Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state of, or on the storage, use, or other consumption in this state of, tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law requires a person desiring to engage in or conduct business as a seller within this state to file with the California Department of Tax and Fee Administration an application for a permit for each place of business, as prescribed.

This bill would make nonsubstantive changes to that provision.

Date of Hearing: April 23, 2024

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Marc Berman, Chair

ABPCA Bill Id:AB 3248

Author:(Essayli) – As Amended Ver:March 21, 2024

NOTE: This bill is double referred and if passed by this Committee will be re-referred to the Assembly Committee on Revenue and Taxation.

SUBJECT: Cannabis excise tax: rate reduction.

SUMMARY: Reduces the state’s excise tax on purchasers of cannabis or cannabis products from 15 percent of the gross receipts of a retail sale to 5 percent, beginning January 1, 2025.

EXISTING LAW:

1. Enacts the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to provide for a comprehensive regulatory framework for the cultivation, distribution, transport, storage, manufacturing, processing, and sale of medicinal and adult-use cannabis. (Business and Professions Code (BPC) §§ 26000 et seq.)
2. Establishes the Department of Cannabis Control (DCC) within the Business, Consumer Services, and Housing Agency (previously established as the Bureau of Cannabis Control, the Bureau of Marijuana Control, the Bureau of Medical Cannabis Regulation, and the Bureau of Medical Marijuana Regulation), for purposes of administering and enforcing MAUCRSA. (BPC § 26010)
3. Requires the DCC to provide waivers and deferrals for application fees, licensing fees, and renewal fees for equity applicants and other specified licensees. (BPC § 26249)
4. Establishes the Cannabis Tax Law. (Revenue and Tax Code (RTC) §§ 34010 et seq.)
5. Provides the Department of Tax and Fee Administration (CDTFA) with responsibility for administering and collecting taxes on cannabis businesses. (RTC § 34013)
6. Imposes a cannabis excise tax upon purchasers of cannabis or cannabis products sold in California at 15 percent of the gross receipts of any retail sale by a cannabis retailer, effective January 1, 2023. (RTC § 34011.2(a)(1))
7. Imposes a cultivation tax on all harvested cannabis that enters the commercial market at a rate of $9.25 per dry-weight ounce for cannabis flowers and $2.75 per dry-weight ounce for cannabis leaves; suspends the imposition of this tax effective July 1, 2022. (RTC § 34012)
8. Beginning in Fiscal Year 2025-26 and every two years thereafter, requires the CDTFA, in consultation with the Department of Finance, to adjust the cannabis excise tax rate by the additional percentage that the CDTFA estimates will generate an amount of revenue equivalent to the amount that would have been collected in the previous fiscal year if the cultivation tax had not been suspended, to a maximum total rate of no more than 19 percent of the gross receipts of retail sale, rounded to the nearest one-quarter of 1 percent and in effect the following July 1. (RTC § 34011.2(a)(2))
9. On or before May 1, 2025, and each May 1 every two years thereafter, requires the CDTFA, in consultation with the Department of Finance, to estimate the amount of revenue that would have been collected in the previous fiscal year pursuant to the cultivation tax had it not been suspended. (RTC § 34011.2(a)(3))
10. Requires each cannabis retailer is to collect the cannabis excise tax from the purchaser and remit that tax to the CDTFA. (RTC § 34011.2(c))
11. Provides that the cannabis excise tax is in addition to the sales and use tax imposed by the state and local governments. (RTC § 34011.2(e))
12. Prohibits the sale of cannabis or cannabis products unless the cannabis excise tax has been paid by the purchaser at the time of sale. (RTC § 34011.2(g))
13. Until December 31, 2025, authorizes a licensed cannabis retailer that has received approval from the DCC for a fee waiver to retain vender compensation in an amount equal to 20 percent of the cannabis excise tax. (RTC § 34011.1)
14. Provides that the cannabis excise tax collected by a cannabis retailer, and any amount not returned to the purchaser that is not tax but was collected from the purchaser under the representation by the cannabis retailer that it was tax, constitutes debt owed by the cannabis retailer to the state. (RTC § 34012.3)
15. Provides for the administration and collection of cannabis taxes by the CDTFA. (RTC § 34013)
16. Requires the cannabis excise tax to be paid to the CDTFA quarterly on or before the last day of the month following each quarterly period of three months. (RTC § 34015)
17. Establishes the California Cannabis Tax Fund (Tax Fund) in the State Treasury wherein cannabis tax revenues are deposited. (RTC § 34018)
18. Specifies that money in the Tax Fund shall be disbursed by the Controller in the following order of funding priority:
    1. Funds sufficient to reimburse departments for any reasonable costs incurred through the implementation of the state’s cannabis laws that are not otherwise reimbursed.
    2. $10 million to a public university in California annually to research and evaluate the implementation and effect of the state’s cannabis laws, including the impact of legal cannabis on public health; the public safety implications of legal cannabis; the effectiveness of certain drug treatment programs; whether additional antitrust protections are needed in the recreational cannabis market; the economic impacts of the state’s cannabis laws; and how to best tax cannabis based on potency, and the structure and function of licensed cannabis businesses; among other topics of study.
    3. $3 million to the Department of the California Highway Patrol (CHP) annually to establish and adopt protocols to determine whether a driver is operating a vehicle while impaired by the use of cannabis.
    4. $10 million beginning with the 2018-19 fiscal year, then increasing by $10 million each year until reaching $50 million annually, to GO-Biz to award community reinvestments grants to local health departments and at least 50 percent to qualified community-based nonprofit organizations to support job placement, mental health treatment, substance use disorder treatment, system navigation services, legal services to address barriers to reentry, and linkages to medical care for communities disproportionately affected by past federal and state drug policies.
    5. $2 million annually to the University of California, San Diego Center for Medicinal Cannabis Research to further its objectives.
    6. Remaining funds deposited into sub-trust accounts as follows:
       1. 60 percent into the Youth Education, Prevention, Early Intervention and Treatment Account, disbursed to the DHCS for programs for youth that are designed to educate about and to prevent substance use disorders and to prevent harm from substance use. The programs shall emphasize accurate education, effective prevention, early intervention, school retention, and timely treatment services for youth, their families, and their caregivers.
       2. 20 percent into the Environmental Restoration and Protection Account, disbursed to the Department of Fish and Wildlife and the Department of Parks and Recreation to fund activities related to the natural resources and wildlife implications of legal cannabis.
       3. 20 percent into the State and Local Government Law Enforcement Account, disbursed to the CHP to fund education regarding cannabis-impaired driving and to the Board of State and Community Corrections (BSCC) to award grants to local law enforcement to address the public health and safety implications of locally legalized cannabis.

