Personal Cultivation: the risks, consequences and laws.

There is a great deal of confusion about personal cultivation, medical and recreational, and there is a lot of misinformation out there. Many people believe you can do what you want because it is “constitutional.” Many others believe a “red card” with an expanded plant count allows to you cultivate whatever you are allowed. There are several overlapping state and local rules which impact personal cultivation. I write this in hopes that you and your friends will get the true facts and not the “word on the street.” It is my goal that your personal freedom and exercise of your marijuana rights do not result in any legal problems, criminal or civil. Please feel free to share this with anyone you know who could benefit from this information.

Because of the complex ways these constitutional, state, and local laws interact, I wanted to share this summary for your information so that you are as legal as you hope and believe you are in your personal cultivation. As you will see, there are numerous statutes and policies in place to regulate marijuana within the State of Colorado. However, these regulations can be met with diligent and responsible cultivation practices. There are also numerous criminal and civil risks involved in marijuana use, possession, and cultivation that you should be aware of which are included below. If you have any questions about this research or seek additional information not included below, please do not hesitate to contact our office for an appointment. You can also stay on top of these ever-changing laws by following our blog and newsfeed which contains up to the minute information about marijuana issues: www.marijuanalawscolorado.com.

Colorado State Law

Every discussion about Colorado marijuana law starts with the Colorado Constitution, which affords certain, limited medical and recreational marijuana cultivation rights.

A. Amendment 20:

In 2000, voters of the State of Colorado passed Amendment 20 to the state Constitution which effectively legalized limited amounts of medical marijuana for patients and their primary caregivers. Amendment 20 authorizes a patient who has been issued a Medical Marijuana Registry Identification Card, or that patient’s primary caregiver who has been identified on the patient’s Medical Marijuana Registry Identification Card, to possess “no more marijuana than is medically necessary to address a debilitating medical condition.” Colo. Const. art. XVIII, § 14(4)(a). The law sets a presumptive limit on the quantity of medical marijuana a single patient or caregiver may possess by limiting legal marijuana use to “no more than two (2) ounces of a usable form of marijuana; and no more than six (6) marijuana plants, with three (3) or fewer being mature, flowering plants that are producing a usable form of marijuana.” Id. Think of it like this, every one with a medical card has a chronic, debilitating medical condition and Amendment 20 presumes cultivation of 6 plants and possession of up to 2 ounces is enough for any medical marijuana patient.

Currently, primary caregivers may be listed as a “cultivating or transporting primary caregiver for no more than five patients on the medical marijuana program registry at any given time.” Colo. Rev. Stat. § 25-1.5-106(8). Patients, on the other hand, “shall have only one primary caregiver at any given time” and any patient who has “designated a primary caregiver for himself or herself may not be designated as a primary caregiver for another patient.” Id. Absent exceptional circumstances, a primary caregiver may only provide for the needs of up to 5 patients. For a primary caregiver this means the constitutionally presumptive limit for cultivation is 30 plants (6 plants x 5 patients), and 36 plants if the caregiver is also a patient. From a criminal law perspective, cultivation of 6 plants for a patient or 30 plants for a primary caregiver with 5 patients affords the patient and/or caregiver “exception to criminal law” which is a very strong legal defense.

However, should a Colorado medical marijuana patient or primary caregiver cultivate or possess more than two ounces of a usable form of marijuana or cultivate more than six plants per patient, an affirmative defense for medical necessity may apply. Pursuant to the Colorado Criminal Code, “affirmative defense” means that you can and likely will be prosecuted for felony cultivation if you cultivate more than the presumptive limits (30 plants). I know there are people who have cultivated within their red card exception limits, but do not count on “lightning striking twice in the same place.” Law enforcement has grown both more knowledgeable and aggressive in the last few years toward marijuana cultivation. This is likely in response to the lawsuit from our neighboring states for all the illegal marijuana being daily transported out of state.

Returning to the distinction between affirmative defenses and exception to criminal law. Exception to criminal law essentially means that the criminal law does not apply to your cultivation activities. An affirmative defense assumes you have committed a crime, cultivation of more than the presumptive limits, but have a legally valid excuse. One example of affirmative defense is in the case of murder. If someone breaks into your home with the intent to murder you or your family, you may be inclined to use deadly force against the intruder. If you succeed in killing the intruder, you will likely be arrested and charged with murder. At your murder trial, your attorney would raise an affirmative defense for either: (1) defense of self, (2) defense of others, or both. Colo. Rev. Stat. 18-1-706. Regardless of which affirmative defense you and your attorney choose to raise, presenting this type of defense does not negate the fact that you killed someone, but it may provide an excuse or justification to the jury for why you acted in such a manner.

Applying the affirmative defense analysis to the charge of cultivation, let us assume you are prosecuted for cultivating more than the presumptive limits (30 plants) and within the limits of your red card expanded plant court. The DA will present the case that you cultivated more than 30 plants. You will then be able to raise and prove an affirmative defense that “such amounts were medically necessary.” Under Amendment 20, patients or primary caregivers with more than two ounces of marijuana or six plants may raise an affirmative defense in court if they are charged with violating the state law but can show that the amount they possess is “medically necessary to address the patient’s debilitating medication condition.” Colo. Const. art. XVIII, § 14(2)(a). To raise this affirmative defense, a patient or primary caregiver must show: “(I) The patient was previously diagnosed by a physician as having a debilitating medical condition; (II) The patient was advised by his or her physician, in the context of a bona fide physician-patient relationship, that the patient might benefit from the medical use of marijuana in connection with a debilitating medical condition; and (III) The patient and his or her primary care-giver were collectively in possession of amounts of marijuana only as permitted under this section.” Id.

