Medical Marijuana: State of Michigan Outlines New Procedures and Requirements for Medical Marijuana Facility Licensing
In less than a week, the state of Michigan will start accepting medical marijuana license applications. The Department of Licensing and Regulatory Affairs (LARA) released emergency rules on Monday, December 4, 2017, outlining procedures and requirements for potential licensees. The emergency rules are effective for at least the next six months, and could be extended for another six months as LARA continues the promulgation process for permanent rules.
Many of the items addressed in the rules have already been discussed by the Bureau of Medical Marihuana Regulation (BMMR) during licensing board meetings occurring earlier this year. Nevertheless, and by way of background, last year the state enacted its Medical Marijuana Facilities Licensing Act (MMFLA) to regulate dispensaries and clarify the legality of edible products in Michigan. The law allows licensed dispensaries to operate in communities that choose to allow them. Growers, processers, testing facilities, and transporters are also subject licensure and regulation under the act.
While the MMFLA took effect last year – December 20, 2016 — it included a built-in delay in implementation of 360 days to enable the state to establish the licensing system required by the Act. A person cannot apply to the state for a license of any kind under the MMFLA until Friday, December 15, 2017. And, no one can apply to the state for a license of any kind under the MMFLA unless the municipality where the person is located adopts an ordinance authorizing that type of facility.
Applying for a Medical Marijuana Facilities License
First and foremost under the newly released emergency rules, those seeking a license under the MMFLA will be able to submit applications on December 15, 2017. Applicants will have to pay a $6,000 fee per license application and undergo extensive background checks for anyone who has ownership interest. The background checks will include submitting fingerprints and a handwriting exemplar to the state.
The rules require licensee to meet certain capitalization requirements. The requirements range from $150,000 to $500,000. A retail operation — called a provisioning center – carries a $300,000 capitalization requirement, which must be proven through attested financial statements.
Only 25 percent of the capital required needs to be in liquid assets, cash or cash equivalents – easily converted to cash. Up to 15 ounces of usable marijuana or 72 marijuana plants may be used toward the capitalization requirements.
LARA has broad authority to deny a license. A licensee can be denied if an applicant fails to comply with the rules or if the applicant is operating a facility after December 15 without a license. That said, facilities that are operating in a municipality that has licensed them can operate after December 15, may be permitted to continue operations, but must submit documentation showing the local municipality allowed them to operate. The rules provide no mechanism to appeal an adverse licensing decision, or to contest the imposition of fines and penalties.
Currently operating facilities with municipal licensure must apply for a state license no later than February 15, 2018. If those facilities do not have a state license by June 15, 2018, their operation will be considered unlicensed activity and could be referred to law enforcement. Although the rules do not address the situation were licensure is not met by June 15 due to government delay.
Details on Licensing
Licenses will be up for renewal annually. Applicants and licensees will be required to report a variety of information to LARA, including changes of location, contact information, members, managers and adverse reactions to a medical marijuana product. Theft or other criminal activity on the premises will have to be reported to the department within 24 hours of occurrence.
LARA has sweeping authority to inspect, examine and audit records of the licensee and enter the facility without notice to inspect. The department is allowed to charge civil fines of up to $5,000 for an individual and $10,000 or an amount equal to daily gross receipts against a licensee for violations. Given the number and various requirements regarding inventory control and the specifications for the physical facility itself, the risk of fines and penalties is no insubstantial.
During the first 30 days a state-operating license is issued to a licensee, marijuana products will need be entered into a statewide monitoring system and inventory will need to be tagged and packaged.
Class C grower licenses, which would allow 1,500 plants, for example, may be stacked under the rules. And licensed growers, processors and provisioning centers will be permitted to operate at the same location.
Security Requirements for Marijuana Facilities
Applicants will be required to submit security plans. Facilities will be required to maintain an alarm system and a 24-hour video surveillance system. Licensed-facilities will also have to maintain visitor logs.
Advertising Stipulations for Marijuana Facilities
Licensees will not be permitted to advertise any marijuana products in a way that is visible to the general public. However, that does not apply to advertisements that are not about a specific product.
Products also will be prohibited from being marketed toward minors, and edible products cannot be associated with cartoons or other things that would appeal to minors. Edible products also cannot be easily confused with commercially sold candy.
Federal Regulation of Marijuana Facilities
Of course, while specified medical use of marijuana is permitted under state law, its use is still illegal under federal law, and we don’t know for sure what the federal government will do in the future with regard to these specified uses. The status quo is that federal attention is diverted away from uses that are “authorized” by and operated in compliance with state laws. Attorney General Jeff Sessions, however, has made his view clear: “Good people don’t smoke marijuana.” On the other hand, the industry seems to be growing at a pace that exceeds the federal government’s ability (time and resources) to do much about it.
Fraser Trebilcock understands the regulatory aspects of the marijuana industry along with the legal risks. Our attorneys are available to advise you on issues related to state law and compliance.
Fraser Trebilcock attorney Michael P. Donnelly has years of experience handling matters ranging from major insurance fraud to intellectual property disputes. He formerly served three years as the President of Fraser Trebilcock and is currently the Managing Partner of the Detroit office. He can be contacted at 313.965.4968 or email@example.com.
Fraser Trebilcock attorney Paul V. McCord has more than 20 years of tax litigation experience, including serving as a clerk on the U.S. Tax Court and as a judge of the Michigan Tax Tribunal. Paul has represented clients before the IRS, Michigan Department of Treasury, other state revenue departments and local units of government. He can be contacted at 517.377.0861 or firstname.lastname@example.org.