(RTC § 34019)

1. Prohibits the Legislature from changing the cannabis tax revenue funding allocations before July 1, 2028. (RTC § 34019(h))
2. Requires the Controller to additionally disburse, to the extent available, an amount necessary to enable funds disbursed to the sub-trust accounts to be equal to the 2020–21 fiscal year baseline. (BPC § 34019.01)
3. Requires the DCC, in consultation with the CDTFA and the Department of Finance, to submit a report to the Legislature on the condition and health of the cannabis industry in the state, including the health of the Cannabis Tax Fund, any future projections of Cannabis Tax Fund revenues, and the impacts of the suspension of the cultivation tax, including whether that suspension resulted in a decrease in retail cannabis prices or increased participation in the legal cannabis market. (RTC § 34020.1)
4. Provides that state cannabis are in addition to any other tax imposed by a city, county, or city and county. (RTC § 34021)

THIS BILL:

1. Reduces the cannabis excise tax from 15 percent to 5 percent, effective January 1, 2025.

FISCAL EFFECT: Unknown; this bill is keyed fiscal by the Legislative Counsel.

COMMENTS:

Purpose. This bill is sponsored by the author. According to the author:

“The cannabis market has been on a decline in recent years, as retailers and purchasers alike have been deterred from participating in California’s legal cannabis market due to excessive taxes. In response to these conditions, I introduced AB 3248, which would lower the excise tax on cannabis purchasers from 15% to 5%. This bill will help to revitalize the legal cannabis market by providing much needed tax relief with the goal of deterring purchasers from participating in the illegal cannabis market, which has caused significant harm through environmental degradation and extremely hazardous working conditions that have led to multiple deaths.”

Background.

Brief History of Cannabis Regulation in California. Consumption of cannabis was first made lawful in California in 1996 when voters approved Proposition 215, or the Compassionate Use Act. Proposition 215 protected qualified patients and caregivers from prosecution relating to the possession and cultivation of cannabis for medicinal purposes, if recommended by a physician. This regulatory scheme was further refined by SB 420 (Vasconcellos) in 2003, which established the state’s Medical Marijuana Program. After several years of lawful cannabis cultivation and consumption under state law, a lack of a uniform regulatory framework led to persistent problems across the state. Cannabis’s continued illegality under the federal Controlled Substances Act, which classifies it as a Schedule I drug ineligible for prescription, generated periodic enforcement activities by the United States Department of Justice. Threat of action by the federal government created persistent apprehension within California’s cannabis community.

