As many of you do, our firm revisits the alignment of our actions and values annually. As such, you may be contemplating organized, budgeted giving, making a positive impact, and fulfillment of a higher purpose. (If you’ve read the book Conscious Capitalism, this will sound familiar. If not, we recommend picking up a copy and reading it!) In that spirit, we offer guidance for businesses wishing to provide compassionate care donations to patients. Keep reading to find out how it works for your part of the supply chain and what you can do to get started. 
 
(Note: This law is not yet operative, so don’t start donations just yet. This is an introductory summary to help you see the big picture of how different licensees can participate.)

A Little History

More than twenty years ago, California passed the Compassionate Use Act (Proposition 215), with the intent of ensuring that seriously ill Californians could access and use medical cannabis. Cultivators and others in the cannabis industry have been donating cannabis low-income and sick patients for many years. However, the 2016 ballot measure that created our current system of regulated adult use and medicinal cannabis (Proposition 64) failed to create a workable system for the continuation of compassionate use donations. The structures that facilitated donations to medicinal patients became complicated and expensive; for example, businesses would need to pay high tax rates (cultivation and excise), even on donated cannabis.

In October of last year, in response to committed and sustained pressure by advocates, Governor Newsom signed SB 34, the Dennis Peron and Brownie Mary Act, regulating “the distribution of donated medicinal cannabis and medicinal cannabis products” and restoring legal and tax-exempt pathways to provide access to medicinal cannabis patients who have difficulty accessing cannabis or cannabis products. The importance of this bill, particularly in the context of California’s history with medicinal cannabis, cannot be understated. It reinstates the pathway for socially conscious businesses to help low-income patients and honor the history of cannabis in this state.

A Quick Guide to Compassionate Use Donations, by License Type

CULTIVATORS
  • Designate cannabis for donation – before it leaves the farm – in the track and trace system.
  • Keep a record of any cannabis designated for donation.
  • For the cannabis that has been designated for donation in track and trace, you will not need to submit cultivation tax to the distributor. Cannabis that will go to retailers for sale to consumers, on the other hand, is subject to the usual taxes.

Other Licensees

  • Donate medicinal cannabis or medicinal cannabis product to a licensed retailer for subsequent donation to a medicinal cannabis patient (exempt from use tax). Make sure you keep the required records to ensure you are exempted from tax liability.
Retailers
  • If the cannabis or cannabis product is being donated by another licensee, you will need to provide that licensee with documentation.
  • Complete additional steps (including recording the inventory and verifying information about the patient and physician) prior to donation to a patient. Refer to SB 34 or call our office for the details.
  • Provide the cannabis or cannabis products to the medicinal patient, up to the amounts specified under HSC 11362.5.
  • Storefront retailers may contract with an individual or organization to coordinate donations on the premises.
  • Delivery-only retailers may provide donations by delivery.
  • You may also donate the use of equipment in compliance with local compassionate use, equity, or other similar program (administered by local jurisdiction).

When Do We Start

SB 34 becomes operational upon the earlier of the following:
  1. When CDFA announces that the Metrc track and trace system is ready to handle compassionate use donations 
  2. March 1, 2020.

Definitions

  • “Medicinal cannabis” or “medicinal cannabis product” means cannabis or a cannabis product, respectively, intended to be sold or donated for use pursuant to the Compassionate Use Act of 1996 (Proposition 215), found in Section 11362.5 of the Health and Safety Code, by a medicinal cannabis patient in California who possesses a physician’s recommendation, or in compliance with any compassionate use, equity, or other similar program administered by a local jurisdiction.
  • “Physician’s recommendation” means a recommendation by a physician and surgeon that a patient use cannabis provided in accordance with the Compassionate Use Act of 1996 (Proposition 215), found at Section 11362.5 of the Health and Safety Code.

This email is provided as informational only and does not constitute legal advice.

If you have any questions about compassionate use donations, please contact your attorney directly or call our main line at 877-257-2442.

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