AB 1448: Cannabis: enforcement by local jurisdictions.
- Session Year: 2023-2024
- House: Assembly
- Latest Version Date: 2023-10-13
Current Status:
Passed
(2023-10-13: Chaptered by Secretary of State - Chapter 843, Statutes of 2023.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
Existing law, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities. MAUCRSA establishes the Department of Cannabis Control within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director.
Under MAUCRSA, a person engaging in commercial cannabis activity without a license is subject to civil penalties, as specified. MAUCRSA requires, in an action for civil penalties brought by the Attorney General, a county counsel, a city attorney, or a city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs of bringing the action, with the remainder, if any, to be deposited in the General Fund.
This bill would recast those provisions to require, in an action brought by a county counsel, city attorney, or city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs in bringing the action, with 50% of the remainder, if any, paid to the county or city, as applicable, and the other 50% to be deposited into the General Fund.
Existing law, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities. MAUCRSA establishes the Department of Cannabis Control within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director.
Under MAUCRSA, a person engaging in commercial cannabis activity without a license is subject to civil penalties, as specified. MAUCRSA requires, in an action for civil penalties brought by the Attorney General, a county counsel, a city attorney, or a city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs of bringing the action, with the remainder, if any, to be deposited in the General Fund.
This bill would recast those provisions to require, in an action brought by a county counsel, city attorney, or city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs in bringing the action, with 50% of the remainder, if any, paid to the county or city, as applicable, and the other 50% to be deposited into the General Fund.
Existing law, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities. MAUCRSA establishes the Department of Cannabis Control within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director.
Under MAUCRSA, a person engaging in commercial cannabis activity without a license is subject to civil penalties, as specified. MAUCRSA requires, in an action for civil penalties brought by the Attorney General, a county counsel, a city attorney, or a city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs of bringing the action, with the remainder, if any, to be deposited in the General Fund.
This bill would recast those provisions to require, in an action brought by a county counsel, city attorney, or city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs in bringing the action, with 50% of the remainder, if any, paid to the county or city, as applicable, and the other 50% to be deposited into the General Fund.
Existing law authorizes the legislative body of a local agency, as defined, to make, by ordinance, a violation of an ordinance subject to an administrative fine or penalty, as specified.The bill would state the intent of the Legislature to amend the bill to provide local governments with an administrative procedure to give them a mechanism to swiftly address illegal cannabis activity in their communities.Existing law, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities. MAUCRSA establishes the Department of Cannabis Control within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director.
Under MAUCRSA, a person engaging in commercial cannabis activity without a license is subject to civil penalties, as specified. MAUCRSA requires, in an action for civil penalties brought by the Attorney General, a county counsel, a city attorney, or a city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs of bringing the action, with the remainder, if any, to be deposited in the General Fund.
This bill would recast those provisions to require, in an action brought by a county counsel, city attorney, or city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs in bringing the action, with 50% of the remainder, if any, paid to the county or city, as applicable, and the other 50% to be deposited into the General Fund.
Existing law authorizes the legislative body of a local agency, as defined, to make, by ordinance, a violation of an ordinance subject to an administrative fine or penalty, as specified. Existing law requires the ordinance adopted by the local agency to provide for a reasonable period of time, as specified in the ordinance, for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties when the violation pertains to specified structural or zoning issues that do not create an immediate danger to health or safety.
This bill would authorize a local jurisdiction, by ordinance, to make a violation of a local law relating to certain unlicensed commercial cannabis activities subject to an administrative fine or penalty, as prescribed, including a requirement that the ordinance set forth the administrative procedures that govern the local jurisdictions imposition, enforcement, collection, and administrative review of those administrative fines or penalties. The bill would authorize those administrative procedures to provide for a reasonable period of time for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties. The bill would establish related administrative and appeal procedures, including, among others, authorizing the establishment, by ordinance, of a procedure to collect these administrative fines or penalties by a special lien upon the parcel of land on which the violation occurred.Under the bill, a local jurisdiction that has established administrative procedures for the imposition, enforcement, collection, and administrative review of administrative fines and penalties would be authorized to impose and collect, as administrative penalties under those procedures, the above-described MAUCRSA penalties for engaging in unlicensed commercial cannabis activity, in addition to any other administrative fines or penalties established by the local jurisdiction. The bill would require 50% of the penalty collected to be paid to the local jurisdiction and 50% to be deposited into the General Fund.The bill would state the intent of the Legislature to amend the bill to provide local governments with an administrative procedure to give them a mechanism to swiftly address illegal cannabis activity in their communities.
Existing law, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities. MAUCRSA establishes the Department of Cannabis Control within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director.
Under MAUCRSA, a person engaging in commercial cannabis activity without a license is subject to civil penalties, as specified. MAUCRSA requires, in an action for civil penalties brought by the Attorney General, a county counsel, a city attorney, or a city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs of bringing the action, with the remainder, if any, to be deposited in the General Fund.
This bill would recast those provisions to require, in an action brought by a county counsel, city attorney, or city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs in bringing the action, with 50% of the remainder, if any, paid to the county or city, as applicable, and the other 50% to be deposited into the General Fund.
Existing law authorizes the legislative body of a local agency, as defined, to make, by ordinance, a violation of an ordinance subject to an administrative fine or penalty, as specified. Existing law requires the ordinance adopted by the local agency to provide for a reasonable period of time, as specified in the ordinance, for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties when the violation pertains to specified structural or zoning issues that do not create an immediate danger to health or safety.
This bill would authorize a local jurisdiction, by ordinance, to make a violation of a local law relating to described certain unlicensed commercial cannabis activities relating to cannabis or cannabis products subject to an administrative fine or penalty, as prescribed, including a requirement that the ordinance set forth the administrative procedures that govern the local jurisdictions imposition, enforcement, collection, and administrative review of those administrative fines or penalties. The bill would authorize those administrative procedures to provide for a reasonable period of time for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties. The bill would establish related administrative and appeal procedures, including, among others, authorizing the establishment, by ordinance, of a procedure to collect these administrative fines or penalties by a special lien upon the parcel of land on which the violation occurred.
Under the bill, a local jurisdiction that has established administrative procedures for the imposition, enforcement, collection, and administrative review of administrative fines and penalties would be authorized to impose and collect, as administrative penalties under those procedures, the above-described MAUCRSA penalties for engaging in unlicensed commercial cannabis activity, in addition to any other administrative fines or penalties established by the local jurisdiction. The bill would require 50% of the penalty collected to be paid to the local jurisdiction and 50% to be deposited into the General Fund.
The Existing law, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, measure, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities. MAUCRSA establishes the Department of Cannabis Control within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director.
Under MAUCRSA, a person engaging in commercial cannabis activity without a license is subject to civil penalties, as specified. MAUCRSA requires, in an action for civil penalties brought by the Attorney General, a county counsel, a city attorney, or a city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs of bringing the action, with the remainder, if any, to be deposited in the General Fund.
This bill would recast those provisions to require, in an action brought by a county counsel, city attorney, or city prosecutor, the penalty first be used to reimburse the prosecuting agency for specified costs in bringing the action, with 50% of the remainder, if any, paid to the county or city, as applicable, and the other 50% to be deposited into the General Fund.
Existing law authorizes the legislative body of a local agency, as defined, to make, by ordinance, a violation of an ordinance subject to an administrative fine or penalty, as specified. Existing law requires the ordinance adopted by the local agency to provide for a reasonable period of time, as specified in the ordinance, for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties when the violation pertains to specified structural or zoning issues that do not create an immediate danger to health or safety.
This bill would authorize a local jurisdiction, by ordinance, to make a violation of a local law relating to described activities relating to cannabis or cannabis products subject to an administrative fine or penalty, as prescribed, including a requirement that the ordinance set forth the administrative procedures that govern the local jurisdictions imposition, enforcement, collection, and administrative review of those administrative fines or penalties. The bill would authorize those administrative procedures to provide for a reasonable period of time for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties. The bill would establish related administrative and appeal procedures, including, among others, authorizing the establishment, by ordinance, of a procedure to collect these administrative fines or penalties by a special lien upon the parcel of land on which the violation occurred.
The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.Under the bill, a local jurisdiction that has established administrative procedures for the imposition, enforcement, collection, and administrative review of administrative fines and penalties would be authorized to impose and collect, as administrative penalties under those procedures, the above-described MAUCRSA penalties for engaging in unlicensed commercial cannabis activity, in addition to any other administrative fines or penalties established by the local jurisdiction. The bill would require 50% of the penalty collected to be paid to the local jurisdiction and 50% to be deposited into the General Fund.
The Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities. MAUCRSA establishes the Department of Cannabis Control within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director.
Existing law authorizes the legislative body of a local agency, as defined, to make, by ordinance, a violation of an ordinance subject to an administrative fine or penalty, as specified. Existing law requires the ordinance adopted by the local agency to provide for a reasonable period of time, as specified in the ordinance, for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties when the violation pertains to specified structural or zoning issues that do not create an immediate danger to health or safety.
This bill would authorize a local jurisdiction, by ordinance, to make a violation of a local law relating to described activities relating to cannabis or cannabis products subject to an administrative fine or penalty, as prescribed, including a requirement that the ordinance set forth the administrative procedures that govern the local jurisdictions imposition, enforcement, collection, and administrative review of those administrative fines or penalties. The bill would authorize those administrative procedures to provide for a reasonable period of time for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties. The bill would establish related administrative and appeal procedures, including, among others, authorizing the establishment, by ordinance, of a procedure to collect these administrative fines or penalties by a special lien upon the parcel of land on which the violation occurred.
The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.
(a)(1)A person engaging in commercial cannabis activity without a license as required by this division shall be subject to civil penalties of up to three times the amount of the license fee for each violation. Each day of operation shall constitute a separate violation of this section.
(2)(A)A person aiding and abetting unlicensed commercial cannabis activity shall be subject to civil penalties of up to three times the amount of the license fee for each violation, but in no case shall the penalty exceed thirty thousand dollars ($30,000) for each violation. Each day of operation of unlicensed commercial cannabis activity that a person is found to have aided and abetted shall constitute a separate violation of this section.
(B)For the purposes of this section, in order to prove that a person aided and abetted an unlicensed cannabis activity, all of the following shall be demonstrated:
(i)The person was an owner, officer, controlling shareholder, or in a similar position of authority allowing them to make command or control decisions regarding the operations and management of the unlicensed cannabis activity or the property in which the activity is taking place.
(ii)The person had actual knowledge that the cannabis activity was unlicensed and that the cannabis activity required a license.
(iii)The person provided substantial assistance or encouragement to the unlicensed cannabis activity.
(iv)The persons conduct was a substantial factor in furthering the unlicensed cannabis activity.
(3)(A)A person who has management or control of a commercial property, or a commercial building, room, space, or enclosure, either as an owner, lessee, agent, employee, or mortgagee, who knowingly rents, leases, or makes available for use, with or without compensation, the commercial property, building, room, space, or enclosure for the purpose of the unlicensed commercial cultivation, manufacture, storage, sale, or distribution of cannabis shall be subject to civil penalties of up to ten thousand dollars ($10,000) for each violation. Each day of violation shall constitute a separate violation of this section.
(B)For purposes of this paragraph, in order to prove that a person knowingly rented, leased, or made available the commercial property for unlawful commercial cannabis activity, it shall be demonstrated that the person had actual knowledge that the cannabis-related activity was for commercial purposes, required a license, and was unlicensed. The presence of a lawful amount of cannabis, cannabis products, or cannabis plants, subject to Sections 11362.1 and 11362.45 of the Health and Safety Code, shall not be evidence of actual knowledge.
(4)In assessing a penalty, a court shall give due consideration to the appropriateness of the amount of the civil penalty with respect to factors the court determines to be relevant, including the following:
(A)The gravity of the violation by the licensee or person.
(B)The good faith of the licensee or person.
(C)The licensees or persons history of previous violations.
(D)Whether, and to what extent, the licensee or person profited from the unlicensed cannabis activity.
(5)Cannabis associated with a violation described in this subdivision may be destroyed in accordance with Section 11479 of the Health and Safety Code. The person in violation shall be responsible for the cost of the destruction of cannabis associated with their violation.
(b)An action for civil penalties brought against a person pursuant to this division shall not be commenced unless the action is filed within three years from the date of the violation.
(c)(1)Actions for civil penalties pursuant to paragraph (1) of subdivision (a) may be brought by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel or city prosecutor.
(2)Actions for civil penalties pursuant to paragraph (2) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel or city prosecutor in a city or county having a population in excess of 750,000.
(3)Actions for civil penalties pursuant to paragraph (3) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel, or city prosecutor.
(d)(1)All civil penalties imposed and collected pursuant to this section by a court shall be deposited into the General Fund except as provided in this subdivision.
(2)If an action for civil penalties is brought against a person pursuant to this division by the Attorney General on behalf of the people or on behalf of the department or a participating agency, the penalty shall first be used to reimburse the Attorney General and the department or the participating agency for the costs of investigating and prosecuting the action, including expert fees and reasonable attorneys fees, with the remainder, if any, to be deposited into the General Fund.
(3)If the action is brought by a county counsel, the penalty shall first be used to reimburse the county counsel for the costs of bringing the action for civil penalties, with one-half of the remainder, if any, to be paid to the treasurer of the county in which the judgment was entered and one-half deposited into the General Fund.
(4)If the action is brought by a city attorney or city prosecutor, the penalty collected shall first be used to reimburse the city attorney or city prosecutor for the costs of bringing the action for civil penalties, with one-half of the remainder, if any, to be paid to the treasurer of the city in which the complaining attorney has jurisdiction and one-half deposited into the General Fund.
(e)Notwithstanding subdivision (a), criminal penalties shall continue to apply to an unlicensed person engaging in commercial cannabis activity in violation of this division.
(f)(1)This section does not limit, preempt, or otherwise affect any other state or local law, rule, regulation, or ordinance applicable to the conduct described in subdivision (a), or otherwise relating to commercial cannabis activities.
(2)This section is meant to further the intent of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), which allows local governments to reasonably regulate the cultivation of nonmedical cannabis for personal use by adults 21 years of age and older through zoning and other local laws.
(a)(1)A person engaging in commercial cannabis activity without a license as required by this division shall be subject to civil penalties of up to three times the amount of the license fee for each violation. Each day of operation shall constitute a separate violation of this section.
(2)(A)A person aiding and abetting unlicensed commercial cannabis activity shall be subject to civil penalties of up to three times the amount of the license fee for each violation, but in no case shall the penalty exceed thirty thousand dollars ($30,000) for each violation. Each day of operation of unlicensed commercial cannabis activity that a person is found to have aided and abetted shall constitute a separate violation of this section.
(B)For the purposes of this section, in order to prove that a person aided and abetted an unlicensed cannabis activity, all of the following shall be demonstrated:
(i)The person was an owner, officer, controlling shareholder, or in a similar position of authority allowing them to make command or control decisions regarding the operations and management of the unlicensed cannabis activity or the property in which the activity is taking place.
(ii)The person had actual knowledge that the cannabis activity was unlicensed and that the cannabis activity required a license.
(iii)The person provided substantial assistance or encouragement to the unlicensed cannabis activity.
(iv)The persons conduct was a substantial factor in furthering the unlicensed cannabis activity.
(3)(A)A person who has management or control of a commercial property, or a commercial building, room, space, or enclosure, either as an owner, lessee, agent, employee, or mortgagee, who knowingly rents, leases, or makes available for use, with or without compensation, the commercial property, building, room, space, or enclosure for the purpose of the unlicensed commercial cultivation, manufacture, storage, sale, or distribution of cannabis shall be subject to civil penalties of up to ten thousand dollars ($10,000) for each violation. Each day of violation shall constitute a separate violation of this section.
(B)For purposes of this paragraph, in order to prove that a person knowingly rented, leased, or made available the commercial property for unlawful commercial cannabis activity, it shall be demonstrated that the person had actual knowledge that the cannabis-related activity was for commercial purposes, required a license, and was unlicensed. The presence of a lawful amount of cannabis, cannabis products, or cannabis plants, subject to Sections 11362.1 and 11362.45 of the Health and Safety Code, shall not be evidence of actual knowledge.
(4)In assessing a penalty, a court shall give due consideration to the appropriateness of the amount of the civil penalty with respect to factors the court determines to be relevant, including the following:
(A)The gravity of the violation by the licensee or person.
(B)The good faith of the licensee or person.
(C)The licensees or persons history of previous violations.
(D)Whether, and to what extent, the licensee or person profited from the unlicensed cannabis activity.
(5)Cannabis associated with a violation described in this subdivision may be destroyed in accordance with Section 11479 of the Health and Safety Code. The person in violation shall be responsible for the cost of the destruction of cannabis associated with their violation.
(b)An action for civil penalties brought against a person pursuant to this division shall not be commenced unless the action is filed within three years from the date of the violation.
(c)(1)Actions for civil penalties pursuant to paragraph (1) of subdivision (a) may be brought by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel or city prosecutor.
(2)Actions for civil penalties pursuant to paragraph (2) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel or city prosecutor in a city or county having a population in excess of 750,000.
(3)Actions for civil penalties pursuant to paragraph (3) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel, or city prosecutor.
(d)(1)All civil penalties imposed and collected pursuant to this section by a court shall be deposited into the General Fund except as provided in this subdivision.
(2)If an action for civil penalties is brought against a person pursuant to this division by the Attorney General on behalf of the people or on behalf of the department or a participating agency, the penalty shall first be used to reimburse the Attorney General and the department or the participating agency for the costs of investigating and prosecuting the action, including expert fees and reasonable attorneys fees, with the remainder, if any, to be deposited into the General Fund.
(3)If the action is brought by a county counsel, the penalty shall first be used to reimburse the county counsel for the costs of bringing the action for civil penalties, with one-half of the remainder, if any, to be paid to the treasurer of the county in which the judgment was entered and one-half deposited into the General Fund.
(4)If the action is brought by a city attorney or city prosecutor, the penalty collected shall first be used to reimburse the city attorney or city prosecutor for the costs of bringing the action for civil penalties, with one-half of the remainder, if any, to be paid to the treasurer of the city in which the complaining attorney has jurisdiction and one-half deposited into the General Fund.
(e)Notwithstanding subdivision (a), criminal penalties shall continue to apply to an unlicensed person engaging in commercial cannabis activity in violation of this division.
(f)(1)This section does not limit, preempt, or otherwise affect any other state or local law, rule, regulation, or ordinance applicable to the conduct described in subdivision (a), or otherwise relating to commercial cannabis activities.
(2)This section is meant to further the intent of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), which allows local governments to reasonably regulate the cultivation of nonmedical cannabis for personal use by adults 21 years of age and older through zoning and other local laws.
(a)(1)A person engaging in commercial cannabis activity without a license as required by this division shall be subject to civil penalties of up to three times the amount of the license fee for each violation. Each day of operation shall constitute a separate violation of this section.
(2)(A)A person aiding and abetting unlicensed commercial cannabis activity shall be subject to civil penalties of up to three times the amount of the license fee for each violation, but in no case shall the penalty exceed thirty thousand dollars ($30,000) for each violation. Each day of operation of unlicensed commercial cannabis activity that a person is found to have aided and abetted shall constitute a separate violation of this section.
(B)For the purposes of this section, in order to prove that a person aided and abetted an unlicensed cannabis activity, all of the following shall be demonstrated:
(i)The person was an owner, officer, controlling shareholder, or in a similar position of authority allowing them to make command or control decisions regarding the operations and management of the unlicensed cannabis activity or the property in which the activity is taking place.
(ii)The person had actual knowledge that the cannabis activity was unlicensed and that the cannabis activity required a license.
(iii)The person provided substantial assistance or encouragement to the unlicensed cannabis activity.
(iv)The persons conduct was a substantial factor in furthering the unlicensed cannabis activity.
(3)(A)A person who has management or control of a commercial property, or a commercial building, room, space, or enclosure, either as an owner, lessee, agent, employee, or mortgagee, who knowingly rents, leases, or makes available for use, with or without compensation, the commercial property, building, room, space, or enclosure for the purpose of the unlicensed commercial cultivation, manufacture, storage, sale, or distribution of cannabis shall be subject to civil penalties of up to ten thousand dollars ($10,000) for each violation. Each day of violation shall constitute a separate violation of this section.
(B)For purposes of this paragraph, in order to prove that a person knowingly rented, leased, or made available the commercial property for unlawful commercial cannabis activity, it shall be demonstrated that the person had actual knowledge that the cannabis-related activity was for commercial purposes, required a license, and was unlicensed. The presence of a lawful amount of cannabis, cannabis products, or cannabis plants, subject to Sections 11362.1 and 11362.45 of the Health and Safety Code, shall not be evidence of actual knowledge.
(4)In assessing a penalty, a court shall give due consideration to the appropriateness of the amount of the civil penalty with respect to factors the court determines to be relevant, including the following:
(A)The gravity of the violation by the licensee or person.
(B)The good faith of the licensee or person.
(C)The licensees or persons history of previous violations.
(D)Whether, and to what extent, the licensee or person profited from the unlicensed cannabis activity.
(5)Cannabis associated with a violation described in this subdivision may be destroyed in accordance with Section 11479 of the Health and Safety Code. The person in violation shall be responsible for the cost of the destruction of cannabis associated with their violation.
