What is the current legal status of marijuana in Maine?
Maine legalized medical marijuana in 1999, and created a regulated distribution system in 2009, both by referendum. The Maine Legislature continued to reform the regulatory system as it evolved. The Maine Department of Health and Human Services (DHHS) has been responsible for implementation and oversight.
Maine voters passed Question 1 on November 8, 2016 by a very narrow margin. By passing Question 1, Maine voters enacted the Maine Marijuana Legalization Act, which legalizes marijuana for adult use in Maine. The Maine legislature is now considering how to reform the citizen initiative for implementation. The initiative called for the Maine Department of Agriculture, Conservation and Forestry to be responsible for implementation and oversight.
Marijuana remains illegal under Federal law. Marijuana is listed on Schedule 1 of the U.S. Controlled Substances Act. The Obama Administration followed a policy of allowing state experiments in legalization to unfold without prosecutions, provided that certain federal law enforcement priorities were not implicated by state legalization efforts. That however, is a statement of policy, and not a change in federal law.
Did MPRM support Question 1 on Maine’s November ballot?
Each individual member of the MPRM Coalition had their own perspective on Question 1. Some supported Question 1, some supported Question 1 with reservations and others opposed it. MPRM members are however, united in the view that the marijuana industry in Maine must be about quality, safety and transparency and that this can only be accomplished through robust but fair regulation and enforcement by state and local authorities.
What does MPRM advocate?
MPRM is a coalition of members who advocate for a robust regulatory environment that ensures the safety of consumers and communities as well as fairness in the marketplace. Whether or not a business is directly or indirectly involved in the industry, a proper regulatory environment can inform the business community about its relationship with the marijuana industry.
The coalition is the right vehicle to gather and distribute quantitative and qualitative data and information for Maine citizens, businesses and policy makers that will inform them on the appropriate regulatory choices for Maine at the state and local levels.
Our definition of a robust regulatory environment is one that will ensure Maine people quality, safety and transparency in the marijuana industry. We believe the following principles are central to that effort:
- Accountability by all actors in the marijuana industry, both medical and adult use, in the context of a well-developed, robust and fair set of regulatory standards and procedures.
- Stringent product safety requirements, focused on areas such as labelling, packaging, stringent product testing and cultivation standards
- Strict and vigorous enforcement of laws against possession and use of marijuana by minors and serious penalties for persons selling or supplying marijuana to minors
- Clear and predictable licensing and operating standards, designed to ensure that licenses are granted to businesses that have both the commitment to these principles and the technical and financial capacity for diligent regulatory compliance.
- Transparency in the form of reporting and data collection requirements, so that Maine policy makers can understand what is happening in our marijuana industry and be in the position to take corrective steps when necessary to ensure a safe industry.
How does the medical marijuana program work?
Under the Maine Medical Use of Marijuana Act, if a person in Maine suffers from one of an enumerated list of “debilitating medical conditions” and if a doctor signs a certification to that effect, that person becomes a “qualifying patient” and can use marijuana for medical purposes. Qualifying patients can get medical marijuana from one of three sources: they can grow it themselves, they can buy it from a “primary caregiver” or they can get it from a “registered dispensary.” Qualifying patients can possess up to 2.5 ounces of prepared marijuana, and they can buy that amount from a primary caregiver or a registered dispensary every 15 days. The Legalization Act did not change the operation of the medical marijuana program.
What are primary caregivers?
To qualify to be a primary caregiver a person must be at least 21 years old, not have a conviction for a "disqualifying drug offense,” and pay a fee to DHHS. There are no licensure requirements . Caregivers are allowed to grow and sell marijuana to up to five patients. A caregiver must grow marijuana in an enclosed, locked facility, and can employ one person to assist with the cultivation and preparation of marijuana. Caregivers can grow six flowering marijuana plants for each patient they serve, and can sell up to 2.5 ounces of prepared marijuana to a qualifying patient every 15 days (or the equivalent of that amount of cannabis in the form of concentrates or edible products.)
Two caregivers may share an enclosed, locked facility if they live in the same household. Except for this, caregivers may not form “collectives” meaning that they cannot operate together as a business or assist each other in the cultivation and processing of marijuana.
There is no limit on how many caregivers there can be. There are no inspections as there are for dispensaries, although DHHS reports that complaints are investigated. There are currently over 3,600 caregivers registered with the Department of Health and Human Services in Maine.
What are registered dispensaries?
The Maine Medical Use of Marijuana Act authorized state to initially license up to eight medical marijuana dispensaries, although DHHS could decide to increase that number. The dispensaries are dispersed geographically, one in each Public Health District. They are held to rigorous standards for security, quality, and inventory control. Dispensaries can have unlimited patients and are subject to municipal zoning restrictions. Dispensaries face a significantly higher regulatory burden than caregivers, including being required to be not for profit companies under Maine law. Only qualifying patients and their guardians are allowed into the dispensary.
How does the Maine Marijuana Legalization Act work?