After several prior attempts to improve the state’s regulation of cannabis, the Legislature passed the Medical Marijuana Regulation and Safety Act—subsequently retitled the Medical Cannabis Regulation and Safety Act (MCRSA)—in 2015. MCRSA established, for the first time, a comprehensive statewide licensing and regulatory framework for the cultivation, manufacture, transportation, testing, distribution, and sale of medicinal cannabis. While entrusting state agencies to promulgate extensive regulations governing the implementation of the state’s cannabis laws, MCRSA fully preserved local control. Under MCRSA, local governments may establish their own ordinances to regulate medicinal cannabis activity. Local jurisdictions could also choose to ban cannabis establishments altogether.

Not long after the Legislature enacted MCRSA, California voters passed Proposition 64, the Adult Use of Marijuana Act (AUMA). The passage of the AUMA legalized cannabis for non-medicinal adult use in a private home or licensed business; allowed adults 21 and over to possess and give away up to approximately one ounce of cannabis and up to eight grams of concentrate; and permitted the personal cultivation of up to six plants. The proponents of the AUMA sought to make use of much of the regulatory framework and authorities set out by MCRSA while making a few notable changes to the structure still being implemented.

In the spring of 2017, SB 94 (Committee on Budget and Fiscal Review) was passed to reconcile the distinct systems for the regulation, licensing, and enforcement of legal cannabis that had been established under the respective authorities of MCRSA and the AUMA. The single consolidated system established by the bill—known as the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA)—created a unified series of cannabis laws. On January 16, 2019, the state’s three cannabis licensing authorities—the Bureau of Cannabis Control, the California Department of Food and Agriculture, and the California Department of Public Health—officially announced that the Office of Administrative Law had approved final cannabis regulations promulgated by the three agencies respectively.

In early 2021, the Department of Finance released trailer bill language to create a new Department with centralized authority for cannabis licensing and enforcement activities. This new department was created through a consolidation of the three prior licensing authorities’ cannabis programs. As of July 1, 2021, the DCC has been the single entity responsible for administering and enforcing the majority of MAUCRSA. New regulations went into effect on January 1, 2023 to effectuate the organizational consolidation and make other changes to cannabis regulation.

Cannabis Taxation under Proposition 64. The AUMA and MAUCRSA imposed a 15 percent excise tax on sales of cannabis and imposed a tax on cannabis cultivation at a rate of $9.25 per dry-weight ounce of cannabis flowers and $2.75 per dry-weight ounce of cannabis leaves that are harvested and brought to market. These taxes are distinct from state sales and use taxes, which apply to recreational cannabis, as well as any taxes imposed by local governments. One of the principal arguments made by the proponents of Proposition 64 was that legalizing cannabis would result in significant tax revenue for use by state and local governments.

Excise tax and cultivation tax revenues are deposited into a special fund referred to as the California Cannabis Tax Fund and are then allocated for a variety of purposes in order of priority. First, expenditures incurred by state agencies responsible for implementing cannabis laws are to be paid for through the Tax Fund. This includes reasonable costs incurred by the CDTFA for administering and collecting the taxes, not to exceed 4 percent of revenue; reasonable costs incurred by the DCC for licensing and enforcement programs; reasonable costs incurred by the Department of Fish and Wildlife, the State Water Resources Control Board, and the Department of Pesticide Regulation for carrying out their environmental protection duties under the state’s cannabis laws; and other state agencies. Allocations to reimburse these state entities shall only be made to the extent the entities are not otherwise reimbursed for their costs.

After reimbursement, Tax Fund revenue is next allocated to fund a series of specific programs designated under Proposition 64. These programs are provided with precise amounts of funding totaling $25 million, appropriated annually until the 2028-29 fiscal year. This includes $10 million to a public university to research and evaluate the implementation and effect of legal cannabis and make recommendations to the Legislature and Governor regarding possible changes to the law; $3 million to the CHP to establish and adopt protocols to determine whether a driver is operating a vehicle while impaired; $10 million to GO-Biz, which subsequently increases by an additional $10 million each fiscal year until reaching a total disbursement of $50 million annually beginning in the 2022-23 fiscal year, to administer a community reinvestments grants program; and $2 million to the University of California San Diego Center for Medicinal Cannabis Research to further the objectives of the center, including the enhanced understanding of the efficacy and adverse effects of cannabis as a pharmacological agent.