(b)An action for civil penalties brought against a person pursuant to this division shall not be commenced unless the action is filed within three years from the date of the violation.
(c)(1)Actions for civil penalties pursuant to paragraph (1) of subdivision (a) may be brought by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel or city prosecutor.
(2)Actions for civil penalties pursuant to paragraph (2) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel or city prosecutor in a city or county having a population in excess of 750,000.
(3)Actions for civil penalties pursuant to paragraph (3) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel, or city prosecutor.
(d)(1)All civil penalties imposed and collected pursuant to this section by a court shall be deposited into the General Fund except as provided in this subdivision.
(2)If an action for civil penalties is brought against a person pursuant to this division by the Attorney General on behalf of the people or on behalf of the department or a participating agency, the penalty shall first be used to reimburse the Attorney General and the department or the participating agency for the costs of investigating and prosecuting the action, including expert fees and reasonable attorneys fees, with the remainder, if any, to be deposited into the General Fund.
(3)If the action is brought by a county counsel, the penalty shall first be used to reimburse the county counsel for the costs of bringing the action for civil penalties, with one-half of the remainder, if any, to be paid to the treasurer of the county in which the judgment was entered and one-half deposited into the General Fund.
(4)If the action is brought by a city attorney or city prosecutor, the penalty collected shall first be used to reimburse the city attorney or city prosecutor for the costs of bringing the action for civil penalties, with one-half of the remainder, if any, to be paid to the treasurer of the city in which the complaining attorney has jurisdiction and one-half deposited into the General Fund.
(e)Notwithstanding subdivision (a), criminal penalties shall continue to apply to an unlicensed person engaging in commercial cannabis activity in violation of this division.
(f)(1)This section does not limit, preempt, or otherwise affect any other state or local law, rule, regulation, or ordinance applicable to the conduct described in subdivision (a), or otherwise relating to commercial cannabis activities.
(2)This section is meant to further the intent of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), which allows local governments to reasonably regulate the cultivation of nonmedical cannabis for personal use by adults 21 years of age and older through zoning and other local laws.
SEC. 2.It is the intent of the Legislature to amend this act to provide local governments with an administrative procedure to give them a mechanism to swiftly address illegal cannabis activity in their communities.(a)(1)A person engaging in commercial cannabis activity without a license as required by this division shall be subject to civil penalties of up to three times the amount of the license fee for each violation. Each day of operation shall constitute a separate violation of this section.
(2)(A)A person aiding and abetting unlicensed commercial cannabis activity shall be subject to civil penalties of up to three times the amount of the license fee for each violation, but in no case shall the penalty exceed thirty thousand dollars ($30,000) for each violation. Each day of operation of unlicensed commercial cannabis activity that a person is found to have aided and abetted shall constitute a separate violation of this section.
(B)For the purposes of this section, in order to prove that a person aided and abetted an unlicensed cannabis activity, all of the following shall be demonstrated:
(i)The person was an owner, officer, controlling shareholder, or in a similar position of authority allowing them to make command or control decisions regarding the operations and management of the unlicensed cannabis activity or the property in which the activity is taking place.
(ii)The person had actual knowledge that the cannabis activity was unlicensed and that the cannabis activity required a license.
(iii)The person provided substantial assistance or encouragement to the unlicensed cannabis activity.
(iv)The persons conduct was a substantial factor in furthering the unlicensed cannabis activity.
(3)(A)A person who has management or control of a commercial property, or a commercial building, room, space, or enclosure, either as an owner, lessee, agent, employee, or mortgagee, who knowingly rents, leases, or makes available for use, with or without compensation, the commercial property, building, room, space, or enclosure for the purpose of the unlicensed commercial cultivation, manufacture, storage, sale, or distribution of cannabis shall be subject to civil penalties of up to ten thousand dollars ($10,000) for each violation. Each day of violation shall constitute a separate violation of this section.
(B)For purposes of this paragraph, in order to prove that a person knowingly rented, leased, or made available the commercial property for unlawful commercial cannabis activity, it shall be demonstrated that the person had actual knowledge that the cannabis-related activity was for commercial purposes, required a license, and was unlicensed. The presence of a lawful amount of cannabis, cannabis products, or cannabis plants, subject to Sections 11362.1 and 11362.45 of the Health and Safety Code, shall not be evidence of actual knowledge.
(4)In assessing a penalty, a court shall give due consideration to the appropriateness of the amount of the civil penalty with respect to factors the court determines to be relevant, including the following:
(A)The gravity of the violation by the licensee or person.
(B)The good faith of the licensee or person.
(C)The licensees or persons history of previous violations.
(D)Whether, and to what extent, the licensee or person profited from the unlicensed cannabis activity.
(5)Cannabis associated with a violation described in this subdivision may be destroyed in accordance with Section 11479 of the Health and Safety Code. The person in violation shall be responsible for the cost of the destruction of cannabis associated with their violation.
(b)An action for civil penalties brought against a person pursuant to this division shall not be commenced unless the action is filed within three years from the date of the violation.
(c)(1)Actions for civil penalties pursuant to paragraph (1) of subdivision (a) may be brought by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency agency, or by a city or county counsel or city prosecutor.
(2)Actions for civil penalties pursuant to paragraph (2) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel or city prosecutor in a city or county having a population in excess of 750,000.
(3)Actions for civil penalties pursuant to paragraph (3) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel, or city prosecutor.
(4)A local jurisdiction that has established administrative procedures for the imposition, enforcement, collection, and administrative review of administrative fines and penalties may impose and collect the penalties set forth in paragraph (1) of subdivision (a) as administrative penalties in accordance with those administrative procedures, in addition to any other administrative fines or penalties established by the local jurisdiction.(d)(1)All civil penalties imposed and collected pursuant to this section by a court shall be deposited into the General Fund except as provided in this subdivision.
(2)If an action for civil penalties is brought against a person pursuant to this division by the Attorney General on behalf of the people or on behalf of the department or a participating agency, the penalty shall first be used to reimburse the Attorney General and the department or the participating agency for the costs of investigating and prosecuting the action, including expert fees and reasonable attorneys fees, with the remainder, if any, to be deposited into the General Fund.
(3)If the action is brought by a county counsel, the penalty shall first be used to reimburse the county counsel for the costs of bringing the action for civil penalties, with one-half of the remainder, if any, to be paid to the treasurer of the county in which the judgment was entered and one-half deposited into the General Fund.
(4)If the action is brought by a city attorney or city prosecutor, the penalty collected shall first be used to reimburse the city attorney or city prosecutor for the costs of bringing the action for civil penalties, with one-half of the remainder, if any, to be paid to the treasurer of the city in which the complaining attorney has jurisdiction and one-half deposited into the General Fund.
(5)Civil penalties under paragraph (1) of subdivision (a) that are collected pursuant to paragraph (4) of subdivision (c) shall be paid one-half to the local jurisdiction and one-half to the Treasurer for deposit into the General Fund.(e)Notwithstanding subdivision (a), criminal penalties shall continue to apply to an unlicensed person engaging in commercial cannabis activity in violation of this division.
(f)(1)This section does not limit, preempt, or otherwise affect any other state or local law, rule, regulation, or ordinance applicable to the conduct described in subdivision (a), or otherwise relating to commercial cannabis activities.
(2)This section is meant to further the intent of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), which allows local governments to reasonably regulate the cultivation of nonmedical cannabis for personal use by adults 21 years of age and older through zoning and other local laws.
SEC. 2.Section 26038.1 is added to the Business and Professions Code, to read:26038.1.(a)(1)A local jurisdiction, by ordinance, may make a violation of a local law relating to the unlicensed cultivating, manufacturing, producing, processing, preparing, storing, providing, donating, selling, delivering, or distributing of cannabis or cannabis products, including, but not limited to, an ordinance adopted under Section 26200, subject to an administrative fine or penalty. The local jurisdiction shall set forth, by ordinance, the administrative procedures that govern the imposition, enforcement, collection, and administrative review by the local jurisdiction of those administrative fines or penalties. The ordinance shall specify the amount or range of amounts of the administrative fine or penalty, as determined by the local jurisdiction, for each violation subject to these procedures. Where the violation would otherwise be an infraction, the administrative fine or penalty shall not exceed three times the amount of the license fee required under this division for the relevant activity per day of unlicensed operation.(2)The administrative procedures set forth by ordinance adopted by the local jurisdiction pursuant to this subdivision may provide for a reasonable period of time, as specified in the ordinance, for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties.(b)(1)Notwithstanding Section 1094.5 or 1094.6 of the Code of Civil Procedure, within 20 days after service of the final administrative order or decision of the local jurisdiction is made pursuant to an ordinance enacted in accordance with this section regarding the imposition, enforcement, or collection of the administrative fines or penalties, a person contesting that final administrative order or decision may seek review by filing an appeal to be heard by the superior court, where the same shall be heard de novo, except that the contents of the local jurisdictions file in the case shall be received in evidence. A proceeding under this subdivision is a limited civil case. A copy of the document or instrument of the local jurisdiction providing notice of the violation and imposition of the administrative fine or penalty shall be admitted into evidence as prima facie evidence of the facts stated therein. A copy of the notice of appeal shall be served in person or by first-class mail upon the local jurisdiction by the contestant.(2)The fee for filing the notice of appeal shall be as specified in Section 70615 of the Government Code. The court shall request that the local jurisdictions file on the case be forwarded to the court, to be received within 15 court days of the request. The court shall retain the fee specified in Section 70615 of the Government Code regardless of the outcome of the appeal. If the court finds in favor of the contestant, the amount of the fee shall be reimbursed to the contestant by the local jurisdiction. A deposit of the fine or penalty shall be refunded by the local jurisdiction in accordance with the judgment of the court.(3)The conduct of the appeal under this section is a subordinate judicial duty that may be performed by traffic trial commissioners and other subordinate judicial officials at the direction of the presiding judge of the court.(4)An appeal under this subdivision shall be the exclusive means of judicial review for an administrative fine or penalty imposed pursuant to this section.(5)For the purposes of this section, a local jurisdictions file on the case shall include all of the following:(A)All notices issued by the local jurisdiction to comply with this division or any other law or local ordinance regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.(B)Any audio recording or written transcript or minutes of any proceeding relating to the decision by the local jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.(C)Any written correspondence transmitted or received by the local jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.(D)Documentation of any written order by the local jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section, and all documents cited or relied on in the findings supporting any written order.(E)The full written record before any inferior administrative decisionmaking body where the decision was appealed to a superior administrative decisionmaking body prior to the filing of litigation.(F)Any other written material relevant to or relied on by the local jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section, provided the material was reasonably available to the local jurisdiction for its consideration prior to the issuance of a final order regarding the imposition, enforcement, or collection of the administrative fines or penalties.(c)For the purposes of this section, a local jurisdictions file shall not include a document or record whose disclosure is exempted or prohibited pursuant to federal or state law, including, but not limited to, provisions of the Evidence Code relating to privilege. Before transmitting its file to the court pursuant to this section, the local jurisdiction shall redact the name and identifying information, including the telephone number, street address, and email address, of a person who lodged a complaint that resulted in an investigation or order pursuant to this section.(d)If a notice of appeal of the local jurisdictions final administrative order or decision is not filed within the period described in this section, the order or decision shall be deemed confirmed.(e)If the fine or penalty has not been deposited and the decision of the court is against the contestant, the local jurisdiction may proceed to collect the penalty pursuant to the procedures set forth in its ordinance.(f)After the exhaustion of the administrative and appeal procedures provided in this section, the local jurisdiction may file a certified copy of a final decision of the local jurisdiction that directs the payment of an administrative fine or penalty and, if applicable, a copy of an order of the superior court rendered on an appeal from the local jurisdictions decision with the clerk of the superior court of any county. Judgment shall be entered immediately by the clerk in conformity with the decision or order. A fee shall not be charged by the clerk of the superior court for the performance of an official service required in connection with the entry of judgment pursuant to this section.(g)The local jurisdiction, by ordinance, may establish a procedure to collect administrative fines or penalties imposed pursuant to this section by a special lien upon the parcel of land on which the violation occurred. The ordinance shall require service or mailing of notice before the recordation of the special lien to the owner of record of the parcel of land on which the violation occurred, based on the last equalized assessment roll or the supplemental roll, whichever is more current, and to the owner of an encumbrance of record on the property. Once a copy of the notice of special lien, as described in this subdivision, is recorded in the county recorders office, the lien is superior to all encumbrances, existing and future, except liens for taxes and assessments.(h)The remedies or penalties provided by this section are cumulative to the remedies or penalties available under other law.SEC. 2.It is the intent of the Legislature to amend this act to provide local governments with an administrative procedure to give them a mechanism to swiftly address illegal cannabis activity in their communities.
(a)(1)A person engaging in commercial cannabis activity without a license as required by this division shall be subject to civil penalties of up to three times the amount of the license fee for each violation. Each day of operation shall constitute a separate violation of this section.
(2)(A)A person aiding and abetting unlicensed commercial cannabis activity shall be subject to civil penalties of up to three times the amount of the license fee for each violation, but in no case shall the penalty exceed thirty thousand dollars ($30,000) for each violation. Each day of operation of unlicensed commercial cannabis activity that a person is found to have aided and abetted shall constitute a separate violation of this section.
(B)For the purposes of this section, in order to prove that a person aided and abetted an unlicensed cannabis activity, all of the following shall be demonstrated:
(i)The person was an owner, officer, controlling shareholder, or in a similar position of authority allowing them to make command or control decisions regarding the operations and management of the unlicensed cannabis activity or the property in which the activity is taking place.
(ii)The person had actual knowledge that the cannabis activity was unlicensed and that the cannabis activity required a license.
(iii)The person provided substantial assistance or encouragement to the unlicensed cannabis activity.
(iv)The persons conduct was a substantial factor in furthering the unlicensed cannabis activity.
(3)(A)A person who has management or control of a commercial property, or a commercial building, room, space, or enclosure, either as an owner, lessee, agent, employee, or mortgagee, who knowingly rents, leases, or makes available for use, with or without compensation, the commercial property, building, room, space, or enclosure for the purpose of the unlicensed commercial cultivation, manufacture, storage, sale, or distribution of cannabis shall be subject to civil penalties of up to ten thousand dollars ($10,000) for each violation. Each day of violation shall constitute a separate violation of this section.
(B)For purposes of this paragraph, in order to prove that a person knowingly rented, leased, or made available the commercial property for unlawful commercial cannabis activity, it shall be demonstrated that the person had actual knowledge that the cannabis-related activity was for commercial purposes, required a license, and was unlicensed. The presence of a lawful amount of cannabis, cannabis products, or cannabis plants, subject to Sections 11362.1 and 11362.45 of the Health and Safety Code, shall not be evidence of actual knowledge.
(4)In assessing a penalty, a court shall give due consideration to the appropriateness of the amount of the civil penalty with respect to factors the court determines to be relevant, including the following:
(A)The gravity of the violation by the licensee or person.
(B)The good faith of the licensee or person.
(C)The licensees or persons history of previous violations.
(D)Whether, and to what extent, the licensee or person profited from the unlicensed cannabis activity.
(5)Cannabis associated with a violation described in this subdivision may be destroyed in accordance with Section 11479 of the Health and Safety Code. The person in violation shall be responsible for the cost of the destruction of cannabis associated with their violation.
(b)An action for civil penalties brought against a person pursuant to this division shall not be commenced unless the action is filed within three years from the date of the violation.
(c)(1)Actions for civil penalties pursuant to paragraph (1) of subdivision (a) may be brought by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency by a city or county counsel or city prosecutor.
(2)Actions for civil penalties pursuant to paragraph (2) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel or city prosecutor in a city or county having a population in excess of 750,000.
(3)Actions for civil penalties pursuant to paragraph (3) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel, or city prosecutor.
(4)A local jurisdiction that has established administrative procedures for the imposition, enforcement, collection, and administrative review of administrative fines and penalties may impose and collect the penalties set forth in paragraph (1) of subdivision (a) as administrative penalties in accordance with those administrative procedures, in addition to any other administrative fines or penalties established by the local jurisdiction.
(d)(1)All civil penalties imposed and collected pursuant to this section by a court shall be deposited into the General Fund except as provided in this subdivision.
(2)If an action for civil penalties is brought against a person pursuant to this division by the Attorney General on behalf of the people or on behalf of the department or a participating agency, the penalty shall first be used to reimburse the Attorney General and the department or the participating agency for the costs of investigating and prosecuting the action, including expert fees and reasonable attorneys fees, with the remainder, if any, to be deposited into the General Fund.
(3)If the action is brought by a county counsel, the penalty shall first be used to reimburse the county counsel for the costs of bringing the action for civil penalties, with one-half of the remainder, if any, to be paid to the treasurer of the county in which the judgment was entered and one-half deposited into the General Fund.
(4)If the action is brought by a city attorney or city prosecutor, the penalty collected shall first be used to reimburse the city attorney or city prosecutor for the costs of bringing the action for civil penalties, with one-half of the remainder, if any, to be paid to the treasurer of the city in which the complaining attorney has jurisdiction and one-half deposited into the General Fund.
(5)Civil penalties under paragraph (1) of subdivision (a) that are collected pursuant to paragraph (4) of subdivision (c) shall be paid one-half to the local jurisdiction and one-half to the Treasurer for deposit into the General Fund.
(e)Notwithstanding subdivision (a), criminal penalties shall continue to apply to an unlicensed person engaging in commercial cannabis activity in violation of this division.
(f)(1)This section does not limit, preempt, or otherwise affect any other state or local law, rule, regulation, or ordinance applicable to the conduct described in subdivision (a), or otherwise relating to commercial cannabis activities.
(2)This section is meant to further the intent of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), which allows local governments to reasonably regulate the cultivation of nonmedical cannabis for personal use by adults 21 years of age and older through zoning and other local laws.
SEC. 2.Section 26038.1 is added to the Business and Professions Code, to read:26038.1.(a)(1)A local jurisdiction, by ordinance, may make a violation of a local law relating to the unlicensed cultivating, manufacturing, producing, processing, preparing, storing, providing, donating, selling, delivering, or distributing of cannabis or cannabis products, including, but not limited to, an ordinance adopted under Section 26200, subject to an administrative fine or penalty. The local jurisdiction shall set forth, by ordinance, the administrative procedures that govern the imposition, enforcement, collection, and administrative review by the local jurisdiction of those administrative fines or penalties. The ordinance shall specify the amount or range of amounts of the administrative fine or penalty, as determined by the local jurisdiction, for each violation subject to these procedures. Where the violation would otherwise be an infraction, the administrative fine or penalty shall not exceed three times the amount of the license fee required under this division for the relevant activity per day of unlicensed operation.
(2)The administrative procedures set forth by ordinance adopted by the local jurisdiction pursuant to this subdivision may provide for a reasonable period of time, as specified in the ordinance, for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties.
(b)(1)Notwithstanding Section 1094.5 or 1094.6 of the Code of Civil Procedure, within 20 days after service of the final administrative order or decision of the local jurisdiction is made pursuant to an ordinance enacted in accordance with this section regarding the imposition, enforcement, or collection of the administrative fines or penalties, a person contesting that final administrative order or decision may seek review by filing an appeal to be heard by the superior court, where the same shall be heard de novo, except that the contents of the local jurisdictions file in the case shall be received in evidence. A proceeding under this subdivision is a limited civil case. A copy of the document or instrument of the local jurisdiction providing notice of the violation and imposition of the administrative fine or penalty shall be admitted into evidence as prima facie evidence of the facts stated therein. A copy of the notice of appeal shall be served in person or by first-class mail upon the local jurisdiction by the contestant.
(2)The fee for filing the notice of appeal shall be as specified in Section 70615 of the Government Code. The court shall request that the local jurisdictions file on the case be forwarded to the court, to be received within 15 court days of the request. The court shall retain the fee specified in Section 70615 of the Government Code regardless of the outcome of the appeal. If the court finds in favor of the contestant, the amount of the fee shall be reimbursed to the contestant by the local jurisdiction. A deposit of the fine or penalty shall be refunded by the local jurisdiction in accordance with the judgment of the court.
(3)The conduct of the appeal under this section is a subordinate judicial duty that may be performed by traffic trial commissioners and other subordinate judicial officials at the direction of the presiding judge of the court.
(4)An appeal under this subdivision shall be the exclusive means of judicial review for an administrative fine or penalty imposed pursuant to this section.
(5)For the purposes of this section, a local jurisdictions file on the case shall include all of the following:
(A)All notices issued by the local jurisdiction to comply with this division or any other law or local ordinance regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.
(B)Any audio recording or written transcript or minutes of any proceeding relating to the decision by the local jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.
(C)Any written correspondence transmitted or received by the local jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.
(D)Documentation of any written order by the local jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section, and all documents cited or relied on in the findings supporting any written order.
(E)The full written record before any inferior administrative decisionmaking body where the decision was appealed to a superior administrative decisionmaking body prior to the filing of litigation.
(F)Any other written material relevant to or relied on by the local jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section, provided the material was reasonably available to the local jurisdiction for its consideration prior to the issuance of a final order regarding the imposition, enforcement, or collection of the administrative fines or penalties.
