Cannabis Compliance: No. 1 Thing to Focus On, Given Uncertainty with Feds

What California Cannabis Industry Players Should Take Away from Recent Statements by Trump Administration?

Amid a lot of noise about cannabis laws, there are actual developments. First, the Trump Administration signaled its tolerance for medical cannabis but predicted “greater enforcement” against recreational cannabis. Then, Attorney General Sessions criticized arguments in favor of legalization commonly advanced in states like Colorado (where recreational cannabis is legal and where its neighbor (Nebraska) is suing it). 3/2/2017 UPDATE: Latest reports suggest that Mr. Sessions has privately reassured Republicans that a shift away from Obama-era policy is not imminent.

Here’s the trend –the White House and the Attorney General showed intolerance for recreational cannabis but were either silent or accepting of medical cannabis. This is a consistent position – the Cole Memo points enforcement away from regulated medical cannabis programs. The White House and Attorney General, while not addressing the Cole Memo itself, are acting in line with the Cole Memo: in other words, medical is good and recreational or unregulated is bad.

Focus On Local and State Cannabis Regulatory Compliance

California is not on the front lines of recreational cannabis. Last November, the Adult Use of Marijuana Act (Prop. 64) created a recreational cannabis system, but it also postponed commercial cultivation and sales until 2018. For the time being, legal cannabis transactions in California are all medicinal. This means the Attorney General’s best targets are in recreational Colorado, Washington, Oregon and Alaska, compared to Nevada, California, Maine and Massachusetts, where recreational cannabis is legal but not yet operational. If the Attorney General tolerates medical cannabis, then compliance with medical rules becomes much more important. Meeting state rules for medical cannabis operations is a strong step away from the Attorney General’s focus. In fact, compliance with medical rules could work like a safe harbor: a collective that complies with all the medical rules would be operating within the zone the White House supported.

Now is a great time to remind the medical cannabis community about California rules for non-profit collectives currently operating in the state. These standards are what the Cole Memo stands on – tolerance for well-regulated medical cannabis. As Federal enforcement changes focus and intensifies, medical cannabis operations should work to ensure strict compliance with California law.

Membership Guidelines For California Cannabis Collectives

Doctor’s Recommendations

Every Collective member must be a qualified patient or primary caregiver. This means having on file an unexpired physician recommendation from a California-licensed physician for each member. Collectives should maintain membership rosters and remove members with expired recommendations. Collectives should track the expiration of these recommendations and ensure that only qualified patients receive cannabis.

Membership Agreements

Up-to-date and accurate membership rosters are crucial. Membership Agreements must be kept for several years and:

  • Verify qualified patient status
  • Provide for reverification of status
  • Promise not to divert cannabis to non-members
  • Promise not to use the cannabis for non-medical purposes

Medical Cannabis Possession Guidelines

  • State law allows qualified patients and primary caregivers may possess 8 ounces of dried cannabis, and no more than 6 mature and 12 immature plants per patient. Counties and cities may have other requirements.
  • Collectives should only possess the amount of cannabis “reasonably related” to the medical needs of its patient members. Accurate membership rosters will help Collective ensure that it does not have more cannabis than justified.
  • Local Possession Guidelines:

Business Guidelines

Non-Profit. Until state licenses are available and obtained, all California cannabis businesses must operate on a non-profit basis. Proving non-profit operations requires a bookkeeper and substantial records – a Collective should keep written records of all its income, expenses, employees, utilities and other costs. Remember, scrupulous adherence to California rules might be the best way to avoid federal attention. If you do not have a bookkeeper and are handling transactions, please call us for recommendations.

Sales are Recorded. A Collective may not sell cannabis to non-members. Records should include prices, dates, amounts and patients. For additional discussion on record keeping and how it makes all the difference, see this case.

Sales to Other Collectives. Collectives that wish to sell cannabis to other Collectives should do so pursuant to a written Cultivation Agreement.

Money Matters. Reimbursements, purchases and services provided by the Collective or its members may not include profits. All your records should be maintained by a professional bookkeeper or accountant. A Collective proves its non-profit status through its accounting records.

Taxes. A Collective must obtain an EIN from the IRS, register with the State Board of Equalization, and hold a Seller’s Permit.

Security Policy. A Collective needs a written security policy that includes a) how the Collective avoids being a nuisance, b) steps to deter robberies, c) systems for regular cash deposits, and d) keeping extensive transaction records.

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