The Maine Marijuana Legalization Act became effective on January 30, 2017. It became legal for persons in Maine over the age of 21 to possess up to 2.5 ounces of marijuana and to use marijuana in non-public places. It also became legal for people over 21 in Maine to grow up to 6 flowering marijuana plants for personal use.
At the present time, there is no commercial marketplace for marijuana products in Maine. This means there is no place that a person who wants to purchase marijuana for adult use can go to buy it. Under the Legalization Act, the state needs to issue regulations that will regulate the cultivation, processing, testing and sale of marijuana, and then must issue licenses for cultivation, product manufacturing, retail sales, testing and social clubs. No commercial cultivation or sales of marijuana can take place until the Legislature finalizes changes to the Legalization Act and the Executive Branch completes rulemaking.
On January 27, 2017, Governor LePage signed a bill that had been passed by the legislature delaying the opening of a commercial marketplace, and the granting of marijuana licenses until February 1, 2018.
Who will regulate the adult use marijuana market in Maine?
The Marijuana Legalization Act granted that authority to the Department of Agriculture, Conservation and Forestry (DACF). MPRM coalition members have taken the position that DACF is not the agency best suited to regulate the adult use marijuana industry. It supports transfer of responsibility to the Bureau of Alcoholic Beverages and Lottery Operations (BABLO) operating under the Liquor Control Board. It is more experienced with an industry like the marijuana industry and would provide more robust enforcement and oversight. On January 30, 2017, Governor LePage signed an executive order transferring regulatory oversight of adult use marijuana from DACF to BABLO.
What kinds of licenses will Maine be issuing for adult use marijuana?
The Legalization Act creates five categories of licensure for the Maine marijuana marketplace: cultivators, processor/manufacturers, retail sales, testing labs and social clubs.
Cultivation licenses allow license holders to grow marijuana for sale at wholesale to manufacturers and retailers. Licenses will be granted in “blocks” of 100 square feet of cultivation “canopy.” Canopy is the marijuana industry’s term of art for the amount of square footage dedicated to growing marijuana plants.
Manufacturing licenses allow licensees to purchase marijuana at wholesale and process it into other products, such as edible products infused with marijuana and concentrates. Manufacturers themselves can sell at wholesale to retailers.
Retail stores sell marijuana products at retail to consumers over 21 years of age; they may get their products from cultivators or processors.
Testing lab licenses allow license holders to test marijuana for purity and potency, in a manner to be determined by regulations.
Social clubs are facilities that will allow on-premises sale and consumption of marijuana products. So far, only Alaska has allowed social clubs to operate.
A person can apply for and receive more than one class of license; however under current law, a testing facility licensee may not hold any other class of license. This ensures that testing facilities are strictly independent. Laboratory licensing processes and standards adopted in other states, however, have caused a bottleneck in the supply chain that needs to be addressed in Maine
Are there caps on any of the license classes?
Under the Legalization Act, only cultivation licenses have any cap at the statewide level. There is no cap on the number of manufacturing, retail, testing or social club licenses, although municipalities may impose caps on all classes of licenses or prohibit commercial marijuana activities altogether. Cultivation licenses are capped at 800,000 square feet state wide. These licenses will be given out in blocks of 100 square feet, and will be divided into two tiers, one tier of cultivation sites of between 3,000 and 30,000 square feet, and the other tier being 3,000 square feet and under. Forty percent of the cultivation licenses must be issued to smaller growers.
How are sales of marijuana taxed in Maine?
Medical marijuana is subject to the 5.5% sales tax. Under the Legalization Act, adult use sales will be taxed at a rate of 10%. This tax rate is quite low compared to other adult use states and will not pay for the implementation of the program at the state level. MPRM recommends a sales tax rate of 5.5% plus a “special tax” of 20%, with the special tax being allocated to fund robust regulatory enforcement.
What happens to the medical marijuana system with the passage of the Marijuana Legalization Act?
The Legalization Act does not repeal or modify the Medical Use of Marijuana Act. However, MPRM recommends that the Legislature make immediate changes to the medical marijuana system, specifically by requiring caregivers and dispensaries to comply with the same product labelling, packaging and testing rules that adult use licensees will face. Also, MPRM recommends stricter record keeping requirements and for audit requirements for caregivers and dispensaries. Ultimately MPRM supports consolidation of the industry under the same regulatory agency, with the primary difference between medical and adult use marijuana being the tax rate charged on the products and the kinds of additional services and counselling offered to medical marijuana qualifying patients.
What kinds of powers do municipalities have over marijuana businesses?
The Legalization Act affords municipalities the power to regulate commercial marijuana activities. Most importantly, municipalities may impose a complete prohibition on commercial marijuana activities and not allow any of the five classes of licenses to operate with municipal boundaries. Municipalities may also allow all or a limited number of license classes to operate within a municipality, and may limit the number of licensees in each class that operate within a municipality. Municipalities across Maine are considering how to make decisions about the scope of commercial activities that they will permit. Additionally, the Legalization Act allows towns to engage in zoning related to marijuana businesses and also to impose additional regulations or licensing requirements over and above what the state imposes. Municipalities may consider areas such as fire code and health and safety issues as subject matter of local regulations. MPRM supports local control over the marijuana industry.