(c)For the purposes of this section, a local jurisdictions file shall not include a document or record whose disclosure is exempted or prohibited pursuant to federal or state law, including, but not limited to, provisions of the Evidence Code relating to privilege. Before transmitting its file to the court pursuant to this section, the local jurisdiction shall redact the name and identifying information, including the telephone number, street address, and email address, of a person who lodged a complaint that resulted in an investigation or order pursuant to this section.
(d)If a notice of appeal of the local jurisdictions final administrative order or decision is not filed within the period described in this section, the order or decision shall be deemed confirmed.
(e)If the fine or penalty has not been deposited and the decision of the court is against the contestant, the local jurisdiction may proceed to collect the penalty pursuant to the procedures set forth in its ordinance.
(f)After the exhaustion of the administrative and appeal procedures provided in this section, the local jurisdiction may file a certified copy of a final decision of the local jurisdiction that directs the payment of an administrative fine or penalty and, if applicable, a copy of an order of the superior court rendered on an appeal from the local jurisdictions decision with the clerk of the superior court of any county. Judgment shall be entered immediately by the clerk in conformity with the decision or order. A fee shall not be charged by the clerk of the superior court for the performance of an official service required in connection with the entry of judgment pursuant to this section.
(g)The local jurisdiction, by ordinance, may establish a procedure to collect administrative fines or penalties imposed pursuant to this section by a special lien upon the parcel of land on which the violation occurred. The ordinance shall require service or mailing of notice before the recordation of the special lien to the owner of record of the parcel of land on which the violation occurred, based on the last equalized assessment roll or the supplemental roll, whichever is more current, and to the owner of an encumbrance of record on the property. Once a copy of the notice of special lien, as described in this subdivision, is recorded in the county recorders office, the lien is superior to all encumbrances, existing and future, except liens for taxes and assessments.
(h)The remedies or penalties provided by this section are cumulative to the remedies or penalties available under other law.
(a)(1)A person engaging in commercial cannabis activity without a license as required by this division shall be subject to civil penalties of up to three times the amount of the license fee for each violation. Each day of operation shall constitute a separate violation of this section.
(2)(A)A person aiding and abetting unlicensed commercial cannabis activity shall be subject to civil penalties of up to three times the amount of the license fee for each violation, but in no case shall the penalty exceed thirty thousand dollars ($30,000) for each violation. Each day of operation of unlicensed commercial cannabis activity that a person is found to have aided and abetted shall constitute a separate violation of this section.
(B)For the purposes of this section, in order to prove that a person aided and abetted an unlicensed cannabis activity, all of the following shall be demonstrated:
(i)The person was an owner, officer, controlling shareholder, or in a similar position of authority allowing them to make command or control decisions regarding the operations and management of the unlicensed cannabis activity or the property in which the activity is taking place.
(ii)The person had actual knowledge that the cannabis activity was unlicensed and that the cannabis activity required a license.
(iii)The person provided substantial assistance or encouragement to the unlicensed cannabis activity.
(iv)The persons conduct was a substantial factor in furthering the unlicensed cannabis activity.
(3)(A)A person who has management or control of a commercial property, or a commercial building, room, space, or enclosure, either as an owner, lessee, agent, employee, or mortgagee, who knowingly rents, leases, or makes available for use, with or without compensation, the commercial property, building, room, space, or enclosure for the purpose of the unlicensed commercial cultivation, manufacture, storage, sale, or distribution of cannabis shall be subject to civil penalties of up to ten thousand dollars ($10,000) for each violation. Each day of violation shall constitute a separate violation of this section.
(B)For purposes of this paragraph, in order to prove that a person knowingly rented, leased, or made available the commercial property for unlawful commercial cannabis activity, it shall be demonstrated that the person had actual knowledge that the cannabis-related activity was for commercial purposes, required a license, and was unlicensed. The presence of a lawful amount of cannabis, cannabis products, or cannabis plants, subject to Sections 11362.1 and 11362.45 of the Health and Safety Code, shall not be evidence of actual knowledge.
(4)In assessing a penalty, a court shall give due consideration to the appropriateness of the amount of the civil penalty with respect to factors the court determines to be relevant, including the following:
(A)The gravity of the violation by the licensee or person.
(B)The good faith of the licensee or person.
(C)The licensees or persons history of previous violations.
(D)Whether, and to what extent, the licensee or person profited from the unlicensed cannabis activity.
(5)Cannabis associated with a violation described in this subdivision may be destroyed in accordance with Section 11479 of the Health and Safety Code. The person in violation shall be responsible for the cost of the destruction of cannabis associated with their violation.
(b)An action for civil penalties brought against a person pursuant to this division shall not be commenced unless the action is filed within three years from the date of the violation.
(c)All civil penalties imposed and collected pursuant to this section by a court shall be deposited into the General Fund except as provided in subdivision (e).(d)For the purposes of this section, in order to prove that a person aided and abetted an unlicensed cannabis activity all of the following must be demonstrated:(1)The person was an owner, officer, controlling shareholder, or in a similar position of authority allowing them to make command or control decisions regarding the operations and management of the unlicensed cannabis activity or the property in which the activity is taking place.(2)The person had actual knowledge that the cannabis activity was unlicensed and that the cannabis activity required a license.(3)The person provided substantial assistance or encouragement to the unlicensed cannabis activity.(4)The persons conduct was a substantial factor in furthering the unlicensed cannabis activity.(c)(1)Actions for civil penalties pursuant to paragraph (1) of subdivision (a) may be brought by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency by a city or county counsel or city prosecutor.
(2)Actions for civil penalties pursuant to paragraph (2) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel or city prosecutor in a city or county having a population in excess of 750,000.
(3)Actions for civil penalties pursuant to paragraph (3) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel, or city prosecutor.
(4)A local jurisdiction that has established administrative procedures for the imposition, enforcement, collection, and administrative review of administrative fines and penalties may impose and collect the penalties set forth in paragraph (1) of subdivision (a) as administrative penalties in accordance with those administrative procedures, in addition to any other administrative fines or penalties established by the local jurisdiction.
(d)(1)All civil penalties imposed and collected pursuant to this section by a court shall be deposited into the General Fund except as provided in this subdivision.
(e)(1)(2)If an action for civil penalties is brought against a person pursuant to this division by the Attorney General on behalf of the people or on behalf of the department or a participating agency, the penalty shall first be used to reimburse the Attorney General and the department or the participating agency for the costs of investigating and prosecuting the action, including expert fees and reasonable attorneys fees, with the remainder, if any, to be deposited into the General Fund.
(2)(3)If the action is brought by a county counsel, the penalty shall first be used to reimburse the county counsel for the costs of bringing the action for civil penalties, with the one-half of the remainder, if any, to be paid to the treasurer of the county in which the judgment was entered and one-half deposited into the General Fund.
(3)(4)If the action is brought by a city attorney or city prosecutor, the penalty collected shall first be used to reimburse the city attorney or city prosecutor for the costs of bringing the action for civil penalties, with the one-half of the remainder, if any, to be paid to the treasurer of the city in which the complaining attorney has jurisdiction and one-half deposited into the General Fund.
(4)Actions for civil penalties pursuant to paragraph (2) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel or city prosecutor in a city or county having a population in excess of 750,000.(5)Actions for civil penalties pursuant to paragraph (3) of subdivision (a) shall be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel, or city prosecutor.(f)For purposes of paragraph (3) of subdivision (a), in order to prove that a person knowingly rented, leased, or made available the commercial property for unlawful commercial cannabis activity, it shall be demonstrated that the person had actual knowledge that the cannabis-related activity was for commercial purposes, required a license, and was unlicensed. The presence of a lawful amount of cannabis, cannabis products, or cannabis plants, subject to Sections 11362.1 and 11362.45 of the Health and Safety Code, shall not be evidence of actual knowledge.(5)Civil penalties under paragraph (1) of subdivision (a) that are collected pursuant to paragraph (4) of subdivision (c) shall be paid one-half to the local jurisdiction and one-half to the Treasurer for deposit into the General Fund.
(g)(e)Notwithstanding subdivision (a), criminal penalties shall continue to apply to an unlicensed person engaging in commercial cannabis activity in violation of this division.
(h)(f)(1)This section does not limit, preempt, or otherwise affect any other state or local law, rule, regulation, or ordinance applicable to the conduct described in subdivision (a), or otherwise relating to commercial cannabis activities.
(2)This section is meant to further the intent of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), which allows local governments to reasonably regulate the cultivation of nonmedical cannabis for personal use by adults 21 years of age and older through zoning and other local laws.
SECTION 1.SEC. 2.Section 26038.1 is added to the Business and Professions Code, to read:26038.1.(a)(1)A local jurisdiction, by ordinance, may make a violation of a local law relating to the cultivating, manufacturing, producing, processing, preparing, storing, providing, donating, selling, delivering, or distributing of cannabis or cannabis products, including, but not limited to, an ordinance adopted under Section 26200, subject to an administrative fine or penalty. The local jurisdiction shall set forth, by ordinance, the administrative procedures that govern the imposition, enforcement, collection, and administrative review by the local jurisdiction of those administrative fines or penalties. The ordinance shall specify the amount or range of amounts of the administrative fine or penalty, as determined by the local jurisdiction, for each violation subject to these procedures.
(2)The administrative procedures set forth by ordinance adopted by the local jurisdiction pursuant to this subdivision may provide for a reasonable period of time, as specified in the ordinance, for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties.
(b)(1)Notwithstanding Section 1094.5 or 1094.6 of the Code of Civil Procedure, within 20 days after service of the final administrative order or decision of the local jurisdiction is made pursuant to an ordinance enacted in accordance with this section regarding the imposition, enforcement, or collection of the administrative fines or penalties, a person contesting that final administrative order or decision may seek review by filing an appeal to be heard by the superior court, where the same shall be heard de novo, except that the contents of the local jurisdictions file in the case shall be received in evidence. A proceeding under this subdivision is a limited civil case. A copy of the document or instrument of the local jurisdiction providing notice of the violation and imposition of the administrative fine or penalty shall be admitted into evidence as prima facie evidence of the facts stated therein. A copy of the notice of appeal shall be served in person or by first-class mail upon the local jurisdiction by the contestant.
(2)The fee for filing the notice of appeal shall be as specified in Section 70615 of the Government Code. The court shall request that the local jurisdictions file on the case be forwarded to the court, to be received within 15 court days of the request. The court shall retain the fee specified in Section 70615 of the Government Code regardless of the outcome of the appeal. If the court finds in favor of the contestant, the amount of the fee shall be reimbursed to the contestant by the local jurisdiction. A deposit of the fine or penalty shall be refunded by the local jurisdiction in accordance with the judgment of the court.
(3)The conduct of the appeal under this section is a subordinate judicial duty that may be performed by traffic trial commissioners and other subordinate judicial officials at the direction of the presiding judge of the court.
(4)An appeal under this subdivision shall be the exclusive means of judicial review for an administrative fine or penalty imposed pursuant to this section.
(5)For the purposes of this section, a local agencys jurisdictions file on the case shall include all of the following:
(A)All notices issued by the local agency jurisdiction to comply with this division or any other law or local ordinance regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.
(B)Any audio recording or written transcript or minutes of any proceeding relating to the decision by the local agency jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.
(C)Any written correspondence transmitted or received by the local agency jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.
(D)Documentation of any written order by the local agency jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section, and all documents cited or relied on in the findings supporting any written order.
(E)The full written record before any inferior administrative decisionmaking body where the decision was appealed to a superior administrative decisionmaking body prior to the filing of litigation.
(F)Any other written material relevant to or relied on by the local agency jurisdiction regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section, provided the material was reasonably available to the local agency jurisdiction for its consideration prior to the issuance of a final order regarding the imposition, enforcement, or collection of the administrative fines or penalties.
(c)For the purposes of this section, a local agencys jurisdictions file shall not include a document or record whose disclosure is exempted or prohibited pursuant to federal or state law, including, but not limited to, provisions of the Evidence Code relating to privilege. Before transmitting its file to the court pursuant to this section, the local agency jurisdiction shall redact the name and identifying information, including the telephone number, street address, and email address, of a person who lodged a complaint that resulted in an investigation or order pursuant to this section.
(d)If a notice of appeal of the local jurisdictions final administrative order or decision is not filed within the period described in this section, the order or decision shall be deemed confirmed.
(e)If the fine or penalty has not been deposited and the decision of the court is against the contestant, the local jurisdiction may proceed to collect the penalty pursuant to the procedures set forth in its ordinance.
(f)After the exhaustion of the administrative and appeal procedures provided in this section, the local jurisdiction may file a certified copy of a final decision of the local jurisdiction that directs the payment of an administrative fine or penalty and, if applicable, a copy of an order of the superior court rendered on an appeal from the local jurisdictions decision with the clerk of the superior court of any county. Judgment shall be entered immediately by the clerk in conformity with the decision or order. A fee shall not be charged by the clerk of the superior court for the performance of an official service required in connection with the entry of judgment pursuant to this section.
(g)The local jurisdiction, by ordinance, may establish a procedure to collect administrative fines or penalties imposed pursuant to this section by a special lien upon the parcel of land on which the violation occurred. The ordinance shall require service or mailing of notice before the recordation of the special lien to the owner of record of the parcel of land on which the violation occurred, based on the last equalized assessment roll or the supplemental roll, whichever is more current, and to the owner of an encumbrance of record on the property. Once a copy of the notice of special lien, as described in this subdivision, is recorded in the county recorders office, the lien is superior to all encumbrances, existing and future, except liens for taxes and assessments.
(h)The remedies or penalties provided by this section are cumulative to the remedies or penalties available under other law.
(i)Notwithstanding Section 26001, for purposes of this section, local jurisdiction means a city, county, city and county, or charter city.SEC. 2.The Legislature finds and declares that Section 1 of this act adding Section 26038.1 to the Business and Professions Code addresses a matter of statewide concern rather than a municipal affair as that term is used in Section 5 of Article XI of the California Constitution. Therefore, Section 1 of this act applies to all cities, including charter cities.(a)(1)A local jurisdiction, by ordinance, may make a violation of a local law relating to the cultivating, manufacturing, producing, processing, preparing, storing, providing, donating, selling, delivering, or distributing of cannabis or cannabis products, including, but not limited to, an ordinance adopted under Section 26200, subject to an administrative fine or penalty. The local jurisdiction shall set forth, by ordinance, the administrative procedures that govern the imposition, enforcement, collection, and administrative review by the local jurisdiction of those administrative fines or penalties. The ordinance shall specify the amount or range of amounts of the administrative fine or penalty, as determined by the local jurisdiction, for each violation subject to these procedures.
(2)The administrative procedures set forth by ordinance adopted by the local jurisdiction pursuant to this subdivision may provide for a reasonable period of time, as specified in the ordinance, for a person responsible for a continuing violation to correct or otherwise remedy the violation before the imposition of administrative fines or penalties.
(b)(1)Notwithstanding Section 1094.5 or 1094.6 of the Code of Civil Procedure, within 20 days after service of the final administrative order or decision of the local jurisdiction is made pursuant to an ordinance enacted in accordance with this section regarding the imposition, enforcement, or collection of the administrative fines or penalties, a person contesting that final administrative order or decision may seek review by filing an appeal to be heard by the superior court, where the same shall be heard de novo, except that the contents of the local jurisdictions file in the case shall be received in evidence. A proceeding under this subdivision is a limited civil case. A copy of the document or instrument of the local jurisdiction providing notice of the violation and imposition of the administrative fine or penalty shall be admitted into evidence as prima facie evidence of the facts stated therein. A copy of the notice of appeal shall be served in person or by first-class mail upon the local jurisdiction by the contestant.
(2)The fee for filing the notice of appeal shall be as specified in Section 70615 of the Government Code. The court shall request that the local jurisdictions file on the case be forwarded to the court, to be received within 15 court days of the request. The court shall retain the fee specified in Section 70615 of the Government Code regardless of the outcome of the appeal. If the court finds in favor of the contestant, the amount of the fee shall be reimbursed to the contestant by the local jurisdiction. A deposit of the fine or penalty shall be refunded by the local jurisdiction in accordance with the judgment of the court.
(3)The conduct of the appeal under this section is a subordinate judicial duty that may be performed by traffic trial commissioners and other subordinate judicial officials at the direction of the presiding judge of the court.
(4)An appeal under this subdivision shall be the exclusive means of judicial review for an administrative fine or penalty imposed pursuant to this section.
(5)For the purposes of this section, a local agencys file on the case shall include all of the following:
(A)All notices issued by the local agency to comply with this division or any other law or local ordinance regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.
(B)Any audio recording or written transcript or minutes of any proceeding relating to the decision by the local agency regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.
(C)Any written correspondence transmitted or received by the local agency regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section.
(D)Documentation of any written order by the local agency regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section, and all documents cited or relied on in the findings supporting any written order.
(E)The full written record before any inferior administrative decisionmaking body where the decision was appealed to a superior administrative decisionmaking body prior to the filing of litigation.
(F)Any other written material relevant to or relied on by the local agency regarding the imposition, enforcement, or collection of the administrative fines or penalties pursuant to this section, provided the material was reasonably available to the local agency for its consideration prior to the issuance of a final order regarding the imposition, enforcement, or collection of the administrative fines or penalties.
(c)For the purposes of this section, a local agencys file shall not include a document or record whose disclosure is exempted or prohibited pursuant to federal or state law, including, but not limited to, provisions of the Evidence Code relating to privilege. Before transmitting its file to the court pursuant to this section, the local agency shall redact the name and identifying information, including the telephone number, street address, and email address, of a person who lodged a complaint that resulted in an investigation or order pursuant to this section.
(d)If a notice of appeal of the local jurisdictions final administrative order or decision is not filed within the period described in this section, the order or decision shall be deemed confirmed.
(e)If the fine or penalty has not been deposited and the decision of the court is against the contestant, the local jurisdiction may proceed to collect the penalty pursuant to the procedures set forth in its ordinance.
(f)After the exhaustion of the administrative and appeal procedures provided in this section, the local jurisdiction may file a certified copy of a final decision of the local jurisdiction that directs the payment of an administrative fine or penalty and, if applicable, a copy of an order of the superior court rendered on an appeal from the local jurisdictions decision with the clerk of the superior court of any county. Judgment shall be entered immediately by the clerk in conformity with the decision or order. A fee shall not be charged by the clerk of the superior court for the performance of an official service required in connection with the entry of judgment pursuant to this section.
(g)The local jurisdiction, by ordinance, may establish a procedure to collect administrative fines or penalties imposed pursuant to this section by a special lien upon the parcel of land on which the violation occurred. The ordinance shall require service or mailing of notice before the recordation of the special lien to the owner of record of the parcel of land on which the violation occurred, based on the last equalized assessment roll or the supplemental roll, whichever is more current, and to the owner of an encumbrance of record on the property. Once a copy of the notice of special lien, as described in this subdivision, is recorded in the county recorders office, the lien is superior to all encumbrances, existing and future, except liens for taxes and assessments.
(h)The remedies or penalties provided by this section are cumulative to the remedies or penalties available under other law.
(i)Notwithstanding Section 26001, for purposes of this section, local jurisdiction means a city, county, city and county, or charter city.
