill.  The information presented comes from California Legislative Information.

DEPARTMENT OF CANNABIS CONTROL

See KVK Blog AB-141’s Changes to Existing Cannabis Laws

DEFINITIONS

  • AB-141 revises the definition of “commercial cannabis” to include acting as a cannabis event organizer for temporary cannabis events.  
  • AB-141 revises the definition of “manufacture” to include packaging or labeling cannabis products, and removes the definition of “manufacturer” altogether.
  • AB-141 removes from the definition of “harvest batch” that specifies cannabis plant matter be uniform in strain.
  • AB-141 includes, in the definition of “misbranded,” cannabis or cannabis products that are (or consist of cannabis or cannabis products that are) cultivated, processed, manufactured, packed, or held in a location not licensed pursuant to the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA).
  • AB-141 includes, in the definition of “adulterated,” cannabis where the methods, facilities, or controls used for its cultivation fail to conform with MAUCRSA’s requirements.  This definition applies for the purpose of enforcing AB-141’s provisions against adulterated cannabis or cannabis products.

PROVISIONAL LICENSES

  • DCC may issue provisional licenses until June 30, 2022, extending MAUCRSA’s original January 1, 2022 deadline.  
  • Applying for new provisional licenses that include cultivation activities requires submitting certain documentation to DCC about streambed alteration agreements, including:
  1. a final agreement
  2. a draft agreement provided by the Department of Fish and Wildlife (DFW) and signed and returned to DFW
  3. written verification by DFW an agreement is not needed
  4. written verification bv DFW the applicant has submitted a notification pursuant to the California Fish and Game Code, submitted payment of applicable fees, and is responsive to DFW.
  • Applications must be submitted to DCC on or before March 31, 2022.
  • For the first provisional license renewal on or after July 1, 2022, DCC will not renew without one of the streambed alteration agreement-related documents covered above (for cultivation licenses) and evidence of progress with the California Environmental Quality Act (CEQA).
  • For all following provisional license renewals, DCC will not renew unless:
  1. licensees provide a final streambed alteration agreement or DFW verifies in writing an agreement is not needed
  2. DCC verifies progress with CEQA compliance
  • Provisional licenses authorizing cultivation activities will not renewed if the State Water Resources Control Board (Water Board) or DFW notifies DCC provisional licensees lack compliance with certain provisions governing provisional licenses in the California Business and Professions Code, certain provisions of the California Water Code (Water Board), or a final streambed alteration agreement (DFW).
  • DCC may not issue provisional cultivation licenses for applications submitted on or after January 1, 2022, if doing so would result in a licensee holding multiple cultivation licenses on contiguous premises exceeding one (1) acre of total canopy for outdoor cultivation, or twenty-two thousand (22,000) square feet for mixed-light or indoor cultivation.  
  • After January 1, 2023, DCC will not renew cultivation activity licenses if renewing would result in a licensee holding multiple cultivation licenses on contiguous premises exceeding one (1) acre of total canopy for outdoor cultivation or twenty-two thousand (22,000) square feet for mixed-light or indoor cultivation.
  • After January 1, 2024, AB-141 terminates any provisional license resulting in a licensee holding multiple cultivation licenses on contiguous premises exceeding one (1) acre of total canopy for outdoor cultivation or twenty-two thousand (22,000) square feet for mixed-light or indoor cultivation.
  • DCC may not renew provisional licenses after January 1, 2025, and no provisional license will be effective after January 1, 2026.
  • DCC may allow provisional licensees to move locations after provisional licenses can no longer be issued, provided the new location complies with CEQA, the Lake and Streambed Alteration Program, and certain requirements of the California Business and Professions Code.  DCC may similarly renew the license at the new location if all other renewal requirements are satisfied.
  • AB-141 extends the operative date of these provisional license provisions to January 1, 2026.  By extending provisional licensure, applications for which must be signed under penalty of perjury, AB-141 expands the scope of the crime of perjury and thereby imposes a state-mandated local program.

