On September 21, 2016, Governor Rick Snyder signed the Medical Marihuana Facilities Licensing Act(1), a collection of bills that drastically changed the existing rules and regulations applicable to medical marijuana in Michigan. The new laws expand the medical marijuana industry and establish a regulatory and licensing scheme applicable to all phases of the marijuana industry. The history of medical marijuana in Michigan is not long and is continually changing, so while the recreational use of it remains illegal, this new act is adding new dimensions to its story.
History of Medical Marijuana in Michigan
In 2008, Michigan legalized medical marijuana by enacting the Michigan Medical Marihuana Act (MMMA). At the time, only 12 other states in the Union had legalized medical marijuana. In the MMMA, the Legislature declared that the people of the State of Michigan found that marijuana had legitimate medical usefulness. The MMMA allowed medical marijuana only “to treat or alleviate a registered qualifying patient’s debilitating medical condition or symptoms associated with the debilitating medical condition.” It is important to note that, while several states have recently legalized recreational use of marijuana, recreational use of marijuana remains illegal in Michigan, as well as under Federal law.
The MMMA created two categories of individuals that may use and/or possess medical marijuana. First, a “Qualified Patient” (defined as someone who has been diagnosed by a physician as having a debilitating medical condition) can possess a limited amount of marijuana for medical use only, and they may grow up to 12 marijuana plants for their exclusive use. Second, a “Primary Caregiver” (defined as someone who is at least 21 years old, who has agreed to assist with a patient’s medical use of marijuana, and who has not been convicted of certain felonies) is allowed to grow medical marijuana for themselves and up to five connected Qualified Patients.
The Medical Marihuana Facilities Licensing Act
In September 2016, Michigan enacted legislation to further regulate Michigan’s growing medical marijuana industry. The Medical Marihuana Facilities Licensing Act (MMFLA) creates a highly-regulated system that controls and tracks medical marijuana from the grow operations, to transportation, all the way through the sale to medical marijuana patients. The MMFLA requires an annual license for the operation of the following medical marijuana facilities:
- Grower: a Michigan entity that cultivates, dries, trims, or cures and packages marijuana for sale to a processor or provisioning center. There are three classes of growers: Class A is allowed to grow one to 500 plants, Class B is allowed to grow 500 to 1,000 plants, and Class C is allowed to grow 1,000 to 1,500 plants.
- Processor: a Michigan entity that purchases marijuana from a grower and that extracts resin from the marijuana or creates a marijuana-infused product to sell and transfer in packaged form to a provisioning center.
- Provisioning Center: a Michigan entity that purchases marijuana from a grower or processor and sells, supplies, or provides marijuana or marijuana-infused products to registered qualifying patients, directly or through the patients’ registered primary caregivers.
- Secure Transport: a Michigan entity that stores marijuana and transports it between marijuana facilities for a fee.
- Safety Compliance Facility: a Michigan entity that receives marijuana from a marijuana facility or registered primary caregiver, tests it for contaminants and for tetrahydrocannabinol and other cannabinoids, returns the test results, and may return the marijuana to the marijuana facility.
Under the MMFLA, municipalities have the power to choose whether to allow any medical marijuana facilities in their jurisdiction. It is an “opt-in” provision, meaning that if a municipality wants to allow a facility, it must enact a specific ordinance authorizing the operation. If a municipality does nothing, the law states that medical marijuana facilities are not allowed. If a municipality allows a facility in its jurisdiction, the municipality is authorized under the MMFLA to charge an annual, nonrefundable fee of up to $5,000 and adopt further ordinances related to the facility (for example, zoning), as long as it is within the municipality’s jurisdiction.
Economic Impact and Money Issues
Early estimates say the MMFLA can generate between $44 to $64 million a year in revenue for the State of Michigan, and will create an estimated 10,000 jobs. That being said, there are still issues related to money made from medical marijuana. As marijuana is listed as a controlled substance under Federal law, money generated from the production or sale of marijuana is illegal federally. Banks are required to comply with Federal law, so taking money from medical marijuana companies requires multiple additional steps to ensure compliance. Also, certain banks have refused to accept money from marijuana business. For example, Colorado chartered its own bank to address this issue, but their application to open a master account with the Federal Reserve (which is required for a bank to operate) was rejected.
In addition, there are tax issues to consider. Legal marijuana businesses are limited to what they can deduct, and they pay taxes under Section 280E of the Internal Revenue Code, the same as illegal drug traffickers because marijuana is still illegal federally. This means the IRS can tax medical marijuana business up to 70 percent.
The Medical Marihuana Licensing Board will begin accepting applications in December 2017. Marijuana dispensaries currently in operation are required to obtain a license or they will be shut down. The application process is complex and often confusing. It is wise to seek out the advice of an attorney who can assist you with this process.
- Certain Federal laws, as well as the Michigan Medical Marihuana Act and the Medical Marihuana Facilities Licensing Act spell “marijuana” with an “h.”