SEC. 2.The Legislature finds and declares that Section 1 of this act adding Section 26038.1 to the Business and Professions Code addresses a matter of statewide concern rather than a municipal affair as that term is used in Section 5 of Article XI of the California Constitution. Therefore, Section 1 of this act applies to all cities, including charter cities.
|
Date
|
Status
|
|---|---|
| Oct 13, 2023 | Chaptered by Secretary of State - Chapter 843, Statutes of 2023. |
| Oct 13, 2023 | Approved by the Governor. |
| Sep 21, 2023 | Enrolled and presented to the Governor at 3:30 p.m. |
| Sep 13, 2023 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 80. Noes 0. Page 3448.). |
| Sep 12, 2023 | In Assembly. Concurrence in Senate amendments pending. |
| Sep 12, 2023 | Read third time. Passed. Ordered to the Assembly. (Ayes 39. Noes 0. Page 2689.). |
| Sep 8, 2023 | Ordered to special consent calendar. |
| Sep 5, 2023 | Read second time. Ordered to third reading. |
| Sep 1, 2023 | From committee: Do pass. (Ayes 7. Noes 0.) (September 1). |
| Aug 21, 2023 | In committee: Referred to APPR suspense file. |
| Aug 14, 2023 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on APPR. |
| Jul 12, 2023 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 11. Noes 0.) (July 11). Re-referred to Com. on APPR. |
| Jul 10, 2023 | From committee: Do pass and re-refer to Com. on JUD. (Ayes 13. Noes 0.) (July 10). Re-referred to Com. on JUD. |
| Jun 21, 2023 | In committee: Set, first hearing. Hearing canceled at the request of author. |
| Jun 14, 2023 | Referred to Coms. on B., P. & E. D. and JUD. |
| Jun 1, 2023 | In Senate. Read first time. To Com. on RLS. for assignment. |
| Jun 1, 2023 | Read third time. Passed. Ordered to the Senate. (Ayes 78. Noes 0. Page 2119.) |
| May 18, 2023 | Read second time. Ordered to third reading. |
| May 18, 2023 | Joint Rule 62(a), file notice suspended. (Page 1580.) |
| May 18, 2023 | From committee: Do pass. (Ayes 15. Noes 0.) (May 18). |
| May 17, 2023 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| May 10, 2023 | In committee: Hearing postponed by committee. |
| May 4, 2023 | Re-referred to Com. on APPR. pursuant to Joint Rule 10.5. |
| May 4, 2023 | Read second time. Ordered to third reading. |
| May 3, 2023 | Read second time and amended. Ordered returned to second reading. |
| May 2, 2023 | From committee: Amend, and do pass as amended. (Ayes 11. Noes 0.) (May 2). |
| Apr 17, 2023 | Re-referred to Com. on JUD. |
| Apr 12, 2023 | Read second time and amended. |
| Apr 11, 2023 | From committee: Amend, and do pass as amended and re-refer to Com. on JUD. (Ayes 18. Noes 0.) (April 11). |
| Mar 22, 2023 | Re-referred to Com. on B. & P. |
| Mar 21, 2023 | From committee chair, with author's amendments: Amend, and re-refer to Com. on B. & P. Read second time and amended. |
| Mar 9, 2023 | Referred to Coms. on B. & P. and JUD. |
| Feb 18, 2023 | From printer. May be heard in committee March 20. |
| Feb 17, 2023 | Read first time. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Sep 13, 2023 | AB 1448 Wallis Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Sep 12, 2023 | Special Consent AB1448 Wallis By Alvarado-Gil | Senate Floor |
Passed |
|
| Sep 1, 2023 | Do pass | Senate Standing Committee on Appropriations |
Passed |
|
| Aug 21, 2023 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Jul 11, 2023 | Do pass, but first be re-referred to the Committee on [Appropriations] | Senate Standing Committee on Judiciary |
Passed |
|
| Jul 10, 2023 | Do pass, but first be re-referred to the Committee on [Judiciary] | Senate Standing Committee on Business, Professions and Economic Development |
Passed |
|
| Jun 1, 2023 | AB 1448 Wallis Assembly Third Reading | Assembly Floor |
Passed |
|
| May 18, 2023 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| May 2, 2023 | Do pass as amended. | Assembly Standing Committee on Judiciary |
Passed |
|
| Apr 11, 2023 | Do pass as amended and be re-referred to the Committee on [Judiciary] | Assembly Standing Committee on Business and Professions |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| California Association Of Realtors | ** Against | |
| California Bankers Association | ** Against | |
| California Credit Union League | * Neutral | May 2, 2023 |
| California Escrow Association | ** Against | |
| California Land Title Association | * Neutral | May 2, 2023 |
| California Mortgage Association | ** Against | |
| California Mortgage Bankers Association | ** Against | |
| California State Association Of Counties | ** Support | |
| CannaCraft | * Support | Apr 11, 2023 |
| County of Monterey | ** Support | |
| County of Nevada | ** Support | |
| County of Riverside | ** Support | |
| County of San Bernardino | ** Support | |
| County of Siskiyou | ** Support | |
| Escrow Institute Of California | ** Against | |
| League Of California Cities | ** Support | |
| March and Ash | * Support | Apr 11, 2023 |
| RCRC | * Support | Jul 11, 2023 |
| Rural County Represenatatives of California | * Support | Jul 10, 2023 |
| Rural County Representatives of California | ** Support | |
| Rural County Representatives of California California Cannabis Industry Association | ** Support | |
| San Bernadino County | * Support | Jul 10, 2023 |
| Shaw Yoder Antwih Schmelzer Lange Inc | * Support | Jul 10, 2023 |
| United Trustees Association | ** Against |
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 1448
Author:(Wallis)
As Amended Ver:August 14, 2023
Majority vote
SUMMARY
Redirects specified portions of civil penalties collected for unlicensed commercial cannabis activity from the General Fund to the treasurers of localities that brought the action for the penalties.
Senate Amendments
Delete legislative intent language.
COMMENTS
Background. The Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA), which incorporates prior cannabis laws and authorizes a person who obtains a state license under MAUCRSA to engage in commercial adult-use cannabis activity under that license and applicable local ordinances. It is unlawful to operate a cannabis business without a license.
The Department of Cannabis Control (DCC) is the California state agency that licenses and regulates cannabis businesses. DCC regulates the:
- Growing of cannabis plants.
- Manufacture of cannabis products.
- Transportation and tracking of cannabis goods throughout the state.
- Sale of cannabis goods.
- Events where cannabis is sold or used.
- Labeling of goods sold at retail.
Unlicensed Market. As noted during the February 25, 2020, joint informational hearing between this Committee and the Assembly Budget Subcommittee No. 4 on State Administration, there have been significant concerns over cannabis operations that continue to do business outside of the regulatory scheme. They can avoid taxes and compete with lawful businesses. They also create the potential for consumer and environmental harm, avoiding testing and agricultural requirements.
Normally, licensing agencies regulate problematic licensed and unlicensed activity by imposing administrative penalties against an existing license (the strongest of which is revocation of the license), or by withholding the issuance of a license until any problems or deficiencies are addressed. The difficulty in regulating unlicensed businesses that do not plan to obtain a license, including unlicensed cannabis businesses, is that there is no incentive to comply with the administrative penalties because the license is irrelevant to them.
As a result, MAUCRSA includes various civil penalties which are sought in court and are not tied to the licensing process, which can be brought by the DCC, the Attorney General, or local public attorneys. There are individual penalties of up to three times the amount of the required license fee (which vary based on gross annual revenue, up to $300,000 for a microbusiness with gross annual revenue of $80,000,000). There are also civil penalties of up to $30,000 per day of operation for aiding and abetting unlicensed cannabis activity, which means a person encouraged, aided, or facilitated, the activity (not just mere knowledge of the activity).
However, according to the sponsors, much of the enforcement of state violations is left to local jurisdictions. And while the law requires the civil penalties collected to first reimburse the local agency that prosecuted the case, the sponsors note that there is no other incentive for locals to enforce state laws because the remainder of the collected penalties goes to the state general fund. This bill seeks to provide additional incentives by allowing local jurisdictions to collect half of the remaining penalties that would normally go to the general fund and collect unlicensed civil penalties as administrative penalties. According to the sponsors, this would allow local jurisdictions to reinvest the penalties into unlicensed cannabis activity enforcement.
According to the Author
"The promise of Proposition 64 was, make marijuana legal and we would have a safer product, we would have a billion dollars annually in tax revenue, and we would protect kids by eliminating the illegal market. Because of illegal cannabis activities, only a portion of these promises have been achieved. Illicit cannabis operators frequently engage in human trafficking, unlawful labor practices, water theft, illegal pesticide use, and environmental degradation as part of their operations. Local law enforcement agencies and code enforcement departments are on the front lines struggling to deal with the growth of illicit cannabis activities. [This bill] will give local jurisdictions enhanced tools in their effort to info to end unlicensed cannabis activities. We can only achieve the promise of Prop 64 if we stop illegal cannabis."
Arguments in Support
The Rural County Representatives of California (RCRC) (sponsor), the California State Association of Counties (CSAC), and the League of California Cities (Cal Cities) write in support:
[This bill] incentivizes local jurisdictions to use the statutory penalties for unlicensed cannabis activities by revising Business and Professions Code 26038 to authorize the recovery of penalties through local administrative processes. In addition, [this bill] allows a 50/50 state-local split of the statutory penalties recovered in actions brought by local jurisdictions, as originally enacted by the Legislature in the Medical Cannabis Regulation and Safety Act (MCRSA). Revenues from these actions will provide a much-needed source of funds to reinvest in illicit cannabis enforcement.
We are unaware of any county or city utilizing statutory penalties for unlicensed cannabis activities because all the funds go directly to the state rather than portions staying with the local government to cover the comprehensive enforcement costs to shut down the illegal activity. The proposed change would provide a greater tool for locals that covers more than attorney costs for enforcement efforts. This measure would potentially be a revenue generator, as the State does not receive Business & Professions 26038 revenues from local jurisdictions.
Arguments in Opposition
None on file
FISCAL COMMENTS
According to the Senate Appropriations Committee:
- Unknown court workload cost pressures to the extent this bill results in increased litigation as a result of local jurisdictions pursuing civil actions against persons conducting unlicensed cannabis activity that they may not have otherwise pursued (Trial Court Trust Fund, General Fund). See Staff Comments for additional details.
- Unknown General Fund impacts, commensurate with reduced revenue through the redirection of civil penalties recovered against persons who engage in unlicensed cannabis activity as prescribed by this bill.
VOTES:
ASM BUSINESS AND PROFESSIONS: 18-0-0
YES: Berman, Flora, Alanis, Alvarez, Bonta, Chen, Dixon, Gipson, Grayson, Irwin, Jackson, Lee, Lowenthal, McCarty, McKinnor, Stephanie Nguyen, Joe Patterson, Ting
ASM JUDICIARY: 11-0-0
YES: Maienschein, Essayli, Connolly, Dixon, Haney, Kalra, Pacheco, Papan, Reyes, Robert Rivas, Sanchez
ASM APPROPRIATIONS: 15-0-1
YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Pellerin, Sanchez, Weber, Ortega
ABS, ABST OR NV: Robert Rivas
ASSEMBLY FLOOR: 78-0-2
YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk‑Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon
ABS, ABST OR NV: Bennett, Gabriel
UPDATED
VERSION: August 14, 2023
CONSULTANT: Vincent Chee / B. & P. / (916) 319-3301 FN: 0002243
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB 1448 |
THIRD READING
Bill No: AB 1448
Author: Wallis (R)
Amended: 8/14/23 in Senate
Vote: 21
SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 13-0, 7/10/23
AYES: Roth, Nguyen, Alvarado-Gil, Archuleta, Ashby, Becker, Dodd, Eggman, Glazer, Niello, Smallwood-Cuevas, Wahab, Wilk
SENATE JUDICIARY COMMITTEE: 11-0, 7/11/23
AYES: Umberg, Wilk, Allen, Ashby, Caballero, Durazo, Laird, Min, Niello, Stern, Wiener
SENATE APPROPRIATIONS COMMITTEE: 7-0, 9/1/23
AYES: Portantino, Jones, Ashby, Bradford, Seyarto, Wahab, Wiener
ASSEMBLY FLOOR: 78-0, 6/1/23 - See last page for vote
SUBJECT: Cannabis: enforcement by local jurisdictions
SOURCE: Rural County Representatives of California
DIGEST:
This bill redirects specified portions of civil penalties collected for unlicensed commercial cannabis activity from the General Fund to the treasurers of local cities or counties that brought the action for the penalties, as specified.
ANALYSIS:
Existing law:
- Establishes the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of both medicinal cannabis and adult-use cannabis. (Business and Professions Code (BPC) § 26000)
- Establishes the Department of Cannabis Control (DCC) to administer and regulate provisions of MAUCRSA. (BPC § 26010)
- Prohibits a person from engaging in commercial cannabis activity without a state license issued by the DCC, as specified. (BPC § 26037.5)
- Subjects a person engaging in commercial cannabis activity without a required license to civil penalties of up to three times the amount of the license fee for each violation, and each day constitutes a new violation. (BPC § 26038(a)(1))
- Subjects a person who has management or control of a commercial property, or a commercial building, room, space, or enclosure either as an owner, lessee, agent, employee or mortgagee who knowingly rents, leases, or makes available for use, with or without compensation, the commercial property, commercial building, room, space, or enclosure for the purpose of the unlicensed commercial cannabis cultivation, manufacture, storage, sale or distribution of cannabis to a civil penalty of up to $10,000 for each violation, and each day constitutes a new violation. (BPC § 26038(a)(3))
- Specifies who is to be reimbursed when collecting civil penalties associated with the investigation and to which fund the monies are to be deposited based on who brought forth the action, as specified. (BPC § 26038(c)(e))
- Authorizes the superior court for the county in which any person has engaged or is about to engage in any act which constitutes a violation of MAUCRSA to, upon a petition filed by the DCC, issue an injunction or other appropriate order restraining the conduct. (BPC § 26031.2(a))
This bill:
- Revises and recasts various code sections related to the penalties for violations of unlicensed commercial cannabis activity.
- Redirects one-half of the remaining civil penalties collected for unlicensed cannabis activity after reimbursing a county counsel, city attorney, or city prosecutor from the General Fund to the treasurer of the county in which the judgment was entered or the city in which the complaining attorney has jurisdiction.
- Makes conforming changes.
Background
In 2021, DCC was established with both licensing, regulatory and enforcement authority. DCC was designed to centralize and align critical licensing, compliance and enforcement responsibilities to help build a sustainable and successful legal cannabis market by creating a single point of contact for cannabis applicant, licensees and local governments. The goal was to ultimately simplify and centralize state regulatory efforts; improve coordination, including enforcement; reduce barriers to participation in the legal market; and incentivize greater local participation.
Under current law, a separate license is required for every corner of the cannabis market, including growing cannabis, transporting cannabis, making cannabis products, testing cannabis products, selling cannabis, and holding an event where cannabis is sold. Each license type is distinct and must be approved before operating. Products sold, cultivated, transported, manufactured, tested and developed by licensed cannabis persons comply with strict requirements for the lifecycle of the products. This bill adjusts the distributions from collections of civil penalties to provide greater reimbursements to local jurisdictions.
The illicit cannabis market and those operating without local or state oversight do not abide by any of California’s current state licensing requirements and do not remit the proper payments into the Cannabis Tax Fund, which is designated for the collection of state cannabis excise tax. Monies from the fund are dedicated to regulatory and administrative costs, reimbursing certain state agencies for reasonable costs associate with implementing, administering, and enforcing MAUCRSA. Monies additionally support academic research grants, including researching the efficacy of medicinal cannabis and the impacts of legalization. Monies are set aside for youth education, prevention, early intervention, and treatment; environmental protection; and public safety-related activities.
BPC § 26038 details the specific penalties for unlicensed commercial cannabis activity. A person engaging in commercial cannabis without a license is subject to civil penalties. Further, the DCC is authorized to destroy cannabis seized as part of a violation of operating without a license and may seek reimbursement for the cost of the enforcement process. It is currently illegal to grow, distribute, sell, deliver, transport, and make cannabis products etc., without obtaining the appropriate state or local license and authorization.
Current law specifies the current structure for assessing civil penalties. An action for civil penalties can be brought by the DCC, the Attorney General, or local public attorneys. There are individual penalties of up to three times the amount of the required license fee for each violation, and each day constitutes a separate violation. There are also civil penalties of up to $30,000 per day of operation for aiding and abetting unlicensed cannabis activity, which means a person encouraged, aided, or facilitated the activity. There are also civil penalties of up to $10,000 per day for a person who provides property, including providing the space, enclosures, rents, etc. for the purpose of unlicensed commercial activity.
Under current law, the civil penalties assed are collected by either the DCC, the AG or a local city attorney or county counsel and divided amongst administrative costs to the prosecuting agency with the balance deposited into the General Fund. This bill would revise the penalty cost distribution to allocate one-half of the penalties collected be directed to a city attorney or county counsel. As noted by the author, local jurisdictions impose penalties for commercial cannabis violations through judicial process (BPC §26038), but any net recovery (after costs) is not shared with the enforcing jurisdiction making this mechanism unattractive for local governments.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee, this bill will result in unknown court workload cost pressures to the extent this bill results in increased litigation as a result of local jurisdictions pursuing civil actions against persons conducting unlicensed cannabis activity that they may not have otherwise pursued. It will also result in unknown General Fund impacts, commensurate with reduced revenue through the redirection of civil penalties recovered against persons who engage in unlicensed cannabis activity as prescribed by the bill.
SUPPORT: (Verified 9/1/23)
Rural County Representatives of California (source) California Cannabis Industry Association
California State Association of Counties
County of Monterey
County of Riverside
League of California Cities
OPPOSITION: (Verified 9/1/23)
None received
ARGUMENTS IN SUPPORT: Supporters note generally that this bill provides new incentives to address the illicit cannabis market and helps local governments by allowing them to collect a portion of penalties.
ASSEMBLY FLOOR: 78-0, 6/1/23
AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon
NO VOTE RECORDED: Bennett, Gabriel
Prepared by: Elissa Silva / B., P. & E.D. / 916-651-4104
9/2/23 9:52:02
**** END ****
SENATE COMMITTEE ON APPROPRIATIONS
Senator Anthony Portantino, Chair
2023 - 2024 Regular Session
AB 1448 (Wallis) - Cannabis: enforcement by local jurisdictions
Version: August 14, 2023 | Policy Vote: B., P. & E.D. 13 - 0, JUD. 11 - 0 |
Urgency: No | Mandate: No |
Hearing Date: August 21, 2023 | Consultant: Janelle Miyashiro |
Bill Summary:
AB 1448 redirects specified portions of civil penalties collected for unlicensed commercial cannabis activity from the General Fund to the treasurers of local cities or counties that brought the action for the penalties, as specified.
Fiscal Impact:
- Unknown court workload cost pressures to the extent this bill results in increased litigation as a result of local jurisdictions pursuing civil actions against persons conducting unlicensed cannabis activity that they may not have otherwise pursued (Trial Court Trust Fund, General Fund). See Staff Comments for additional details.
- Unknown General Fund impacts, commensurate with reduced revenue through the redirection of civil penalties recovered against persons who engage in unlicensed cannabis activity as prescribed by the bill.
Background:
The Medicinal and Adult-Use Cannabis Regulation and Safety Act authorizes civil penalties to be recovered in a civil action by the Attorney General, and in certain circumstances, a county or city counsel or a public prosecutor for:
- Engaging in unlicensed commercial cannabis activity.
- Aiding and abetting unlicensed commercial cannabis activity, provided that the person was a high-level operator or participant in the business.
- Knowingly renting or making property available for the purpose of unlicensed commercial cannabis activity.
Under current law, amounts recovered first go to reimburse the public prosecutor for the costs of bringing the action, and the remainder is deposited in the General Fund. There are individual penalties of up to three times the amount of the required license fee for each violation, and each day constitutes a separate violation. There are also civil penalties of up to $30,000 per day of operation for aiding and abetting unlicensed cannabis activity, meaning a person encouraged, aided, or facilitated the activity. There are also civil penalties of up to $10,000 per day for a person who provides property, including providing the space, enclosures, rents, etc. for the purpose of unlicensed commercial activity.
This bill redirects the proceeds of civil penalties recovered against persons who engage in, aid and abet, or knowingly provide property for unlicensed cannabis activity in suits brought by county or city counsel or a public prosecutor. Specifically, the bill provides that, after the public prosecutor is reimbursed for their costs of bringing the suit, half of the remaining penalty is deposited in the General Fund. The other half, if the prosecuting attorney was a county counsel, goes to the treasurer of the county in which the judgment was entered; if the prosecuting attorney was a city counsel or city prosecutor, it goes to the city treasurer for the city in which the attorney that brought the action has jurisdiction.
Proposed Law:
- Revises and recasts various code sections related to penalties for violations of unlicensed commercial cannabis activity.
- Redirects one-half of the remaining civil penalties imposed for unlicensed commercial cannabis activity in cases where the action was brought by a county counsel, city attorney, or city prosecutor to the treasurer of the county or city in which the judgement was entered or the complaining attorney has jurisdiction in.
- Makes conforming changes.
Staff Comments:
It is unknown how many additional actions would be brought as a result of the implementation of this bill. The sponsors state that one goal of the bill is to increase incentives to pursue enforcement against unlicensed cannabis activity. It generally costs about $8,000 to operate a courtroom for one eight-hour day. Although courts are not funded on the basis of workload, increased pressure on the trial courts and staff may create a need for increased funding for courts from the General Fund to perform existing duties. Numerous trial court operations are funded through the imposition and collection of criminal fines and fees. However, the Legislature has reduced and eliminated criminal fines and fees over the past decade. As a result, the 2023-24 budget includes an ongoing annual allocation of $105.1 million backfill from the General Fund in order to address declining revenue to the Trial Court Trust Fund.
-- END --
Senator Thomas Umberg, Chair
2023-2024 Regular Session
Bill No: AB 1448 (Author:Wallis)
Version: May 3, 2023
Hearing Date: July 11, 2023
Fiscal: Yes
Urgency: No
Consultant: AWM
SUBJECT
Cannabis: enforcement by local jurisdictions
DIGEST
This bill redirects the proceeds of civil penalties recovered against persons who engage in, aid and abet, or knowingly provide property for unlicensed cannabis activity in suits brought by county or city counsel or a city prosecutor, to provide that the county or city obtains half of the penalties recovered, after the prosecuting entity is reimbursed for the costs of bringing the lawsuit.
EXECUTIVE SUMMARY
Although cannabis has been legal in California for medical use since the mid-1990s and for adult recreational use since 2016, an illicit market for cannabis products continues to flourish in the state. Operators engaging in unlicensed cannabis activity have significant economic advantages over their licensed counterparts, as unlicensed operators can avoid the costs of complying with state regulations, paying taxes, and properly testing products. In recent years, the Legislature has approved several measures aimed at strengthening civil enforcement of cannabis laws to prevent the illicit market from overtaking licensed cannabis businesses. Under current law, civil penalties recovered go first to reimburse the prosecuting entity (the Attorney General, city or county counsel, or city prosecutor) for the costs of bringing the suit, and any remaining penalties are deposited in the General Fund.