ORGANIC PROGRAMS

  1. cover the reasonable regulatory costs of performing the duties relating to their respective organic programs (comparable to the federal National Organic Program and the California Organic Food and Farming Act);
  2. to levy civil penalties; and
  3. to deny, suspend, or revoke registrations or certifications issued pursuant to those programs, for violating the agencies’ programs or the National Organic Program. 
  • The penalties or fees CDFA collects must be deposited in the CDFA Fund, and the penalties or fees SDPH collects must be deposited in the Food Safety Fund.
  • CDFA may collect fees to cover the reasonable regulatory costs of performing the duties relating to MAUCRSA’s appellations-of-origin provisions for California geographical areas.  These fees must be deposited in the CDFA Fund.

TESTING LABORATORIES

  • Testing laboratories must destroy the remains of cannabis or cannabis product samples upon completing analysis.
  • Testing laboratories must directly employ drivers transporting samples to the testing laboratories.
  • AB-141 deletes the MAUCRSA provision authorizing licensees, as of January 1, 2018, to sell untested cannabis or cannabis products for a limited and finite time.
  • Testing laboratories may receive and test cannabis or cannabis product samples from a licensed manufacturer or cultivator for quality control purposes, and not for retail sale.
  • Persons with financial interests in state testing laboratories may not hold financial interests in any other cannabis license type.

PACKAGING AND LABELING

  • Cannabis and cannabis product packaging must be resealable only if the cannabis or cannabis product contains multiple servings.
  • Cannabis and cannabis product labels and inserts no longer must include the source and date of cultivation and date of manufacture.

MISBRANDED OR ADULERATED CANNABIS

  • AB-141 prohibits:

  • cultivating, processing, manufacturing, selling, delivering, holding, or offering for sale misbranded cannabis or cannabis products
  • misbranding cannabis or cannabis products
  • receiving misbranded cannabis or cannabis products in commerce
  • distributing, delivering, or offering for delivery misbranded cannabis or cannabis products
  • adulterating cannabis or cannabis products
  • receiving adulterated cannabis or cannabis products in commerce
  • distributing, delivering, or proffering for delivery adulterated cannabis or cannabis products
  • correcting cannabis or cannabis products found or cultivated, processed, produced, or manufactured at unlicensed locations, and requires the destruction of that embargoed cannabis or cannabis product
  • By expanding the definition of crimes, this bill imposes a state-mandated local program.
  • AB-141 extends the process of ceasing distribution of and recalling adulterated or misbranded cannabis products to include cannabis as well. 
  • Licensees may voluntarily recall affected cannabis or cannabis products and either remediate or destroy it.  Licensed cultivators may request permission to continue cultivating or harvesting cannabis subject to embargo, and DCC may impose conditions on continued cultivation and harvest of embargoed cannabis. 

TRADE SAMPLES

  • DCC must adopt regulations authorizing licensees to designate cannabis or cannabis products as trade samples at any time while the cannabis or cannabis product is in licensees’ possession, and requires the regulations to include a definition of “trade sample” and the quantity of cannabis and cannabis products that may be designated as trade samples.  
  • Cannabis or cannabis products designated as trade samples may be given for targeted advertising, and DCC may adopt regulations specifying additional purposes.  
  • AB-141 requires the trade samples to be:
  1. subject to quality assurance and testing
  2. recorded in the track-and-trace program
  3. labeled
  • Trade samples may be transported between two (2) licensees by employees of licensed distributors or microbusinesses authorized to engage in distribution, or by licensees authorized to engage in cannabis transportation (including a distributor transport-only licensee).  
  • The bill prohibits any payment, consideration, cost, or compensation in exchange for any cannabis or cannabis products designated as trade samples.  
  • The provisions about trade samples take effect on adoption of regulations by DCC and no later than January 1, 2023.
  • Nothing in § 34011 of the California Revenue and Taxation Code (on the cannabis excise tax) shall be construed to impose an excise tax on cannabis or cannabis products designated as trade samples.
  • On and after January 1, 2022, AB-141 will exempt from the cultivation tax the cultivation of all harvested cannabis that has been, or will be, designated as trade samples and all harvested cannabis used to manufacture cannabis products designated as trade samples.  The bill requires the California Department of Tax and Fee Administration (CDTFA) to adopt regulations prescribing the procedures implementing the exemption.

If you have question about how AB 141 could affect your business, email KVK today.

By: Patrick Babajanian, September 13, 2021