After each of the above allocations have been made in sequential order, totaling $25 million, any remaining revenue in the Tax Fund is divided into sub-trust accounts according to a percentage outlined by Proposition 64. The division is as follows:

1. 60 percent of the remaining revenue is deposited in the Youth Education, Prevention, Early Intervention and Treatment Account, and disbursed by the Controller to the DHCS for programs for youth that are designed to educate about and to prevent substance use disorders and to prevent harm from substance use.
   
2. 20 percent of the remaining revenue is deposited in the Environmental Restoration and Protection Account, and disbursed by the Controller as follows:
   
   1. To the Department of Fish and Wildlife and the Department of Parks and Recreation for the cleanup, remediation, and restoration of environmental damage in watersheds affected by cannabis cultivation and related activities including, but not limited to, damage that occurred prior to enactment of Proposition 64, and to support local partnerships for this purpose. The Department of Fish and Wildlife and the Department of Parks and Recreation may distribute a portion of the funds they receive through grants.
   2. To the Department of Fish and Wildlife and the Department of Parks and Recreation for the stewardship and operation of state-owned wildlife habitat areas and state park units in a manner that discourages and prevents the illegal cultivation, production, sale, and use of cannabis and cannabis products on public lands, and to facilitate the investigation, enforcement, and prosecution of illegal cultivation, production, sale, and use of cannabis or cannabis products on public lands.
   3. To the Department of Fish and Wildlife to assist in funding the watershed enforcement program and multiagency taskforce to facilitate the investigation, enforcement, and prosecution of these offenses and to ensure the reduction of adverse impacts of cannabis cultivation, production, sale, and use on fish and wildlife habitats throughout the state.
3. 20 percent of the remaining revenue is deposited in the State and Local Government Law Enforcement Account and disbursed by the Controller as follows:
   
   1. To the CHP for conducting training programs for detecting, testing and enforcing laws against driving under the influence of alcohol and other drugs, including driving under the influence of cannabis.
   2. To the CHP to fund internal programs and grants to qualified nonprofit organizations and local governments for education, prevention, and enforcement of laws related to driving under the influence of alcohol and other drugs, including cannabis; programs that help enforce traffic laws, educate the public in traffic safety, provide varied and effective means of reducing fatalities, injuries, and economic losses from collisions; and for the purchase of equipment related to enforcement of laws related to driving under the influence of alcohol and other drugs, including cannabis.
   3. To the BSCC for making grants to local governments to assist with law enforcement, fire protection, or other local programs addressing public health and safety associated with the implementation of Proposition 64; the BSCC is prohibited from making grants to local governments which have banned the cultivation or retail sale of cannabis.
   4. The Department of Finance shall determine the allocation of revenues between the agencies; provided, however, beginning in the 2022–23 fiscal year the amount allocated to CHP for training programs shall not be less than $10 million annually and the amount allocated to the CHP for grants shall not be less than $40 million.

Early Efforts to Reform State Cannabis Taxation. In its original analysis of Proposition 64, the Legislative Analyst’s Office (LAO) stated that the initiative’s fiscal effects were “subject to significant uncertainty.” However, the LAO suggested in the Proposition 64 voter guide that over time, the legal sale of legalized cannabis could result in state and local tax revenues the LAO said “could eventually range from the high hundreds of millions of dollars to over $1 billion annually.” However, early tax revenues collected following the implementation of the AUMA signaled that Proposition 64’s promise of substantial tax revenue was not to be immediately fulfilled. The Governor’s Budget Summary for the 2018-19 fiscal year stated that “cannabis excise taxes are expected to generate $175 million in 2017-18 and $643 million in 2018-19.” The January 10, 2019 release of the Governor’s Proposed Budget predicted that approximately $355 million in excise tax revenue would be collected by the end of the fiscal year–nearly half of what was originally anticipated.

This situation was not unique to California. For example, Massachusetts officials projected $63 million in tax revenue for the first year of that state’s cannabis legalization, but as of March 1, the state had collected only $5.9 million. Advocates for California’s legal cannabis industry attributed the lackluster tax revenues on larger struggles for licensed operators to thrive under the requirements of MAUCRSA. Many specifically pointed out that the rate of taxation itself was part of the problem, as products sold on the illicit market were able to be priced much lower than products in the legal market.