This bill modifies the allocation of the civil penalties recovered by a city or county counsel or a city prosecutor. Specifically, the bill provides that, after the public prosecutor is reimbursed for their costs of bringing the suit, half of the remaining penalty is deposited in the General Fund; the other half goes to either the treasurer for the county in which the judgment was entered in the action, if the action was brought by a county counsel, or to the treasurer of the city in which the complaining attorney has jurisdiction, if the action was brought by a city counsel or city prosecutor. The author agreed in the Senate Business, Professions, and Economic Development Committee to amend the bill to remove the intent language in Section 2 of the bill.
This bill is sponsored by Rural County Representatives of California and is supported by the California Cannabis Industry Association, the California State Association of Counties, the County of Monterey, the County of Nevada, the County of Riverside, the County of San Bernardino, the County of Siskiyou, and the League of California Cities. There is no known opposition. The Senate Business, Professions and Economic Development Committee passed this bill with a vote of 13-0.
PROPOSED CHANGES TO THE LAW
Existing law:
- Establishes the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), which establishes a comprehensive system to control and regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of medical cannabis and recreational cannabis for adults aged 21 years and older. (Bus. & Prof. Code, div. 10, §§ 26000 et seq.)
- Establishes the Department of Cannabis Control (DCC), which has licensing and regulation authority under MAUCRSA, except where the authority is expressly delegated to another agency or department. (Bus. & Prof. Code, §§ 26010, 26012.)
- Establishes procedures for the enforcement of MAUCRSA, including administrative action by the DCC and civil action for civil penalty that may be sought by, among others, the Attorney General on behalf of the people. (Bus. & Prof. Code, §§ 26030-26039.6.)
- Provides civil penalties for persons engaging in unlicensed commercial cannabis activity, for persons aiding and abetting unlicensed commercial cannabis activity, and persons who knowingly rent or make available property for unlicensed commercial activity, as follows:
- For unlicensed commercial cannabis activity, the penalty is up to three times the license fee for each day of the violation; for aiding and abetting, the penalty is up to $30,000 for each violation, per day of the violation; for knowingly renting or making property available, the penalty is up to $10,000 per day of the violation.
- The statute of limitations is three years.
- Actions for aiding and abetting may be brought only by the Attorney General on behalf of the DCC, or by a city or county counsel or city prosecutor in a city or county having a population in excess of 750,000; actions for renting or making available property may be brought only by the Attorney General on behalf of the DCC or by a city or county counsel or city prosecutor.
- For aiding and abetting and renting/making available property, the prosecuting entity must establish additional factors regarding the defendant’s knowledge and significant role in the unlicensed cannabis operation. (Bus. & Prof. Code, § 26038.)
- Provides that civil penalties imposed and collected under 4) shall first be used to reimburse the Attorney General, county counsel, or city attorney or prosecutor who brought the action for the cost of bringing the action, and the remainder of the penalties shall be deposited in the General Fund. (Bus. & Prof. Code, § 26038(c), (e).)
This bill:
- Redirects the civil penalties imposed for engaging in, or aiding and abetting in, or knowingly leasing property or making property available for, unlicensed commercial cannabis activity in cases where the case was brought by a county counsel, city attorney, or city prosecutor; after reimbursement for the cost of bringing the action, one-half of the remaining civil penalties collected will be paid to the treasurer of the city or county in which the complaining has jurisdiction, and one-half of the remaining penalties will be deposited in the General Fund.
- Rearranges various provisions for clarity and makes nonsubstantive technical and conforming changes.[1]
COMMENTS
- Author’s comment
According to the author:
The promise of Proposition 64 was, make marijuana legal and we would have a safer product, we would have a billion dollars annually in tax revenue, and we would protect kids by eliminating the illegal market. Because of illegal cannabis activities, only a portion of these promises have been achieved. Illicit cannabis operators frequently engage in human trafficking, unlawful labor practices, water theft, illegal pesticide use, and environmental degradation as part of their operations. Local law enforcement agencies and code enforcement departments are on the front lines struggling to deal with the growth of illicit cannabis activities. AB 1448 will give local jurisdictions enhanced tools in their effort to info to end unlicensed cannabis activities.
AB 1448 authorizes local jurisdictions through county counsel or city prosecutor to bring forward statutory penalties (BPC § 26038) through the courts or a local administrative process. The statutory penalties consequences are a local tool to deter illegal operators. In addition, the proposed 50/50 state local split, modeled after Medical Cannabis Regulation and Safety Act (MCRSA), would create an incentive for jurisdictions to pursue more of these violations resulting in increased funds to the General Fund and creating addition funds at the local level to reinvest into unlicensed cannabis activity enforcement.
2. Despite legalization, unlicensed cannabis activity in California remains prevalent
While cannabis remains a Schedule I narcotic under federal law,[2] California has permitted medical cannabis use since 1996.[3] Adult recreational cannabis use was approved by the voters in 2016,[4] and the Legislature subsequently enacted MAUCRSA to streamline and synthesize the licensing and regulatory regimes for medical and recreational cannabis.[5]
Although many cannabis operators opted to embrace the newly state-legal framework and obtain licenses, the illicit market for unlicensed products continues to flourish.[6] The persistence of unlicensed cannabis operations harms licensed operators—unlicensed operators are able to offer lower prices than licensed operators because they do not have to pay licensing fees[7]—and can also harm the customers, given that unlicensed products do not go through quality testing and can be tainted.[8]
State and local enforcement agencies have taken steps to crack down on unlicensed cannabis, including through the creation of a Unified Cannabis Enforcement Taskforce.[9] Stakeholders report, however, that these efforts are still insufficient to stem the tide of unlicensed cannabis, and that the prevalence of unlicensed businesses may cause licensed businesses to fail in large numbers.
3. This bill allows county and city attorneys who bring lawsuits for civil penalties for engaging in unlicensed commercial business activity to retain a portion of the penalties recovered
MAUCRSA authorizes civil penalties to be recovered in a civil action by the Attorney General, and in certain circumstances, a county or city counsel or a public prosecutor for: (1) engaging in unlicensed commercial cannabis activity; (2) aiding and abetting unlicensed commercial cannabis activity, provided that the person was a high-level operator or participant in the business; and (3) knowingly renting or making property available for the purpose of unlicensed commercial cannabis activity.[10] Under current law, amounts recovered first go to reimburse the public prosecutor for the costs of bringing the action, and the remainder is deposited in the General Fund.[11]
This bill redirects the proceeds of civil penalties recovered against persons who engage in, aid and abet, or knowingly provide property for unlicensed cannabis activity in suits brought by county or city counsel or a public prosecutor. Specifically, the bill provides that, after the public prosecutor is reimbursed for their costs of bringing the suit, half of the remaining penalty is deposited in the General Fund. The other half, if the prosecuting attorney was a county counsel, goes to the treasurer of the county in which the judgment was entered; if the prosecuting attorney was a city counsel or city prosecutor, it goes to the city treasurer for the city in which the attorney that brought the action has jurisdiction.
Although not reflected in the bill in print, the author agreed in the Senate Business, Professions and Economic Development Committee to remove Section 2 of the bill. If this Committee passes this bill, those amendments will be taken in the Senate Appropriations Committee.
SUPPORT
Rural County Representatives of California (sponsor)
California Cannabis Industry Association
California State Association of Counties
County of Monterey
County of Nevada
County of Riverside
County of San Bernardino
County of Siskiyou
League of California Cities
OPPOSITION
None received
RELATED LEGISLATION
Pending Legislation:
SB 820 (Alvarado-Gil, 2023) allows the DCC or a local jurisdiction to seize specified property where unlicensed commercial cannabis activity is being conducted and vehicles used to conduct unlicensed cannabis activity, as specified. SB 820 is pending before the Senate Appropriations Committee.
AB 1684 (Maienschein, 2023) expand the authorization for an ordinance providing for the immediate imposition of administrative fines or penalties to include all unlicensed commercial cannabis activity, including cultivation, manufacturing, processing, distribution, or retail sale and would authorize the ordinance to declare unlicensed commercial cannabis activity a public nuisance. AB 1684 is pending before this Committee and is set to be heard on the same date as this bill.
AB 1601 (Alvarez, 2023) authorizes a local jurisdiction to take disciplinary action against a cannabis licensee for illegal business activities by the licensee, or for concealment of illegal business activities, by a licensee, or by an officer, director, owner, or authorized agent acting on behalf of the licensee. AB 1601 is pending before the Assembly Business & Professions Committee.
AB 1117 (Blanca Rubio, 2023) creates a private right of action allowing a licensed commercial cannabis operator who has been harmed by an unlicensed cannabis operator to seek actual damages, statutory damages, and an injunction against the unlicensed cannabis operator. AB 1171 is pending before this Committee and is set to be heard on the same date as this bill.
Prior Legislation:
AB 1530 (Cooley, 2019) would have authorized a local jurisdiction to adopt an ordinance or resolution that permits, restricts, limits, or bans the delivery of cannabis or cannabis products to a location within its jurisdictional boundaries. AB 1530 failed passage in the Assembly Business and Professions Committee.
SB 2164 (Cooley, Ch. 316, Stats. 2018) added the provisions authorizing a local agency to adopt an ordinance to provide for the immediate imposition of administrative fines or penalties for the violation of building, plumbing, electrical, or other similar structural, health and safety, or zoning requirements if the violation exists as a result of, or to facilitate, the illegal cultivation of cannabis, except as specified.
SB 1302 (Lara, 2018) would have prohibited a local government from adopting or enforcing any ordinance that would prohibit a licensee from delivering cannabis within or outside of the jurisdictional boundaries of the local jurisdiction. SB 1203 died on the Senate Floor.
PRIOR VOTES:
Senate Business, Professions and Economic Development Committee (Ayes 13, Noes 0)
Assembly Floor (Ayes 78, Noes 0)
Assembly Appropriations Committee (Ayes 15, Noes 0)
Assembly Judiciary Committee (Ayes 11, Noes 0)
Assembly Business and Professions Committee (Ayes 18, Noes 0)
**************
The author agreed in the Senate Business, Professions and Economic Development Committee to remove Section 2 of the bill; those amendments will be taken in the Senate Appropriations Committee. ↑
21 U.S.C. § 812. Drugs designated as Schedule I ostensibly have a high potential for abuse, no currently accepted medical use in treatment in the United States, and a lack of accepted safety for use of the drug or other substance under medical supervision. (Id., § 812(b)(1).) Fentanyl and other opioids, by contrast, are designated as Schedule II. (Id., § 812, Schedule II.) ↑
Compassionate Use Act (Prop. 215), as approved by voters, Gen. Elec. (Nov. 5, 1996). ↑
The Control, Regulate, and Tax Adult Use of Marijuana Act (Prop. 64), as approved by voters, Gen. Elec. (Nov. 8, 2016). ↑
SB 94 (Committee on Budget and Fiscal Review, Ch. 27, Stats. 2017). ↑
See, e.g., Orsmeth, Killings, robberies, extortion. California can’t stop its booming illegal cannabis stores, L.A. Times (Sept. 13, 2022), available at https://www.latimes.com/california/story/2022-09-13/illegal-weed-dispensaries-police-raids-crime. All links in this analysis are current as of July 10, 2023 ↑
Ibid. ↑
E.g., Kenny, Monterey County reveals contamination in illicit marijuana samples, The Mercury News (Dec. 15, 2021). ↑
E.g., DCC, Press Release, California’s statewide cannabis enforcement taskforce continues to aggressively combat illegal marijuana by seizing over $52 million worth of unlicensed cannabis products (May 22, 2023), https://cannabis.ca.gov/2023/05/californias-statewide-cannabis-enforcement-taskforce-continues-to-aggressively-combat-illegal-market-by-seizing-over-52m-worth-of-unlicensed-cannabis-products-in-q1-2023/. ↑
Bus. & Prof. Code, § 26038. ↑
Id., § 26039(c), (e). ↑
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Richard Roth, Chair
2023 - 2024 Regular
Bill No: AB 1448 Hearing Date: July 10, 2023
Author: | Wallis | ||
Version: |
| ||
Urgency: | Fiscal: | ||
Consultant: | |||
Subject: Cannabis: enforcement by local jurisdictions
SUMMARY:
Redirects specified portions of civil penalties collected for unlicensed commercial cannabis activity from the General Fund to the treasurers of local cities or counties that brought the action for the penalties, as specified.
NOTE:
Double-referral to the Senate Committee on Judiciary, second.
Existing law:
- Establishes the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of both medicinal cannabis and adult-use cannabis. (Business and Professions Code (BPC) § 26000)
- Establishes the Department of Cannabis Control (DCC) to administer and regulate provisions of MAUCRSA. (BPC § 26010)
- Prohibits a person from engaging in commercial cannabis activity without a state license issued by the DCC, as specified. (BPC § 26037.5)
- Requires the DCC to make and prescribe reasonable rules and regulations as may be necessary to implement, administer, and enforce its duties, which must be consistent with the purpose and intent of the Control, Regulate and Tax Adult Use of Marijuana Act. (BPC § 26013)
- States that nothing under the DCC’s enforcement authority is to be interpreted to supersede or limit state agencies from exercising their existing enforcement authority, including but not limited to, under the Fish and Game Code, the Food and Agriculture Code, the Health and Safety Code, the Public Resources Code, the Water Code, or the application of those laws. (BPC § 26036)
- Subjects a person engaging in commercial cannabis activity without a required licensed under MAUCRSA to civil penalties of up to three times the amount of the license fee for each violation, and each day constitutes a new violation. (BPC § 26038(a)(1))
- Subjects a person who has management or control of a commercial property, or a commercial building, room, space, or enclosure either as an owner, lessee, agent, employee or mortgagee who knowingly rents, leases, or makes available for use, with or without compensation, the commercial property, commercial building, room, space, or enclosure for the purpose of the unlicensed commercial cannabis cultivation, manufacture, storage, sale or distribution of cannabis to a civil penalty of up to $10,000 for each violation, and each day constitutes a new violation. (BPC § 26038(a)(3))
- Specifies who is to be reimbursed when collecting civil penalties associated with the investigation and to which fund the monies are to be deposited based on who brought forth the action, as specified. (BPC § 26038(c)(e))
- Authorizes a peace officer, including a peace officer with the DCC, to seize cannabis products in any of the following circumstances, The cannabis or cannabis product is subject to recall or embargo by the DCC, subject to destruction, or is seized related to an investigation or disciplinary action. (BPC § 26039.4)
- Authorizes the superior court for the county in which any person has engaged or is about to engage in any act which constitutes a violation of MAUCRSA to, upon a petition filed by the DCC, issue an injunction or other appropriate order restraining the conduct. (BPC § 26031.2(a))
This bill:
- Revises and recasts various code sections related to the penalties for violations of unlicensed commercial cannabis activity.
- Redirects one-half of the remaining civil penalties collected for unlicensed cannabis activity after reimbursing a county counsel, city attorney, or city prosecutor from the General Fund to the treasurer of the county in which the judgment was entered or the city in which the complaining attorney has jurisdiction.
- States that it is the intent of the Legislature to provide local governments with an administrative procedure to give them a mechanism to swiftly address illegal cannabis activity in their communities.
- Makes conforming changes.
FISCAL EFFECT:
This bill is keyed fiscal. According to the Assembly Committee on Appropriations analysis, this bill will result in the following: “Costs of an unknown amount to the General Fund due to a loss in funds from penalties. Instead of 100% of penalty funds that exceed the prosecuting agency’s costs of bringing the action, 50% of remaining penalty funds will be paid to the General Fund, but the amount of penalty funds paid is not known.”
COMMENTS:
- Purpose. The Rural County Representatives of California is the sponsor of this bill. According to the author, “Since California voters made recreational cannabis legal in 2016 with Proposition 64, the Legislature, as well as state and local jurisdictions, have struggled to drive unlawful operators out of the cannabis market. Rural communities have been inundated with unlicensed and unregulated cannabis activity that is undermining the health and safety of residents and our regulated cannabis businesses. Illicit cannabis operators frequently engage in human trafficking, unlawful labor practices, water theft, illegal pesticide use, and environmental degradation as part of their operations. Local law enforcement agencies and code enforcement departments are on the front lines struggling to deal with the growth of illicit cannabis activities.”
Additional tools are needed at the local level to support streamlined enforcement measures and enhanced penalty options to combat unlicensed cannabis activities. The traditional code enforcement administrative penalty process and the associated timelines deal with lower-level violations like junk in yards, buildings that aren’t up to code and civil citations. Unlicensed cannabis violations are unique because they are highly profitable to the violator and have a significant impact on the public’s health and safety. In addition, during a prolonged traditional code enforcement process, plants or product are moved to other locations to avoid penalties and removal of product.”
- Background.
Cannabis Regulatory Background. In 1996, California first legalized medicinal cannabis via Proposition 215, also known as the Compassionate Use Act. Proposition 215 protected qualified patients and primary caregivers from prosecution related to the possession and cultivation of cannabis for medicinal purposes. In 2003, the Legislature authorized the formation of medical marijuana cooperatives—nonprofit organizations that cultivate and distribute marijuana for medical uses to their members through dispensaries.
In 2015, Governor Brown signed three bills into law that created a comprehensive state licensing and regulatory framework governing the commercial cultivation, manufacture, retail sale, transport, distribution, delivery, and testing of medical cannabis in California. AB 243 (Wood, Chapter 688, Statutes of 2015), AB 266 (Bonta, Chapter 689, Statutes of 2015), and SB 643 (McGuire, Chapter 719, Statutes of 2015) collectively established the Medical Marijuana Regulation and Safety Act (later renamed to the Medical Cannabis Regulation and Safety Act (MCRSA)), to be administered by a number of state agencies: a Bureau of Cannabis Control (BCC) within the Department of Consumer Affairs (DCA); the California Department of Public Health (CDPH); and the California Department of Food and Agriculture (CDFA).
Shortly following the passage of MCRSA, in November 2016, California voters passed Proposition 64, the “Control, Regulate and Tax Adult Use of Marijuana Act” (Prop 64), which decriminalized and legalized adult-use cannabis. Less than a year later in June 2017, the California State Legislature passed a budget trailer bill, SB 94 (Committee on Budget and Fiscal Review, Chapter 27, Statutes of 2017), that integrated MCRSA with Prop 64 to create the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), the current regulatory structure for both medicinal and adult-use cannabis.
Beginning in 2018, Prop 64 permitted adults 21 years of age or older to legally grow, possess, and use cannabis for nonmedical purposes, with certain restrictions. Additionally, in 2018, because of Prop 64 and as codified in MAUCRSA, the state implemented a cannabis cultivation and excise tax, which imposes a weight-based tax on production of cannabis and a 15% tax on those who purchase cannabis or cannabis products that are sold in the state.
In 2021, DCC was formally established with both licensing, regulatory and enforcement authority. DCC was designed to centralize and align critical licensing, compliance and enforcement responsibilities to help build a sustainable and successful legal cannabis market by creating a single point of contact for cannabis applicant, licensees and local governments. The goal was to ultimately simplify and centralize state regulatory efforts; improve coordination, including enforcement; reduce barriers to participation in the legal market; and incentivize greater local participation.
Licensure. The current licensing structure begins both at the local and state level, essentially creating a dual licensing process. Forty-four percent of cities and counties allow at least one type of cannabis business, but each locality has a different set of rules and processes that businesses must undergo in order to comply with regulatory requirements.
Under current law, a separate license is required for every corner of the cannabis market, including growing cannabis, transporting cannabis, making cannabis products, testing cannabis products, selling cannabis, and holding an event where cannabis is sold. Each license type is distinct and must be approved before operating. Products sold, cultivated, transported, manufactured, tested and developed by licensed cannabis persons comply with strict requirements for the lifecycle of the products. Cultivators meet certain pesticide requirements and environmental standards, retail products must abide by strict labeling standards, and retailers are limited in selling additional products on site including a strict prohibition on selling alcohol on the same premise as a retail site, there are restrictions on the location of sites, among numerous other requirements. This bill adjusts the distributions from collections of civil penalties to provide greater reimbursements to local jurisdictions.
The illicit cannabis market and those operating without local or state oversight do not abide by any of California’s current state licensing requirements and do not remit the proper payments into the Cannabis Tax Fund, which is designated for the collection of state cannabis excise tax. Monies from the fund are dedicated to regulatory and administrative costs, reimbursing certain state agencies for reasonable costs associate with implementing, administering, and enforcing MAUCRSA. Monies additionally support academic research grants, including researching the efficacy of medicinal cannabis and the impacts of legalization. Monies are set aside for youth education, prevention, early intervention, and treatment; environmental protection; and public safety-related activities.
BPC § 26038 details the specific penalties for unlicensed commercial cannabis activity. A person engaging in commercial cannabis without a license is subject to civil penalties. Further, the DCC is authorized to destroy cannabis seized as part of a violation of operating without a license and may seek reimbursement for the cost of the enforcement process. It is currently illegal to grow, distribute, sell, deliver, transport, and make cannabis products etc., without obtaining the appropriate state or local license and authorization.