What is the danger of allowing personal possession now but not having a regulated marketplace until 2018?
MPRM has observed an explosion in the number of registered primary caregivers and a lack of oversight of the number of individual medical patients they serve. It is concerning that there is an unregulated build out of an in illicit industry prior to the Legislature settling on final laws and issuance of final regulations. MPRM recommends that the legislature impose a cap on the number of caregivers to directly address this concern. The long delay between the passage of the Legalization Act and the advent of commercial sales will encourage people to purchase marijuana in black market transactions. MPRM recommends that Maine begin migrating consumers from the black market to the regulated market by allowing an interim or “early rollout” period of adult use sales. During this period, Maine medical marijuana dispensaries would be permitted to sell limited amounts of marijuana to consumers 21 years of age or older from existing inventory and/or from registered caregivers’ existing inventories. MPRM advocates for allowing the eight existing dispensaries to be allowed to make these sales, since they have the technical capacity to administer such an early roll out period in a safe and responsible manner, and are used to dealing with the higher level scrutiny and regulation that would come in such an interim sales period. This interim phase should sunset when adult use licenses begin being issued in Maine. MPRM believes that this would condition consumers to seek reliable and legal sources of marijuana, would generate revenue for the early phases of regulatory roll out and enforcement and would begin the critical task of eliminating the black market for marijuana in Maine.
Can marijuana businesses get banking services?
There is a misconception that banks are not allowed to accept deposits from marijuana related businesses. Banks are allowed to accept deposits, but under U.S. Treasury Department guidelines, they are required to engage in onerous due diligence on their depositors to ensure that the depositors are complying with state regulation. MPRM believes that the cash-based nature of the marijuana industry creates security concerns and makes it difficult for marijuana businesses to engage in adequate accounting controls and tax reporting and compliance. MPRM supports reforms to federal law which would make it easier for banks to accept these deposits and for state level immunity for financial institutions that comply with federal law. Additionally, MPRM intends to be a resource to the Maine financial sector in helping understand the nascent marijuana industry so that Maine financial institutions can be better positioned to provide critical financial services to the Maine marijuana industry.
What is Section 280E of the Internal Revenue Code and why is it a problem?
Under U.S. law, taxpayers must pay income tax on all income, regardless of whether the income derives from legal or illegal activities. Section 280E of the Internal Revenue Code is a Reagan-era law that was designed to prevent narcotics traffickers who had been charged with income tax evasion to escape punishment by deducting business expenses related to trafficking activities from their taxable income. While this may have made sense as a law enforcement tool during a period of a nationwide war on drugs during complete marijuana prohibition, it is now being applied to professionally-run and diligently compliant marijuana businesses operating in accordance with state law. The end result has been extravagantly high marginal tax rates for these businesses. While MPRM supports robust regulation for health and public safety purposes, this kind of discriminatory tax treatment is difficult to justify. MPRM supports repeal of Section 280E at the national level and has supported legislation in Maine that allows marijuana licensees to deduct business expenses for purposes of Maine income tax.
What is the potential economic impact of the marijuana industry in Maine?
ArcView Group, an association of investors focusing on the marijuana industry nationwide, publishes an annual report estimating the size of the marijuana industry by retail sales in states across the country. In its most recent report, it estimated that the size of the retail adult use market in Maine would be approximately $210 million in 2020, assuming that licenses are granted on the time frames that most people are now anticipating. In this light, adult use marijuana represents a fairly significant industry in Maine. By way of comparison, in 2015, the Maine lobster fleet reported total sales of $495 million. This was a record year for the lobster industry, which is one of Maine’s flagship industries.
What has MPRM learned in its review of other state marijuana regulatory efforts that it thinks are relevant for Maine’s marijuana industry?
MPRM has tracked regulatory developments in other states and believes that the following represent some of the critical areas of regulatory focus, and most sensible policy decisions from other jurisdictions:
- Strict licensing qualifications - utilizing existing regulated tax paying entities
- Limitation on number of licenses
- Mandatory inspections for regulatory compliance
- Mandatory safety testing
- Mandatory labeling requirements
- Security and surveillance requirements
- Banning advertising to minors
- 21 + enforcement
- Childproof packaging
- Buffer zones separating marijuana businesses and areas frequented by minors
- Public education
- Mandatory record keeping including records of all financial transactions and financial conditions; accounting and tax records; employee records
- Electronic and video seed to sale tracking
- Disposal requirements for waste, excess, or contaminated products
- Mandatory recalls
- Local safety inspections and state health and sanitation audits
- Unified adult use and medical regulations
- Driving while impaired
- Workplace safety