Given that fewer businesses initially entered the newly licensed cannabis industry than anticipated and many jurisdictions still banned cannabis locally, the illicit market posed a significant challenge to the success of MAUCRSA. Multiple bills were subsequently introduced to lower the state’s excise tax and suspend the cultivation tax, including bills championed by the original authors of MCRSA. Supporters of these bills argued that because the high tax rate on cannabis businesses is a leading cause for this slow industry growth, a tax levy would ultimately lead to a larger scale of taxable activity and thus greater revenue.

Supporters of tax reform pointed to how when the State of Washington first legalized cannabis, it initially had higher tax rates; when that state lowered their rate and simplified their system, the state eventually began generating greater revenue. New Frontier Data provided estimates for an earlier iteration of this bill that “a 4 percent reduction in the state excise tax would expect to see an increase in legal participation by 119,000 consumers, generating an estimated additional $278 million in retail revenue.” However, it was pointed out that the State of Washington was not a perfect allegory for California—originally, Initiative 502 in that state levied a 25 percent tax on cannabis at three separate points in the supply chain: a 25 percent tax on producer sales to processors, another 25 percent tax on processor sales to retailers, and a third 25 percent tax on retailer sales to customers. The change made in Washington was to replace this three-tiered system of taxation with a single 37 percent tax on final sales of cannabis. Not only was this a much more significant reform to the state’s legal scheme for cannabis, but both the resulting excise tax rate of 37 percent remained much higher than California’s 15 percent rate.

It was also noted that state-level taxes on the cultivation and sale of cannabis in California represent only a portion of the overall effective tax rate for any given cannabis operation. Under Proposition 64 and MAUCRSA, local governments are permitted to levy their own taxes on a cannabis business, and many jurisdictions have imposed additional taxes that greatly exceed the assessments adjusted by this bill. For example, the County of Monterey imposed its own cultivation tax of $15 per square foot. The City of Berkeley cut its local excise tax on cannabis sales from 10 percent to 5 percent. In 2017, the City of Campbell approved a measure to impose an initial tax of 7 percent on cannabis businesses that could be raised through local ordinance to a tax rate as high as 15 percent.

Between 2018 and 2022, multiple pieces of legislation attempted to reform the state’s taxation of cannabis, but none were successful, with the majority of bills failing to pass either the Assembly Committee on Revenue and Taxation or the Assembly Committee on Appropriations. Concerns were raised about the potential short-term impact on cannabis tax revenue that would be caused by a tax cut; the State of California had transferred $135 million in General Fund loans to the Cannabis Control Fund, which needed to be paid back. Additionally, the 2019 Governor’s proposed budget summary stated that “the Administration is deferring allocations for Proposition 64 programs until the May Revision, when more updated revenue data will be available.”

In December 2019, the LAO released a report to the Legislature titled: How High? Adjusting California’s Cannabis Taxes. This report, required as part of Proposition 64, was aimed at making recommendations for adjustments to the state’s cannabis tax rate to achieve three goals: (1) undercutting illicit market prices, (2) ensuring sufficient revenues are generated to fund the types of programs designated by the measure, and (3) discouraging youth use. The report went over several different types of taxation, ultimately recommending that the state adopt a potency-based tax or tiered ad valorem cannabis tax. The LAO acknowledged that the Legislature was unlikely to enact the scale of reform recommended in the report, and stated: “If the Legislature decides not to adopt a potency-based or tiered ad valorem cannabis tax, we nevertheless recommend that the Legislature eliminate the cultivation tax. In this case, we recommend that the Legislature set the retail excise tax rate somewhere in the range of 15 percent to 20 percent depending on its policy preferences.”

Enacted Cannabis Tax Reforms. On January 10, 2022, Governor Gavin Newsom announced his proposed 2022-23 Budget. The budget summary provided an update on cannabis tax allocations and the continued funding of programs under the DCC. The Budget summary then stated that “further, the Administration supports cannabis tax reform and plans to work with the Legislature to make modifications to California’s cannabis tax policy to help stabilize the market; better support California’s small licensed operators; and strengthen compliance with state law.” This announcement was made as several legislators had introduced their own bills to reform the state’s cannabis tax laws.

While there appeared to be early consensus around the need to suspend (or zero out) the state’s cultivation tax, there was significant disagreement among stakeholders regarding what reforms should be enacted to the imposition of the state’s excise tax. One frequently cited issue was that MAUCRSA required taxes to be collected at the point of distribution, not sale, requiring the tax to be imposed against the “average market price of any retail sale.” The CDTFA was then required to “mark up” the average price of cannabis at retail, resulting in uncertainty and volatility in the effective impact of taxation. There were numerous discussions about whether to shift tax collection to the point of sale, with some representatives of labor opposing that change.