Current law specifies the current structure for assessing civil penalties, which are sought in court. Under current law, an action for civil penalties can be brought by the DCC, the Attorney General, or local public attorneys. There are individual penalties of up to three times the amount of the required license fee for each violation, and each day constitutes a separate violation. There are also civil penalties of up to $30,000 per day of operation for aiding and abetting unlicensed cannabis activity, which means a person encouraged, aided, or facilitated the activity. There are also civil penalties of up to $10,000 per day for a person who provides property, including providing the space, enclosures, rents, etc. for the purpose of unlicensed commercial activity.
Under current law, the civil penalties assed are collected by either the DCC, the AG or a local city attorney or county counsel and divided amongst administrative costs to the prosecuting agency with the balance deposited into the General Fund. This bill would revise the penalty cost distribution to allocate one-half of the penalties collected be directed to a city attorney or county counsel. As noted by the author, local jurisdictions impose penalties for commercial cannabis violations through judicial process (BPC §26038), but any net recovery (after costs) is not shared with the enforcing jurisdiction making this mechanism unattractive for local governments.
- Related Legislation. AB 1171 (Blanca Rubio of 2023) Authorizes a licensee under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to bring a civil action in superior court against a person engaging in commercial cannabis activities without a license, as specified. (Status: This bill is pending in Senate Committee on Judiciary)
AB 1684 (Maienschein of 2023) would expand the authorization for an ordinance providing for the immediate imposition of administrative fines or penalties to include all unlicensed commercial cannabis activity, including cultivation, manufacturing, processing, distribution, or retail sale and would authorize the ordinance to declare unlicensed commercial cannabis activity a public nuisance. The bill would prohibit the ordinance from imposing an administrative fine or penalty exceeding $1,000 per violation or $10,000 per day. The bill would authorize the ordinance to impose the administrative fine or penalty on the property owner and each owner of the occupant business entity and to hold them jointly and severally liable. The bill would authorize a local agency that adopts an ordinance authorized by this provision to refer a case involving unlawful commercial cannabis activity to the Attorney General, as specified. (Status: This bill is pending in the Senate Committee on Judiciary)
AB 1616 (Lackey of 2023) authorizes the Board of State and Community Corrections (BSCC) to award grants to local governments that were previously ineligible and requires BSCC to prioritize local governments whose programs seek to combat the illicit cannabis market. (Status: This bill is pending in Senate Committee on Public Safety)
- Arguments in Support. Rural County Representatives of California California
State Association of Counties and the League of California Cities writes in support, “AB 1448 will bolster safe access to the cannabis market by targeting enforcement against unlawful operators that undermine the legal marketplace and undercut local economies.”
California Cannabis Industry Association writes in support, “AB 1448 seeks to address the ongoing challenges associated with illicit cannabis by providing additional incentives to enforce state law.”
Riverside County Board of Supervisors writes in support and notes, “Importantly, revenues from these actions would then be available as a much-needed resource to
reinvest in local enforcement efforts.”
The County of Monterey writes in support and notes, “B 1448 allows a 50/50 state-local split of the statutory penalties recovered in actions brought by local jurisdictions, as originally enacted by the Legislature in the Medical Cannabis Regulation and Safety Act (MCRSA). Revenues from these actions will provide a much needed source of funds to reinvest in illicit cannabis enforcement.”
SUPPORT AND OPPOSITION:
Support:
Rural County Representatives of California (sponsor)
California Cannabis Industry Association
California State Association of Counties
County of Monterey
County of Riverside
League of California Cities
Opposition:
None received
-- END --
ASSEMBLY THIRD READING
ATR Bill Id:AB 1448
Author:(Wallis)
As Amended Ver:May 3, 2023
Majority vote
SUMMARY
Redirects specified portions of civil penalties collected for unlicensed commercial cannabis activity from the General Fund to the treasurers of localities that brought the action for the penalties.
Major Provisions
- Redirects one-half of the remaining civil penalties collected after reimbursing a county counsel, city attorney, or city prosecutor from the General Fund to the treasurer of the county in which the judgment was entered or the city in which the complaining attorney has jurisdiction.
- Rearranges various sections related to the penalties for violations of unlicensed commercial cannabis activity.
- Declares that it is the intent of the Legislature to amend this act to provide local governments with an administrative procedure to give them a mechanism to swiftly address illegal cannabis activity in their communities.
COMMENTS
Background. The Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA), which incorporates prior cannabis laws and authorizes a person who obtains a state license under MAUCRSA to engage in commercial adult-use cannabis activity under that license and applicable local ordinances. It is unlawful to operate a cannabis business without a license.
The Department of Cannabis Control (DCC) is the California state agency that licenses and regulates cannabis businesses. DCC regulates the:
- Growing of cannabis plants.
- Manufacture of cannabis products.
- Transportation and tracking of cannabis goods throughout the state.
- Sale of cannabis goods.
- Events where cannabis is sold or used.
- Labeling of goods sold at retail.
Unlicensed Market. As noted during the February 25, 2020, joint informational hearing between this Committee and the Assembly Budget Subcommittee No. 4 on State Administration, there have been significant concerns over cannabis operations that continue to do business outside of the regulatory scheme. They can avoid taxes and compete with lawful businesses. They also create the potential for consumer and environmental harm, avoiding testing and agricultural requirements.
Normally, licensing agencies regulate problematic licensed and unlicensed activity by imposing administrative penalties against an existing license (the strongest of which is revocation of the license), or by withholding the issuance of a license until any problems or deficiencies are addressed. The difficulty in regulating unlicensed businesses that do not plan to obtain a license, including unlicensed cannabis businesses, is that there is no incentive to comply with the administrative penalties because the license is irrelevant to them.
As a result, MAUCRSA includes various civil penalties which are sought in court and are not tied to the licensing process, which can be brought by the DCC, the Attorney General, or local public attorneys. There are individual penalties of up to three times the amount of the required license fee (which vary based on gross annual revenue, up to $300,000 for a microbusiness with gross annual revenue of $80,000,000). There are also civil penalties of up to $30,000 per day of operation for aiding and abetting unlicensed cannabis activity, which means a person encouraged, aided, or facilitated, the activity (not just mere knowledge of the activity).
However, according to the sponsors, much of the enforcement of state violations is left to local jurisdictions. And while the law requires the civil penalties collected to first reimburse the local agency that prosecuted the case, the sponsors note that there is no other incentive for locals to enforce state laws because the remainder of the collected penalties goes to the state general fund. This bill seeks to provide additional incentives by allowing local jurisdictions to collect half of the remaining penalties that would normally go to the general fund and collect unlicensed civil penalties as administrative penalties. According to the sponsors, this would allow local jurisdictions to reinvest the penalties into unlicensed cannabis activity enforcement
Enforcement of Local Laws. Local jurisdictions also have the authority to adopt local ordinances related to unlicensed cannabis activity that is separate from MAUCRSA. However, according to the sponsors, there are three factors that limit the enforcement of the ordinances.
First, existing law limits the amount of any penalty a local jurisdiction can impose for typical unlicensed cannabis activity between $100 and $500 depending on the number of times an ordinance is violated. Any more than that would have to go through the criminal process rather than the administrative process. According to the sponsors, unlicensed cannabis operators are often able to react to enforcement quickly, and the administrative process is quicker. However, this amount is not enough to effectively deter unlicensed cannabis activity.
Second, existing law normally requires administrative decisions to be reviewed via the writ of mandate process. According to the sponsors, this process is too slow for unlicensed cannabis enforcement. While existing law creates a more expedient judicial review process for the appeal of a local jurisdiction's administrative decisions under an ordinance, the courts have found that both methods of appeal are still available to respondents.[1]
Third, the sponsors state that the mechanisms for the collection of penalties, as well as the available enforcement tools altogether, are insufficient to address unlicensed cannabis activity.
According to the Author
"The promise of Proposition 64 was, make marijuana legal and we would have a safer product, we would have a billion dollars annually in tax revenue, and we would protect kids by eliminating the illegal market. Because of illegal cannabis activities, only a portion of these promises have been achieved. Illicit cannabis operators frequently engage in human trafficking, unlawful labor practices, water theft, illegal pesticide use, and environmental degradation as part of their operations. Local law enforcement agencies and code enforcement departments are on the front lines struggling to deal with the growth of illicit cannabis activities. [This bill] will give local jurisdictions enhanced tools in their effort to info to end unlicensed cannabis activities. We can only achieve the promise of Prop 64 if we stop illegal cannabis."
Arguments in Support
The Rural County Representatives of California (RCRC) (sponsor), the California State Association of Counties (CSAC), and the League of California Cities (Cal Cities) write in support:
A commonality amongst local jurisdictions that have sanctioned commercial cannabis activities or restrict such operations is the overwhelming enforcement needs to combat unlicensed cannabis activities. Local law enforcement agencies and code enforcement struggle to effectively deter illicit cannabis operators who sidestep regulations and undermine the health and safety of residents and our regulated cannabis businesses. Enhanced tools at the local level are needed to combat this highly lucrative and harmful unlawful activity. [This bill] would provide effectual tools at the local level to act against persons that have aided and abetted unlicensed cannabis activity….
Local jurisdictions are a critical partner to successfully regulate the commercial cannabis marketplace. [This bill] will bolster safe access to the cannabis market by targeting enforcement against unlawful operators that undermine the legal marketplace and undercut local economies.
Arguments in Opposition
A coalition of real estate associations, the California Association of Realtors, the California Credit Union League, the California Escrow Association, the California Land Title Association, the California Mortgage Association, the California Mortgage Bankers Association, the Escrow Institute of California, and the United Trustees Association were opposed to the "superpriorty lien" provision of this bill, but that provision has since been amended out.
FISCAL COMMENTS
According to the Assembly Appropriations Committee, costs of an unknown amount to the General Fund due to a loss in funds from penalties. Instead of 100% of penalty funds that exceed the prosecuting agency's costs of bringing the action, 50% of remaining penalty funds will be paid to the General Fund, but the amount of penalty funds paid is not known.
VOTES
ASM BUSINESS AND PROFESSIONS: 18-0-0
YES: Berman, Flora, Alanis, Alvarez, Bonta, Chen, Dixon, Gipson, Grayson, Irwin, Jackson, Lee, Lowenthal, McCarty, McKinnor, Stephanie Nguyen, Joe Patterson, Ting
ASM JUDICIARY: 11-0-0
YES: Maienschein, Essayli, Connolly, Dixon, Haney, Kalra, Pacheco, Papan, Reyes, Robert Rivas, Sanchez
ASM APPROPRIATIONS: 15-0-1
YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Pellerin, Sanchez, Weber, Ortega
ABS, ABST OR NV: Robert Rivas
UPDATED
VERSION: May 3, 2023
CONSULTANT: Vincent Chee / B. & P. / (916) 319-3301 FN: 0000557
In Martin v. Riverside County Dept. of Code Enforcement (2008) 166 Cal.App.4th 1406, 1411-1412, the court held that "Government Code section 53069.4 provides for alternative procedures for challenging an administrative decision like a ruling on a code violation, either by a de novo appeal to the superior court to be heard by a judge or a subordinate judicial officer or by a petition for writ of mandate under Code of Civil Procedure sections 1094.5 and 1094.6." ↑
Date of Hearing: May 17, 2023
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Chris Holden, Chair
ABPCA Bill Id:AB 1448
Author:(Wallis) – As Amended Ver:May 3, 2023
Policy Committee: | Business and Professions | Vote: | 18 - 0 |
Judiciary | 11 - 0 | ||
|
|
Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
Under existing law, if an action for civil penalties brought by the Attorney General, a county counsel, a city attorney, or a city prosecutor against an unlicensed person engaging in commercial cannabis activity results in a penalty, the penalty must first be used to reimburse the prosecuting agency for costs of bringing the action, with any remainder to be deposited in the General Fund. This bill requires, instead, 50% of the remainder after reimbursing the prosecuting agency to be paid to the city or county, and 50% to be deposited into the General Fund.
FISCAL EFFECT:
Costs of an unknown amount to the General Fund due to a loss in funds from penalties. Instead of 100% of penalty funds that exceed the prosecuting agency’s costs of bringing the action, 50% of remaining penalty funds will be paid to the General Fund, but the amount of penalty funds paid is not known.
COMMENTS:
This bill is sponsored by the Rural County Representatives of California. According to the author:
The promise of Proposition 64 was, make marijuana legal and we would have a safer product, we would have a billion dollars annually in tax revenue, and we would protect kids by eliminating the illegal market. Because of illegal cannabis activities, only a portion of these promises have been achieved. Illicit cannabis operators frequently engage in human trafficking, unlawful labor practices, water theft, illegal pesticide use, and environmental degradation as part of their operations. Local law enforcement agencies and code enforcement departments are on the front lines struggling to deal with the growth of illicit cannabis activities. AB 1448 will give local jurisdictions enhanced tools in their effort to end unlicensed cannabis activities.
The author contends state and local jurisdictions have struggled to drive unlawful operators out of the cannabis market. Rural communities have been inundated with unlicensed and unregulated cannabis activity that is undermining the health and safety of residents and regulated cannabis businesses. The author notes illicit cannabis operators frequently engage in human trafficking, unlawful labor practices, water theft, illegal pesticide use, and environmental degradation as part of their operations.
According to the Assembly Judiciary Committee analysis of this bill, the state has implemented extensive measures to regulate the cannabis industry, including statutory penalties for unlicensed cannabis operations up to three times the applicable licensing fee. However, despite these oversight efforts and risk of steep civil penalties, the unlicensed cannabis industry has continued to expand.
Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081
Date of Hearing: May 2, 2023
ASSEMBLY COMMITTEE ON JUDICIARY
Brian Maienschein, Chair
ABPCA Bill Id:AB 1448
Author:(Wallis) – As Amended Ver:April 12, 2023
As Proposed to be Amended
SUBJECT: Cannabis: enforcement by local jurisdictions
KEY ISSUE: should one half of civil penalties imposed on unlicensed cannabis activity and collected through enforcement actions brought by specified public attorneys, be redirected from the state’s general fund to the treasurer of the county in which the judgment was entered, or the city in which the complaining attorney has jurisdiction?
SYNOPSIS
California has implemented extensive measures to regulate the exponential growth of the cannabis industry, particularly since the passage of Proposition 64 in 2016, including statutory penalties for unlicensed cannabis operations up to three times the applicable licensing fee. However, despite these oversight efforts and risk of steep civil penalties, the unlicensed cannabis industry has continued to expand.
This bill as currently written would authorize, but not require, local jurisdictions to develop administrative procedures through which to adjudicate violations of local laws or ordinances relating to unlicensed cannabis activity. Additionally, it would redirect half of any remaining civil penalties recovered in an enforcement action brought by one of the several specified public attorneys from the General Fund to the treasurer of the jurisdiction that brought the claim. While understanding the intent of the author to increase local jurisdictions’ ability to enforce local cannabis regulations, there are numerous areas of concern with the bill currently in print. These concerns, as well as the author’s proposed amendment to address them, are discussed in detail in the COMMENTS section of the analysis. The proposed amendments are incorporated into the SUMMARY of the bill, below.
This bill is sponsored by the Rural County Representatives of California. It is supported by Siskiyou and San Bernardino Counties, the California State Association of Counties, the League of California Cities and the California Cannabis Industry Association. As currently in print, the bill is opposed by a coalition of banking, credit union, and mortgage broker associations, including the California Association of Realtors, the California Credit Union league, the California Land Title Association, and the California Mortgage Association. The bill was previously heard and passed by the Assembly Committee on Business and Professions by a vote of 18-0.
SUMMARY: Redirects one-half of the remaining civil penalties collected after reimbursing a county counsel, city attorney, or city prosecutor from the General Fund to the treasurer of the county in which the judgment was entered, or the city in which the complaining attorney has jurisdiction. Specifically, this bill:
- Rearranges various sections related to the penalties for violations of unlicensed commercial cannabis activity.
- Redirects one-half of the remaining civil penalties collected after reimbursing a county counsel, city attorney, or city prosecutor from the General Fund to the treasurer of the county in which the judgment was entered or the city in which the complaining attorney has jurisdiction.
- Declares that it is the intent of the Legislature to provide local governments with an administrative procedure to give them a mechanism to swiftly address illegal cannabis activity in their communities.
EXISTING LAW:
- Regulates the cultivation, distribution, transport, storage, manufacturing, processing, and sale of medicinal and adult-use cannabis under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) and establishes the Department of Cannabis Control (DCC) to administer and enforce the act. (Business and Professions Code Sections 26000-26260.)
- Establishes 20 types of cannabis licenses, including subtypes, for cultivation, manufacturing, testing, retail, distribution, and microbusiness and requires each licensee except for testing laboratories to clearly designate whether their license is for adult-use or medicinal cannabis. (Business and Professions Code Section 26050.)
- Establishes various civil penalties for unlicensed commercial cannabis activity, including civil penalties of up to three times the amount of the relevant license fee for each violation. (Business and Professions Code Sections 26038 (a)(1).)
- Specifies that the civil penalties are in addition to criminal penalties that apply to an unlicensed person engaging in commercial cannabis activity. (Business and Professions Code Sections 26038 (g).)
- Clarifies that the civil penalties do not limit, preempt, or otherwise affect any other state or local law, rule, regulation, or ordinance applicable to the conduct relating to commercial cannabis activities. (Business and Professions Code Sections 26038 (h)(1).)
- Specifies that the civil penalties imposed and collected are first used to reimburse the Attorney General, a county counsel, or a city attorney or prosecutor, whichever brought the action, and the remainder is deposited into the General Fund. (Business and Professions Code Sections 26038 (c),(e).)
- Specifies that MAUCRSA does not supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate commercial cannabis licensees, including, but not limited to, local zoning and land use requirements, business license requirements, and requirements related to reducing exposure to secondhand smoke, or to completely prohibit the establishment or operation of one or more types of commercial cannabis licensees within the local jurisdiction. (Business and Professions Code Sections 26200 (a)(1).)
- Defines “local agency” as a county, city, whether general law or chartered, city and county, town, school district, municipal corporation, district, political subdivision, or any board, commission or agency thereof, or other local public agency. (Government Code Section 54951.)
- Authorizes the legislative body of a local agency, by ordinance, to make any violation of any ordinance enacted by the local agency subject to an administrative fine or penalty, specifically:
- Requires the ordinance to contain administrative procedures governing the imposition, enforcement, collection, and administrative review of the administrative fines or penalties and to comply with specified statutory penalty caps. (Government Code Section 53069.4 (a)(1).)
- Requires the administrative procedures to provide for a reasonable period of time to remedy the violation if the violation pertains to ongoing building, plumbing, electrical, or other similar structural or zoning issues that do not create an immediate danger to health or safety. (Government Code Section 53069.4 (a)(2)(A).)
- Authorizes the ordinance to immediately impose administrative fines or penalties if the violation of building, plumbing, electrical, or other similar structural, health and safety, or zoning requirements is a result of the illegal cultivation of cannabis. (Government Code Section 53069.4 (a)(2)(B).)
- Establishes a process for appealing a final administrative decision under an ordinance that is separate from the existing civil procedures for writs of mandate inquiring into the validity of a final administrative order or decision. (Government Code Sections 53069.4 (b)(1), 53069.4 (b)(2), 70615 (a).)
- Specifies that the conduct of the appeal is a subordinate judicial duty that may be performed by traffic trial commissioners and other subordinate judicial officials at the direction of the presiding judge of the court. (Government Code Section 53069.4 (b)(3).)
- Specifies that, if no notice of appeal of the local agency’s final administrative order or decision is filed within 20 days after service is made, the order or decision will be deemed confirmed. (Government Code Section 53069.4 (c).)
- Specifies that, if the fine or penalty has not been deposited and the decision of the court is against the contestant, the local agency may proceed to collect the penalty using the procedures in the ordinance. (Government Code Section 53069.4 (d).)
- Makes a violation of a city or county ordinance a misdemeanor unless by ordinance it is made an infraction and specifies that the violation of an ordinance may be prosecuted by local authorities in the name of the people of the State of California, or redressed by civil action. (Government Code Sections 25132 (a), 36900 (a).)
- Makes every ordinance violation that is an infraction punishable by the following:
- A fine not exceeding one hundred dollars ($100) for a first violation. (Government Code Sections 25132 (a)(1), 36900 (a)(1).)
- A fine not exceeding two hundred dollars ($200) for a second violation of the same ordinance within one year of the first violation. (Government Code Sections 25132 (a)(2), 36900 (a)(2).)
- A fine not exceeding five hundred dollars ($500) for each additional violation of the same ordinance within one year of the first violation. (Government Code Sections 25132 (a)(3), 36900 (a)(3).)
- Authorizes a city or county to, by ordinance: (1) establish a procedure to collect abatement and related administrative costs by a nuisance abatement lien that has the priority of a judgment lien and (2) make the cost of the abatement a special assessment against the abated parcel that is collected at the same time and in the same manner as local taxes are collected and subject to the same penalties and the same procedure and sale in case of delinquency. (Government Code Section 25845, 38773.1, 38773.5.)
- Defines a judgment lien on personal property as a lien for the amount required to satisfy the money judgment. (Code of Civil Procedure Section 697.540.)
- Ranks the priority between a judgment lien and other conflicting security interests according to either time of filing or perfection, with judgment liens generally having a lower priority than perfected liens. (Code of Civil Procedure Section 697.590.)
- Grants special assessment liens priority over all other liens on a property, regardless of the time of their creation, except (1) liens for general taxes or ad valorem assessments in the nature of and collected as taxes, (2) earlier special assessment liens, (3) easements constituting servitudes upon or burdens to said lands; (4) water rights held separately from the title to the lands, and (4) restrictions of record. (Revenue and Taxation Code Section 2192.1; Government Code Section 53935.)
- Establishes the process for adjudicating writs of mandate for the purpose of determining the validity of any final administrative order or decision. (Code of Civil Procedure Sections 1094.5 – 1094.6.)
FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.
COMMENTS: California has implemented extensive measures to regulate the exponential growth of the cannabis industry, particularly since the passage of Proposition 64 in 2016, including statutory penalties for unlicensed cannabis operations up to three times the applicable licensing fee. However, despite these oversight efforts and risk of steep civil penalties, the unlicensed cannabis industry has continued to expand. According to the author:
The promise of Proposition 64 was, make marijuana legal and we would have a safer product, we would have a billion dollars annually in tax revenue, and we would protect kids by eliminating the illegal market. Because of illegal cannabis activities, only a portion of these promises have been achieved. Illicit cannabis operators frequently engage in human trafficking, unlawful labor practices, water theft, illegal pesticide use, and environmental degradation as part of their operations. Local law enforcement agencies and code enforcement departments are on the front lines struggling to deal with the growth of illicit cannabis activities. AB 1448 will give local jurisdictions enhanced tools in their effort to info to end unlicensed cannabis activities.
The long history of cannabis regulation in California. The use of cannabis in California was first authorized for medical patients, with a valid prescription from a doctor, with the approval of Proposition 215 known as the Compassionate Use Act. In the early years of the permissible use of medical marijuana, there was little oversight or regulation of the practice. In 2003, the Legislature stepped into the fray and enacted the state’s Medical Marijuana Program by passing aptly numbered SB 420 (Vasconcellos) Chap. 875, Stats. 2003. The Medical Marijuana Program provided for a voluntary medical marijuana patient card, which could be used to verify that the patient or their caregiver had state authorization to cultivate, possess, transport, or use medicinal cannabis. Despite the passage of SB 420, the medical marijuana industry still remained largely unregulated. Clinics began to open whereby doctors could prescribe cannabis for a host of conditions, some of which were considered to be generally innocuous. Further, with the adoption of the medical marijuana cards, forgeries began to proliferate throughout the state. Frustrated with the state-level oversight, many local agencies stepped up enforcement against medical marijuana dispensaries and passed several harsh ordinances regulating the medical marijuana industry. The battle between the medical marijuana industry and local governments came to an apex at the California Supreme Court, which held that state law did not expressly or implicitly limit the inherent authority of a local jurisdiction to pass ordinances or enact land use measures to regulate the industry. (Riverside v. Inland Empire Patients (2013) 56 Cal. 4th 729.)
Following the ruling in Inland Empire Patients, the Legislature was once against forced to confront how to regulate the marijuana industry in California. After several attempts, in 2015 the Legislature enacted a comprehensive package of bills to implement the Medical Marijuana Regulation and Safety Act. (AB 243 (Wood) Chap. 668, Stats. 2015, AB 266 (Bonta et al.) Chap 669, Stats. 2018, and SB 643 (McGuire) Chap. 719, Stats. 2015.) These bills established the Bureau of Cannabis Control within the Department of Affairs and, along with the Departments of Public Health and Food and Agriculture, tasked the Bureau with developing a system for regulating the cultivation, manufacture, transportation, testing, distribution, and sale of medicinal cannabis.
The next year, California voters enacted Proposition 64, the Adult Use of Marijuana Act. That Act built upon the existing regulations developed pursuant to the Medical Marijuana Regulation and Safety Act, and retained the Bureau of Cannabis Control as the primary regulator of cannabis in California. Subsequent to the passage of Proposition 64, the Legislature enacted SB 94 (Committee on Budget and Fiscal Review, Chap. 27, Stats. 2017), which reconciled the differences between the medical marijuana regulatory structure and the adult recreational use regulations. SB 94 vested licensing authority for the various aspects of the cannabis business system with the Bureau of Cannabis Control, the Department of Public Health, and the Department of Food and Agriculture. Additionally, other state agencies, including the Department of the Transportation, the Department of Forestry and Fire Protection, and the State Water Resources Control Board, were tasked with participating in various regulatory processes regarding cannabis in those agencies’ area of jurisdiction. Several of the participating agencies have limited enforcement powers of their own to enforce the state’s cannabis regulations.
Despite the state’s flurry of activity over the past 20 years to permit and regulate cannabis use, an illicit cannabis industry still exists, undercutting lawful operations and denying the state millions of dollars in taxes each year. Existing law already imposes a fine against cannabis operations for operating without a valid license equal to three times the licensing fee.
This bill as currently written would authorize, but not require, local jurisdictions to develop administrative procedures through which to adjudicate violations of local laws or ordinances relating to unlicensed cannabis activity. Additionally, it would redirect half of any remaining civil penalties recovered in an enforcement action brought by one of the several specified public attorneys from the General Fund to the treasurer of the jurisdiction that brought the claim. While understanding the intent of the author to increase local jurisdictions’ ability to enforce local cannabis regulations, there are numerous areas of concern with the bill currently in print.
Redirecting half of recovered civil penalties to the jurisdictions bringing the enforcement actions seems a reasonable approach to incentivize local public prosecutors to increase their enforcement activity. Under current law, a public attorney who seeks to enforce state or local law regarding unlawful cannabis activity can only expect to be reimbursed for the costs they incurred by bringing the claim. Considering the significant costs required to spin up enforcement mechanisms specialized to address violations of cannabis law, merely reimbursing these offices is arguably insufficient motivation to develop such programs. By requiring one half of the remaining civil penalties collected through these actions after reimbursement to be directed to the public attorney’s local treasurer, this bill arguably increases both capacity and incentive for the development of local cannabis law enforcement.
By authorizing local jurisdictions to develop administrative procedures for enforcement of administrative fines or penalties for unlawful cannabis activity, this bill risks inconsistent enforcement between jurisdictions. A lack of standards for the local jurisdictions’ administrative processes exacerbate this concern, such as allowing, but not requiring the jurisdictions to provide for an opportunity to cure a violation. Moreover, subdivision (a)(1) permits local jurisdictions to “make a violation of a local law relating to [unlicensed cannabis activity] subject to and administrative fine or penalty.” While this language appears to be reflective of Government Code 53069.4, it fails to provide any statutory caps for said fines or penalties. Existing law provides statutory penalty caps for county ordinances and infractions pursuant to Government Code Section 25132. However, given the novelty of the proposed administrative process in this bill as currently in print, it is not clear whether Section 25132 would continue to apply to the administrative penalties developed under its provisions. In fact, it is possible to interpret the language in a manner that would circumvent the statutory penalty caps in Section 25132 altogether, leading to yet another variation between local jurisdictions’ frameworks.
Subdivision (b)(1) appears to create a hearsay exemption. As currently in print, subdivision (b)(1) authorizes an appeal of a final administrative order to be brought within 20 days of the final order. Strangely, the bill specifies that the appeal shall be heard de novo, “except that the contents of the local jurisdiction’s file in the case shall be received in evidence [and] [a] copy of the document or instrument of the local jurisdiction providing notice of the violation and imposition of the administrative fine or penalty shall be admitted into evidence as prima facie evidence of the facts stated therein.”
Under the hearsay rule, a statement that is made other than by a witness while testifying at the hearing and is offered to prove the truth of the matter stated is inadmissible. (Evidence Code Section 1200.) The hearsay rule reflects the law's preference for live witnesses, who take oaths, are cross-examined, and can be seen by the jury in order to evaluate the credibility of the witness and reliability of the testimony. However, existing law recognizes several exceptions to the hearsay rule, which generally apply when the declarant is unavailable to testify as a witness but where the circumstances surrounding the statement create a presumption of reliability (for example, "dying declarations" or spontaneous utterances, etc.). Existing exceptions to the hearsay rule include prior testimony and prior inconsistent statements. However, both of these exceptions are narrowly tailored to circumstances when the declarant is available for cross-examination, and generally are not admitted as prima facie evidence.
The language in subdivision (b)(1) appears to require the superior court to take the information provided on the specified documents as prima facie evidence, or facts sufficient to establish a claim unless rebutted, thereby precluding the appealing party’s possibility of success in a de novo appeal. While this language is existing under Government Code Section 53069.4, there are several other guardrails present in Section 53069.4 that would arguably provide more justification for such a hearsay exception.
This bill severely constricts existing legal frameworks to appeal administrative adjudications via writ of mandate. Sections 1094.5 and 1094.6 of the Code of Civil Procedure provide a framework for appellate procedures of an administrative decision. Section 1094.6 permits an appeal filed pursuant to 1094.5 to be filed within 90 days of the final decision. This bill, however, would require an appeal to be filed with the superior court within 20 days of service of the final order. Moreover, the bill makes the appeal procedure outlined in (b)(1) the exclusive means of judicial review, effectively prohibiting review of the novel administrative adjudication procedure from review under long-established writ proceedings pursuant to Sections 1094.5 and 1094.6.
The opposition has voiced concern regarding the creation of a super priority lien. A lien is a tool by which someone to whom debt is owed may collect on that debt via the debtor’s personal property. One of the fundamental principles of property law, “first in time first in right,” typically dictates that competing interests in property will be determined in favor of which ever is established first. In the context of liens, this principle helps ensure consistent expectations in the event multiple creditors are seeking to collect from a single debtor – the creditors whose interest was determined first will see their interest likewise satisfied first, with the remainder, if any, satisfying any subsequent creditors in chronological order.
A super priority lien inverts this expectation by granting a specified judgment or interest a special status that “jumps the line.” In the event a judgment is rendered against a debtor and given “super priority” status, it would supersede any previous liens against the same debtor, regardless of how longstanding or how many there may be.
This bill would grant local jurisdictions the ability to establish a procedure to collect on any judgment rendered under its administrative process via “special lien,” which would be “superior to all encumbrances, existing and future, except liens for taxes and assessments.” In essence, this bill proposes to authorize super priority liens for judgments rendered via the local jurisdictions’ administrative proceeding for unlawful cannabis activity, which would be prioritized above all other liens other than taxes and assessments.
Several organizations, including the California Land Title Association, the California Association of Realtors, the California Mortgage Bankers Association, and the Escrow Institute of California have expressed significant concern about the bill’s super priority lien provision. Specifically, they state:
With respect to real property interests, California has long followed the doctrine of “first in time, first in right.” Under this doctrine, lien priority is established by the date of recordation of the lien in real property records, with the exception of tax liens, which are afforded a superpriority status. This doctrine is vital to the health of California’s real estate economy, as it allows parties to real estate transactions – such as title insurers, lenders, and others – to rely upon an examination of real property records in order to establish whether a particular parcel of real property is subject to any encumbrances, such as liens, that have already been recorded and respond accordingly. Without such a guarantee of priority to protect their security interest, lenders would not provide loans to consumers or would be forced to significantly increase the interest rates or fees to cover the exponential increase in risk.
By allowing any jurisdiction to create an ordinance that authorizes the recording of superpriority liens, AB 1448 risks disrupting the predictability of that long-established system. We anticipate that the effects of this disruption will be significant and far outside the intended scope of the bill. Specifically, in order to mitigate the risk of losing a portion of their security in a given property, we anticipate that lenders will be forced to tighten lending standards on the front-end process of loan generation, mandate larger down payments, and/or increase borrowing costs. Unfortunately, due to the unknowable nature of whether a given property will become subject to a superpriority lien after having already lent against it, the negative impacts of these understandable risk mitigation measures will apply to individuals that were never contemplated by the legislation.
The effects of these actions will also be compounded by the reluctance of Government-Sponsored Enterprises (GSEs), such as Fannie Mae and Freddie Mac, to purchase California mortgages on the secondary market, which will further restrict credit availability within the state. GSEs will undoubtedly look at the properties in subject loan markets as having elevated risk for their secondary market investors, and could even enact a ban on the purchase of any mortgage potentially subject to an ordinance under AB 1448.
In order to address each of the above concerns, the author proposes to strike Section 2 in its entirety from the bill and insert the following language:
It is the intent of the Legislature to provide local governments with an administrative procedure to give them a mechanism to swiftly address illegal cannabis activity in their communities.
To the extent this amendment removes language establishing creation of super-priority liens, it appears it also would address the concerns voiced by the opposition.
Additionally, to conform with the amendments to Section 2, the author proposes to strike subdivisions (c)(4) and (d)(5), which rely on the development of the administrative procedure established in the deleted Section 2, from Section 1 of the bill.
ARGUMENTS IN SUPPORT: The bill as currently in print is supported by the California Cannabis Industry Association and the County of Siskiyou. The County of Siskiyou writes:
A commonality amongst local jurisdictions is the overwhelming enforcement needs to combat unlicensed cannabis activities. Local law enforcement agencies and code enforcement struggle to effectively deter illicit cannabis operators who sidestep regulations and undermine the health and safety of residents. Enhanced tools at the local level are needed to combat this highly lucrative and harmful unlawful activity.
[…]
In addition, AB 1448 allows a 50/50 state-local split of the statutory penalties recovered in actions brought by local jurisdictions, as originally enacted by the Legislature in the Medical Cannabis Regulation and Safety Act (MCRSA). Revenues from these actions will provide a much-needed source of funds to reinvest in illicit cannabis enforcement. Local jurisdictions are a critical partner to successfully regulate the commercial cannabis marketplace. AB 1448 will bolster safe access to the cannabis market by targeting enforcement against unlawful operators that undermine the legal marketplace and undercut local economies.
ARGUMENTS IN OPPOSITION: As currently in print this bill is opposed unless amended by a coalition of banking, credit union, and mortgage broker associations, including the California Association of Realtors, the California Credit Union league, the California Land Title Association, and the California Mortgage Association. They write the following:
The superpriority status of liens under AB 1448 are at odds with numerous government lien provisions under existing law, including the Methamphetamine or Fentanyl Contaminated Property Cleanup Act, none of which have special priority:
We recognize the need for jurisdictions to be able to encumber real property in order to recoup incurred costs or levy penalties in the event of violation. In fact, existing law already provides various levels of government with such authority. However, with the exception of tax liens, none of these liens – related to issues ranging from seismic strengthening, to graffiti nuisance or fire abatement, to unpaid water or sewage bills – have superpriority status.
In other words, the Legislature has long taken the position that the predictability of California’s real property records, as well as the interests of other legitimate lienholders, such as contractors, lenders, or child support recipients, should not be jeopardized by allowing government to “cut the line” in terms of lien priority, with tax liens being the sole exception.
An additional example of this can be found in the Methamphetamine or Fentanyl Contaminated Property Cleanup Act of 2005, which provides local jurisdictions with the authority to record liens intended to allow for the recovery of costs incurred as a result of remediating methamphetamine or fentanyl contamination.
By allowing local jurisdictions to record superpriority liens, AB 1448 would set a dangerous precedent:
If AB 1448 is enacted as-is, we would expect a rush of additional superpriority cost recovery and penalty proposals as various interests battle to become the “first in line.”
Such a likely outcome highlights why the existing system of “first in time, first in right” is the best legal principle to keep in place with respect to lien priority and why the Legislature has consistently maintained this doctrine over the years. Not everyone can be first. It is therefore best to create a process where lienholders must promptly seek to record their lienholder interests in a timely manner that allows them to protect themselves.
REGISTERED SUPPORT / OPPOSITION:
Support
Rural County Representatives of California (RCRC) (sponsor)
California Cannabis Industry Association
California State Association of Counties (CSAC)
County of Siskiyou
League of California Cities
San Bernardino County
Oppose Unless Amended (to bill in print)
California Association of Realtors
California Bankers Association
California Credit Union League
California Escrow Association
California Land Title Association
California Mortgage Association
California Mortgage Bankers Association
Escrow Institute of California
United Trustees Association
Analysis Prepared by: Manuela Boucher-de la Cadena / JUD. / (916) 319-2334
Date of Hearing: April 11, 2023
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Marc Berman, Chair
ABPCA Bill Id:AB 1448
Author:(Wallis) – As Introduced Ver:February 17, 2023
NOTE: This bill is double referred and if passed by this Committee will be re-referred to the Assembly Judiciary Committee.
SUBJECT: Cannabis: enforcement of local laws.
SUMMARY: Authorizes a local jurisdiction to establish administrative penalties for violations of local law relating to commercial cannabis activity, including a special lien, authorizes a local jurisdiction that has established procedures for collecting those administrative penalties to additionally collect specified civil penalties as administrative penalties, and redirects specified portions of civil penalties collected for unlicensed commercial cannabis activity from the General Fund to the treasurers of localities that brought the action for the penalties.
EXISTING LAW:
- Regulates the cultivation, distribution, transport, storage, manufacturing, processing, and sale of medicinal and adult-use cannabis under the Medicinal and Adult-Use Cannabis Regulation and Safety Act and establishes the Department of Cannabis Control (DCC) to administer and enforce the act. (Business and Professions Code (BPC) §§ 26000-26260)
- Establishes 20 types of cannabis licenses, including subtypes, for cultivation, manufacturing, testing, retail, distribution, and microbusiness and requires each licensee except for testing laboratories to clearly designate whether their license is for adult-use or medicinal cannabis. (BPC § 26050)
- Establishes various civil penalties for unlicensed commercial cannabis activity, including civil penalties of up to three times the amount of the relevant license fee for each violation. (BPC § 26038(a)(1))
- Specifies that the civil penalties are in addition to criminal penalties that apply to an unlicensed person engaging in commercial cannabis activity (BPC § 26038(g))
- Clarifies that the civil penalties do not limit, preempt, or otherwise affect any other state or local law, rule, regulation, or ordinance applicable to the conduct relating to commercial cannabis activities. (BPC § 26038(h)(1))
- Specifies that the civil penalties imposed and collected are first used to reimburse the Attorney General, a county counsel, or a city attorney or prosecutor, whichever brought the action, and the remainder is deposited into the General Fund. (BPC § 26038(c),(e))
- Specifies that MAUCRSA does not supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate commercial cannabis licensees, including, but not limited to, local zoning and land use requirements, business license requirements, and requirements related to reducing exposure to secondhand smoke, or to completely prohibit the establishment or operation of one or more types of commercial cannabis licensees under within the local jurisdiction. (BPC § 26200(a)(1))
- Defines “local agency” as a county, city, whether general law or chartered, city and county, town, school district, municipal corporation, district, political subdivision, or any board, commission or agency thereof, or other local public agency. (Government Code § 54951)
- Authorizes the legislative body of a local agency, by ordinance, to make any violation of any ordinance enacted by the local agency subject to an administrative fine or penalty, specifically:
- Requires the ordinance to contain administrative procedures governing the imposition, enforcement, collection, and administrative review of the administrative fines or penalties and to comply with specified statutory penalty caps. (GOV § 53069.4(a)(1))
- Requires the administrative procedures to provide for a reasonable period of time to remedy the violation if the violation pertains to ongoing building, plumbing, electrical, or other similar structural or zoning issues that do not create an immediate danger to health or safety. (GOV § 53069.4(a)(2)(A))
- Authorizes the ordinance to immediately impose administrative fines or penalties if the violation of building, plumbing, electrical, or other similar structural, health and safety, or zoning requirements is a result of the illegal cultivation of cannabis. (GOV § 53069.4(a)(2)(B))
- Establishes a process for appealing a final administrative decision under an ordinance that is separate from the existing civil procedures for writs of mandate inquiring into the validity of a final administrative order or decision. (GOV §§ 53069.4(b)(1), 53069.4(b)(2), 70615(a)))
- Specifies that the conduct of the appeal is a subordinate judicial duty that may be performed by traffic trial commissioners and other subordinate judicial officials at the direction of the presiding judge of the court. (GOV § 53069.4(b)(3))
- Specifies that, if no notice of appeal of the local agency’s final administrative order or decision is filed within 20 days after service is made, the order or decision will be deemed confirmed. (GOV § 53069.4(c))
- Specifies that, if the fine or penalty has not been deposited and the decision of the court is against the contestant, the local agency may proceed to collect the penalty using the procedures in the ordinance. (GOV § 53069.4(d))
- Makes a violation of a city or county ordinance a misdemeanor unless by ordinance it is made an infraction and specifies that the violation of an ordinance may be prosecuted by local authorities in the name of the people of the State of California, or redressed by civil action. (GOV §§ 25132(a), 36900(a))
- Makes every ordinance violation that is an infraction punishable by the following:
- A fine not exceeding one hundred dollars ($100) for a first violation. (GOV §§ 25132(a)(1), 36900(a)(1))
- A fine not exceeding two hundred dollars ($200) for a second violation of the same ordinance within one year of the first violation. (GOV §§ 25132(a)(2), 36900(a)(2))
- A fine not exceeding five hundred dollars ($500) for each additional violation of the same ordinance within one year of the first violation. (GOV §§ 25132(a)(3), 36900(a)(3))
- Authorizes a city or county to, by ordinance: (1) establish a procedure to collect abatement and related administrative costs by a nuisance abatement lien that has the priority of a judgment lien and (2) make the cost of the abatement a special assessment against the abated parcel that is collected at the same time and in the same manner as local taxes are collected and subject to the same penalties and the same procedure and sale in case of delinquency. (GOV § 25845, 38773.1, 38773.5)
- Defines a judgment lien on personal property as a lien for the amount required to satisfy the money judgment. (Code of Civil Procedure (CCP) § 697.540)
- Ranks the priority between a judgment lien and other conflicting security interests according to either time of filing or perfection, with judgment liens generally having a lower priority than perfected liens. (CCP § 697.590)
- Grants special assessment liens priority over all other liens on a property, regardless of the time of their creation, except (1) liens for general taxes or ad valorem assessments in the nature of and collected as taxes, (2) earlier special assessment liens, (3) easements constituting servitudes upon or burdens to said lands; (4) water rights held separately from the title to the lands, and (4) restrictions of record. (Revenue and Taxation Code § 2192.1; GOV § 53935)
THIS BILL:
- Authorizes a local jurisdiction that has established administrative procedures for the imposition, enforcement, collection, and administrative review of administrative fines and penalties to impose and collect the civil penalties established for unlicensed commercial cannabis activity as administrative penalties in accordance with those administrative procedures, in addition to any other administrative fines or penalties established by the local jurisdiction.