Another point of contention was about the impact that a reduction of state cannabis taxes would have on programs funded through revenues from those taxes. Advocates for programs focused on child care and for youth prevention, as well as advocates for environmental clean-up programs, formally opposed proposals to reduce the taxes that funded those programs. Other stakeholders weighed in with strong legal opinions that changes to cannabis taxes specified in the AUMA would violate Proposition 64, which gave the Legislature only limited authority to amend provisions of the initiative relating to taxation that would result in a reduction of Tax Fund allocations.

Over the next several months, the Governor’s office convened several meetings with numerous stakeholders. Language was then drafted as part of the budget process to effectuate the agreement reached between the Administration and the Legislature. The resulting trailer bill, enacted as part of the Budget Act of 2022, ultimately made a series of changes to the imposition and collection of cannabis taxes. Specifically, Assembly Bill 195 (Committee on Budget) suspended the state’s cultivation tax, effective July 1, 2022. The trailer bill maintained the 15 percent cannabis excise tax, as required by Proposition 64, until June 30, 2025; however, the trailer bill moved collection of that tax from the distributor to the point-of-sale, thus eliminating the need for CDTFA to assess an estimated “mark up” for purposes of excise tax collection.

The trailer bill required the CDTFA to adjust the excise tax every two years by a rate that would generate an amount of revenue equivalent to what would have been collected from the cultivation tax. Finally, the trailer bill also set a baseline of new cannabis tax revenue for Allocation 3 entities (those entities that use cannabis revenues to operate youth programs related to substance use education, prevention, and treatment, environmental programs, and law enforcement) at $670 million in 2022-23, 2023-24, and 2024-25, which may be satisfied with tax revenues, or General Fund backfill if needed. The Budget Act of 2022 set aside $150 million General Fund to backfill any lost revenue.

This bill would seek to further revise provisions of MAUCRSA relating to cannabis taxation, following multiple years of complex negotiations with numerous concerned stakeholders and experts, by effectively changing the number “15” to the number “5” beginning in 2025. The author believes that doing so will lead to the defeat of the illicit market. If this bill continues to proceed through the legislative process, there will likely be unresolved questions about the practicality, legality, and appropriateness of the measure.

Prior Related Legislation.

AB 195 (Committee on Budget, Chapter 56, Statutes of 2022) suspended the cannabis cultivation tax and shifted collection of the cannabis excise tax from the distributor to point-of-sale.

AB 2506 (Quirk/Lackey) of 2022 would have eliminated the cannabis cultivation tax and increased the excise tax by an amount necessary to compensate for any loss of revenue. This bill died in this committee without a hearing.

AB 2792 (Rubio/Garcia) of 2022 would have reduced the rate of the cannabis excise tax to 8 percent and made additional reforms. This bill died in this committee without a hearing.

AB 1948 (Bonta) of 2020 would have reduced the cannabis excise tax to 11 percent and suspended the cannabis cultivation tax. This bill died in the Assembly Committee on Revenue and Taxation.

AB 286 (Bonta) of 2019 would have reduced the cannabis excise tax to 11 percent and suspended the cannabis cultivation tax. This bill was held on suspense in the Assembly Committee on Appropriations.

AB 3157 (Lackey) of 2018 would have reduced the cannabis excise tax to 11 percent and suspended the cannabis cultivation tax. This bill was held on suspense in the Assembly Committee on Appropriations.

POLICY ISSUE(S) FOR CONSIDERATION:

Questionable Legality. Proposition 64 expressly prohibited the Legislature from changing how money in the Cannabis Tax Fund is allocated until July 1, 2028. Beginning on that date, the Legislature will be authorized to change those allocations by majority vote to further the purposes of Proposition 64. However, Proposition 64 prohibits any changes to the allocations from resulting in a reduction of funds to GO-Biz or the sub-accounts from the amount allocated to each account in the 2027-28 fiscal year. These provisions of Proposition 64 have been interpreted by some stakeholders as legally prohibiting any reduction of the excise tax that would result in a reduction of tax revenue for purposes of the programs funded through that revenue under MAUCRSA.

REGISTERED SUPPORT:

None on file.

REGISTERED OPPOSITION:

None on file.

Analysis Prepared by: Robert Sumner / B. & P. / (916) 319-3301