- Redirects one-half of the remaining civil penalties collected after reimbursing a county counsel, city attorney, or city prosecutor from the General Fund to the treasurer of the county in which the judgment was entered or the city in which the complaining attorney has jurisdiction.
- Rearranges various sections related to the penalties for violations of unlicensed commercial cannabis activity.
- Authorizes a local jurisdiction to, by ordinance, make a violation of a local law relating to commercial cannabis activity subject to an administrative fine or penalty, specifically using a substantially similar structure to the existing authority to establish administrative penalties for violations of ordinances, but leaves out the statutory caps:
- Requires the local jurisdiction to establish the administrative procedures that govern the imposition, enforcement, collection, and administrative review of the administrative fines or penalties.
- Requires the ordinance to specify the amount of the fine or penalty for each violation subject to the procedures.
- Authorizes the administrative procedures to provide a reasonable amount of time to correct or otherwise remedy an ongoing violation.
- Establishes a process for appealing a final administrative decision under an ordinance that is separate from the existing civil procedures for writs of mandate inquiring into the validity of a final administrative order or decision, and specifies what must be included in a local jurisdiction’s file
- Authorizes a local jurisdiction to, after the exhaustion of the administrative and appeal procedures, file a certified copy of a final decision of the local jurisdiction that directs the payment of an administrative fine or penalty and, if applicable, a copy of an order of the superior court rendered on an appeal from the local jurisdiction’s decision with the clerk of the superior court of any county.
- Requires the judgment to be entered immediately by the clerk in conformity with the decision or order.
- Specifies that a fee may not be charged by the clerk of the superior court for the performance of an official service required in connection with the entry of judgment.
- Authorizes a local jurisdiction to establish a procedure to collect the fines or penalties by a special lien upon the parcel of land on which the violation occurred, similar to the existing authority to collect abate nuisances, and specifies that the lien is superior to all encumbrances, existing and future, except liens for taxes and assessments.
- Specifies that the remedies or penalties related to the administrative penalty authority created under this bill are cumulative to the remedies or penalties available under law.
FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel.
COMMENTS:
Purpose. This bill is sponsored by the Rural County Representatives of California. According to the author, “The promise of Proposition 64 was, make marijuana legal and we would have a safer product, we would have a billion dollars annually in tax revenue, and we would protect kids by eliminating the illegal market. Because of illegal cannabis activities, only a portion of these promises have been achieved. Illicit cannabis operators frequently engage in human trafficking, unlawful labor practices, water theft, illegal pesticide use, and environmental degradation as part of their operations. Local law enforcement agencies and code enforcement departments are on the front lines struggling to deal with the growth of illicit cannabis activities. [This bill] will give local jurisdictions enhanced tools in their effort to info to end unlicensed cannabis activities. We can only achieve the promise of Prop 64 if we stop illegal cannabis.”
Background. The Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA), which incorporates prior cannabis laws and authorizes a person who obtains a state license under MAUCRSA to engage in commercial adult-use cannabis activity under that license and applicable local ordinances. It is unlawful to operate a cannabis business without a license.
The Department of Cannabis Control (DCC) is the California state agency that licenses and regulates cannabis businesses. DCC regulates the:
- Growing of cannabis plants.
- Manufacture of cannabis products.
- Transportation and tracking of cannabis goods throughout the state.
- Sale of cannabis goods.
- Events where cannabis is sold or used.
- Labeling of goods sold at retail.
Unlicensed Market. As noted during the February 25, 2020, joint informational hearing between this Committee and the Assembly Budget Subcommittee No. 4 on State Administration, there have been significant concerns over cannabis operations that continue to do business outside of the regulatory scheme. They can avoid taxes and compete with lawful businesses. They also create the potential for consumer and environmental harm, avoiding testing and agricultural requirements.
Normally, licensing agencies regulate problematic licensed and unlicensed activity by imposing administrative penalties against an existing license (the strongest of which is revocation of the license), or by withholding the issuance of a license until any problems or deficiencies are addressed. The difficulty in regulating unlicensed businesses that do not plan to obtain a license, including unlicensed cannabis businesses, is that there is no incentive to comply with the administrative penalties because the license is irrelevant to them.
As a result, MAUCRSA includes various civil penalties which are sought in court and are not tied to the licensing process, which can be brought by the DCC, the Attorney General, or local public attorneys. There are individual penalties of up to three times the amount of the required license fee (which vary based on gross annual revenue, up to $300,000 for a microbusiness with gross annual revenue of $80,000,000). There are also civil penalties of up to $30,000 per day of operation for aiding and abetting unlicensed cannabis activity, which means a person encouraged, aided, or facilitated, the activity (not just mere knowledge of the activity).
However, according to the sponsors, much of the enforcement of state violations is left to local jurisdictions. And while the law requires the civil penalties collected to first reimburse the local agency that prosecuted the case, the sponsors note that there is no other incentive for locals to enforce state laws because the remainder of the collected penalties goes to the state general fund. This bill seeks to provide additional incentives by allowing local jurisdictions to collect half of the remaining penalties that would normally go to the general fund and collect unlicensed civil penalties as administrative penalties. According to the sponsors, this would allow local jurisdictions to reinvest the penalties into unlicensed cannabis activity enforcement
Enforcement of Local Laws. Local jurisdictions also have the authority to adopt local ordinances related to unlicensed cannabis activity that is separate from MAUCRSA. However, according to the sponsors, there are three factors that limit the enforcement of the ordinances.
First, existing law limits the amount of any penalty a local jurisdiction can impose for typical unlicensed cannabis activity between $100 and $500 depending on the number of times an ordinance is violated. Any more than that would have to go through the criminal process rather than the administrative process. According to the sponsors, unlicensed cannabis operators are often able to react to enforcement quickly, and the administrative process is quicker. However, this amount is not enough to effectively deter unlicensed cannabis activity. This bill would remove the penalty limits for cannabis ordinances.
Second, existing law normally requires administrative decisions to be reviewed via the writ of mandate process. According to the sponsors, this process is too slow for unlicensed cannabis enforcement. While existing law creates a more expedient judicial review process for the appeal of a local jurisdiction’s administrative decisions under an ordinance, the courts have found that both methods of appeal are still available to respondents.[1] This bill would make only the more expedient form of review available for unlicensed cannabis ordinances established using the new process.
Third, the sponsors state that the mechanisms for the collection of penalties, as well as the available enforcement tools altogether, are insufficient to address unlicensed cannabis activity. This bill would authorize a local jurisdiction to make the amount of any unpaid penalties a special lien against a property and make the special lien superior to other encumbrances other than tax and assessments. A lien is a right to keep possession of property belonging to another person until a debt owed by that person is discharged. In combination with the removal of the penalty caps under this bill, a local jurisdiction could use the superior lien to foreclose on a property that continues to violate a local cannabis ordinance.
One last technical difference between the existing law and this bill is that existing law requires ordinances to provide a reasonable time to cure a violation, while this bill would make it optional. According to the sponsors, cannabis violations are not always curable.
Case File. This bill also specifies the contents of the local jurisdiction’s case file in the event of an appeal. According to the sponsors, this was adapted from The California Environmental Quality Act (CEQA) and related case law.
Current Related Legislation. AB 1171 (Rubio), which is pending in this committee, would establish a private right of action allowing cannabis licensees to bring an action in superior court against a person engaging in commercial cannabis activity without a license.
AB 1616 (Lackey), which is pending in this committee, would require the Board of State and Community Corrections to prioritize grant funding for local governments whose proposed programs seek to address the black market.
SB 51 (Bradford), which is pending in the Senate, would authorize the DCC to issue a provisional license for a local equity applicant for retailer activities if the applicant meets specified requirements and authorize the DCC to renew a provisional license until it issues or denies the provisional licensee’s annual license, subject to specified requirements, or until 5 years from the date the provisional license was issued, whichever is earlier.
Prior Related Legislation. AB 195 (Committee on Budget), Chapter 56, Statutes of 2022, established the civil penalty of up to $10,000 per violation against a person who has management or control of a commercial property or a commercial building, room, space, or enclosure and knowingly rents, leases, or makes it available for the unlicensed cultivation, manufacture, storage, sale, or distribution of cannabis, made each day the violation continues a separate violation, and required an action for the civil penalties to be brought exclusively by the Attorney General on behalf of the people, on behalf of the department, or on behalf of the participating agency, or by a city or county counsel or city prosecutor.
AB 2102 (Jones-Sawyer) of 2022, which died pending a hearing in the Senate Judiciary Committee, would have established a civil penalty of up to $30,000 per violation for knowingly renting, leasing, or making available a building, room, space, or enclosure for the purpose of unlawfully manufacturing, distributing, or selling cannabis, in addition to the criminal penalty, and authorized injunctive relief, as specified.
AB 2728 (Smith) of 2022, which died pending a hearing in the Senate Judiciary Committee, would have increase the penalty for unlicensed activity from three to four times the fee of the license required, as specified.
AB 1138 (Rubio), Chapter 530, Statutes of 2021, established the $30,000 penalties for a person who aids and abets unlicensed commercial cannabis activity and the associated conditions and mechanisms.
AB 2094 (Jones-Sawyer) of 2020, which died pending a hearing in this Committee, would have imposed a $30,000 civil penalty on a person who makes the property available for unlawful cannabis activity.
AB 2164 (Cooley), Chapter 316, Statutes of 2018, allowed local ordinances to provide for the immediate imposition of administrative fines or penalties for the violation of building, plumbing, electrical, or other similar structural, health and safety, or zoning requirements if the violation exists as a result of, or to facilitate, the illegal cultivation of cannabis, except as specified.
ARGUMENTS IN SUPPORT:
The Rural County Representatives of California (RCRC) (sponsor), the California State Association of Counties (CSAC), and the League of California Cities (Cal Cities) write in support:
A commonality amongst local jurisdictions that have sanctioned commercial cannabis activities or restrict such operations is the overwhelming enforcement needs to combat unlicensed cannabis activities. Local law enforcement agencies and code enforcement struggle to effectively deter illicit cannabis operators who sidestep regulations and undermine the health and safety of residents and our regulated cannabis businesses. Enhanced tools at the local level are needed to combat this highly lucrative and harmful unlawful activity. [This bill] would provide effectual tools at the local level to act against persons that have aided and abetted unlicensed cannabis activity….
Local jurisdictions are a critical partner to successfully regulate the commercial cannabis marketplace. [This bill] will bolster safe access to the cannabis market by targeting enforcement against unlawful operators that undermine the legal marketplace and undercut local economies.
The California Cannabis Industry Association (CCIA) writes in support:
The licensed cannabis industry continues to struggle with competition from an illicit market that is untaxed, unregulated, and untested. This entrenched unlicensed market accounts for approximately ⅔ of all cannabis sales in the state, according to a 2022 Reason Foundation report, and has resulted in numerous consequences, including an increase in cannabis-related violence, worker exploitation, and environmental damage.
While such consequences have had a dramatic impact on public health and safety, it has also robbed the state of billions in tax revenue. Meanwhile, enforcement efforts to combat illicit market activity are largely insufficient to address the severity of this problem.
San Bernadino County writes in support, “Illegal cannabis cultivation is widespread across California and has caused serious environmental damage to many rural areas of the state, including San Bernardino County. [This bill] would authorize local governments to assess an administrative penalty for illegal cannabis activity. Local agencies would have flexibility in determining the amounts of fines, with streamlined appeals and judicial review procedures, and a collection process using lien mechanisms like those used for pesticide violations. [This bill] also revises the Business and Professions Code 26038 to allow a local administrative process to recover penalties, thereby incentivizing local agencies to use this tool to address unlicensed cannabis. The statutory penalties collected are split evenly between the state and local jurisdiction and can be used to support ongoing illegal cannabis enforcement, thereby supporting law-abiding legal cannabis businesses who are competing with illegal cannabis for market share.”
ARGUMENTS IN OPPOSITION:
A coalition of real estate associations, the California Association of Realtors, the California Credit Union League, the California Escrow Association, the California Land Title Association, the California Mortgage Association, the California Mortgage Bankers Association, the Escrow Institute of California, and the United Trustees Association are opposed to the “superpriorty lien” provision of this bill, and request the lien be amended into a judgment lien, writing:
Though well-intended, the use of superpriority liens would likely significantly disrupt the real estate market of any jurisdiction in which they are used, making it more difficult for prospective homebuyers to obtain reasonably priced and available financing. In addition to market-wide effects, [this bill] risks harming individual innocent property owners and other lienholders, including mortgage lenders, contractors and other tradesmen, as well as custodial parents that have already recorded child support liens against a property….
With respect to real property interests, California has long followed the doctrine of “first in time, first in right.” Under this doctrine, lien priority is established by the date of recordation of the lien in real property records, with the exception of tax liens, which are afforded a superpriority status. This doctrine is vital to the health of California’s real estate economy, as it allows parties to real estate transactions – such as title insurers, lenders, and others – to rely upon an examination of real property records in order to establish whether a particular parcel of real property is subject to any encumbrances, such as liens, that have already been recorded and respond accordingly. Without such a guarantee of priority to protect their security interest, lenders would not provide loans to consumers or would be forced to significantly increase the interest rates or fees to cover the exponential increase in risk.
By allowing any jurisdiction to create an ordinance that authorizes the recording of superpriority liens, [this bill] risks disrupting the predictability of that long-established system. We anticipate that the effects of this disruption will be significant and far outside the intended scope of the bill. Specifically, in order to mitigate the risk of losing a portion of their security in a given property, we anticipate that lenders will be forced to tighten lending standards on the front-end process of loan generation, mandate larger down payments, and/or increase borrowing costs. Unfortunately, due to the unknowable nature of whether a given property will become subject to a superpriority lien after having already lent against it, the negative impacts of these understandable risk mitigation measures will apply to individuals that were never contemplated by the legislation.
The effects of these actions will also be compounded by the reluctance of Government-Sponsored Enterprises (GSEs), such as Fannie Mae and Freddie Mac, to purchase California mortgages on the secondary market, which will further restrict credit availability within the state. GSEs will undoubtedly look at the properties in subject loan markets as having elevated risk for their secondary market investors, and could even enact a ban on the purchase of any mortgage potentially subject to an ordinance under [this bill]….
We recognize the need for jurisdictions to be able to encumber real property in order to recoup incurred costs or levy penalties in the event of violation. In fact, existing law already provides various levels of government with such authority. However, with the exception of tax liens, none of these liens – related to issues ranging from seismic strengthening, to graffiti nuisance or fire abatement, to unpaid water or sewage bills – have superpriority status…. An additional example of this can be found in the Methamphetamine or Fentanyl Contaminated Property Cleanup Act of 2005, which provides local jurisdictions with the authority to record liens intended to allow for the recovery of costs incurred as a result of remediating methamphetamine or fentanyl contamination….
Rather than rely on a superpriority lien to target a single property, we respectfully propose that the author and sponsor would better achieve their goals by utilizing a lien with judgment status, which, once recorded, will attach to all of the violating entity’s property in the county in which it is recorded, both personal or real – including other homes or possessions in the bad actor’s name.
In addition to avoiding the numerous unintended consequences for real estate as described above, this approach has the added benefit of expanding the reach of the lien, thereby making it more difficult for a bad actor to limit the personal impact of a violation. If the bad actor had conducted an illegal operation at a substandard property but not their home, for instance, a judgment lien would attach to both properties, making it much more difficult for the bad actor to shield themselves from penalties. Perhaps even more impactful, a judgment lien would also attach to personal property, such as vehicles or other possessions, greatly expanding the reach of the bill….
Furthermore, it is our understanding that many of the properties that are utilized for the illegal activities that are the target of this bill are completely unencumbered, meaning there is no need for superpriority status as there are no liens in front of which to jump. Lastly, bad actors can further exploit the mechanism currently proposed by [this bill] by utilizing substandard, “throwaway” properties that will likely be a headache for local jurisdictions to foreclose on, and the loss of which will not meaningfully impact the bad actors, again making superpriority status irrelevant.
As stated above, all creditors are afforded a right to protect themselves through the recordation of a lien to establish their rights. We do not specifically seek to invalidate local jurisdictions’ right to record a lien, but rather believe that they would be better served by recording a lien that has the force, effect, and priority of a judgment lien.
POLICY ISSUES FOR CONSIDERATION:
- Inconsistent, Unlimited Penalties. This bill authorizes local jurisdictions to establish administrative penalties that are not subject to any statutory limits. However, it is general practice in licensing enforcement to establish a statutory limit on the penalties that can be assessed. This provides for consistency in enforcement and provides a reasonable expectation of what the penalty for violating the law is. Therefore, the bill should be amended to include a cap.
- Superpriority Liens. This bill authorizes a local jurisdiction to record a lien against a property in the value of uncollected penalties that has higher priority than any other property interest in the property, including a mortgage. According to the opposition, the threat of that type of lien would disrupt the real estate lending market, adding a layer of unpredictability when assessing the risk associated with a property during the lending process. The sponsors respond that this type of lien exists under nuisance abatement laws.
However, nuisance abatement liens are limited to the cost of the abatement of the nuisance, whereas the penalties under this bill, which are not currently capped, could potentially be much higher. In addition, given that the need for this bill is the scale of the unlicensed cannabis market, the new type of lien may be used more frequently than a nuisance lien. If this bill passes this committee, the author may wish to amend the bill to ensure that the priority of the lien is consistent with the weight of the state’s interest in addressing the unlicensed cannabis market against a creditor’s right to its property interests.
IMPLEMENTATION ISSUES:
Bill Conflict. Section 2 of this bill would create a new BPC § 26038.1. AB 1171 (Rubio), which is pending in this committee, would also create a new BPC § 26038.1, but with a substantially different purpose. If this bill passes this committee, the author may wish to reconcile that conflict.
AMENDMENTS:
To clarify that the bill only applies to unlicensed cannabis activity and to establish a limit on the penalties that is consistent with the existing civil penalties for unlicensed cannabis activity, amend the bill as follows:
On page 7 of the bill, after line 21:
26038.1. (a) (1) A local jurisdiction, by ordinance, may make a violation of a local law relating to the unlicensed cultivating, manufacturing, producing, processing, preparing, storing, providing, donating, selling, delivering, or distributing of cannabis or cannabis products, including, but not limited to, an ordinance adopted under Section 26200, subject to an administrative fine or penalty. The local jurisdiction shall set forth, by ordinance, the administrative procedures that govern the imposition, enforcement, collection, and administrative review by the local jurisdiction of those administrative fines or penalties. The ordinance shall specify the amount or range of amounts of the administrative fine or penalty, as determined by the local jurisdiction, for each violation subject to these procedures. Where the violation would otherwise be an infraction, the administrative fine or penalty shall not exceed three times the amount of the license fee required under this division for the relevant activity per day of unlicensed operation.
REGISTERED SUPPORT:
Rural County Representatives of California (RCRC) (sponsor)
California Cannabis Industry Association
California State Association of Counties (CSAC)
League of California Cities
San Bernardino County
REGISTERED OPPOSITION:
Real Estate Coalition (unless amended):
California Association of Realtors
California Credit Union League
California Escrow Association
California Land Title Association
California Mortgage Association
California Mortgage Bankers Association
Escrow Institute of California
United Trustees Association
Analysis Prepared by: Vincent Chee / B. & P. / (916) 319-3301
In Martin v. Riverside County Dept. of Code Enforcement (2008) 166 Cal.App.4th 1406, 1411-1412, the court held that "Government Code section 53069.4 provides for alternative procedures for challenging an administrative decision like a ruling on a code violation, either by a de novo appeal to the superior court to be heard by a judge or a subordinate judicial officer or by a petition for writ of mandate under Code of Civil Procedure sections 1094.5 and 1094.6." ↑
Discussed in Hearing
42SEC
Assembly Floor
50SEC
Senate Standing Committee on Appropriations
4MIN
Senate Standing Committee on Judiciary
6MIN
Senate Standing Committee on Business, Professions and Economic Development
1MIN
Assembly Floor
6MIN
Assembly Standing Committee on Judiciary
11MIN
Assembly Standing Committee on Business and Professions
Bill Author
Bill Co-Author(s):