This medical necessity affirmative defense analysis starts with the doctor’s recommendation, which the doctor will be required to justify from medical treatment perspective. This will likely be difficult since the doctor will not likely recall why the recommendation was made and was likely paid more money for the recommendation, rather than recommending additional plants based on medical considerations. You should be prepared to present other evidence about how sick your patients truly are when compared to other medical patients. The key here is to make sure you only cultivate expanded plant counts for the truly ill, not a person who merely paid the doctor more money for the expanded plant count recommendation. In order to establish the medically necessity affirmative defense, you must first present some credible evidence on that issue, for example the expanded plant count recommendation. Colo. Rev. Stat. 18-1-407(1). The courts have interpreted this “credible evidence” to mean that “a properly raised affirmative defense is treated as though it were another element of [the] offense [at issue].” People v. Garcia, 113 P.3d 775, 784 (Colo. 2005). Once you establish the medical necessity affirmative defense, the DA must take on an additional burden to disprove that the affirmative defense beyond a reasonable doubt.

Under Amendment 64, an adult over 21 is permitted to cultivate 6 plants (3 in flower, 3 in vegetative state) and possess 1 oz. of usable marijuana. There are no provisions to cultivate more than 6 plants or to combine your cultivation efforts with others. This is sometimes referred to as a “collective.” This is not typically a legal arrangement and it is highly likely that the collective is diverting marijuana to the black market. It could theoretically be possible to join with a few friends and share in the costs and expenses of a cultivation room. But, it is very important to make sure that no one sells their personal marijuana to anyone and that each set of 6 plants is clearly marked by person and not strain. Should law enforcement investigate they will presume the grow is black market and prosecute each of the cultivators. Any evidence of sale (money, packaging equipment, scales, etc.) will be used to support the DA in making a case that the grow was black market.

B. Colorado Criminal Consequences:

We need to start with the premise that marijuana cultivation is illegal under Colorado law and Amendments 20 and 64 afford only defenses to criminal prosecution. I understand this statement runs contrary to popular thinking, but the criminal laws are still on the books and still vigorously prosecuted. Remember, law enforcement does not like marijuana legalization and will use every means at its disposal to prosecute personal cultivation since they are powerless to prosecute the marijuana businesses.

There are many criminal consequences you open yourself up to if you operate a greater-than-six-plant marijuana cultivation. For instance: (1) To unlawfully dispense, sell, distribute, or possess with intent to manufacture, dispense, sell, or distribute marijuana or marijuana concentrate, or to attempt to do so, is a level 1 drug felony with a mandatory minimum sentence of eight years in prison and a five thousand dollar fine if the amount of marijuana is more than fifty pounds or the amount of marijuana concentrate is more than twenty-five pounds; (2) Unlawfully cultivating, growing or producing more than 30 medical marijuana plants outside of the protections of Amendment 20 is a level 3 drug felony and carries a prison sentence of up to four years. Colo. Rev. Stat. 18-18-406(2-3). If you find yourself in one of these situations, you should contact a skilled criminal attorney immediately.

C. Recent state laws regarding expanded plant counts:

The first of two laws affecting personal cultivation deals with plant count limits regardless of where the marijuana is cultivated (at home, a warehouse, a farm, etc.). The second law affects residential cultivation. Both laws create limits on Amendment 20 and 64. Many people assert that these two laws are unconstitutional and that they have a right to cultivate whatever a doctor permits or that as recreational cultivators they can combine with others and cultivate 6 plants per person without regard to any cap on the total number of plants. Unfortunately, as discussed above, Amendment 20 and 64 do not afford a general constitutional right to cultivate marijuana. The Courts repeatedly stated that the constitutional rights afforded by Amendment 20 and 64 are only the rights to criminal defenses in the context of criminal cases. That leaves the state and local governments free to limit where, when and how much a person is able to cultivate. There have been no serious legal challenges and the current state of the law upholds these local and state cultivation limitations.

Let us begin with state cultivation limitations. Effective January 1, 2017, a new state law prohibits primary caregivers from “cultivating, transporting, or possessing more than thirty-six plants unless the primary caregiver has one or more patients who, based on medical necessity, have an extended plant count.” Colo. Rev. Stat. 25-1.5-106(8.6). A primary caregiver cultivating more than thirty-six plants must register this information with the state licensing authority’s registry. However, even with the extended plant counts, “a primary caregiver shall not cultivate more than ninety-nine plants.” Id. at (8.6)(II)(B)(b). The ninety-nine-plant limit is strictly enforced, as only medical marijuana businesses licensed and properly authorized by state and local governments may cultivate more than ninety-nine plants. Id. at (8.5)(II)(b).

Next, in an effort to prevent marijuana diversion into the illegal market, Colorado lawmakers passed House Bill 17-1220 which sets a statewide limit of twelve (12) marijuana plants per residential home. The new law, which takes effect January 1, 2018, states, “regardless of whether the plants are for medical or recreational use, it is unlawful for a person to knowingly cultivate, grow, or produce more than twelve marijuana plants on or in a residential property.” In this context, “residential property” means a single structure providing one or more independent living facilities and any land surrounding the structure that is owned in common with the structure. Residential properties may be located in, for instance, agricultural or industrial zones where there is an “independent living facility.”

Though the 12-plant limit is the new statewide maximum, exceptions are permitted for medical marijuana patients and caregivers. Patients and caregivers may grow up to twenty-four (24) plants on a residential property with proper state registration and local approval for additional plants. But local governments must approve the additional plants. Local governments are heading in the exact opposite direction and are further limiting, not expanding, residential cultivation. Be advised that if the local plant total is less than 12 or 24 plants, you must comply with the local limitation. It is not possible here to deal with all of the local regulations and it is important to look into local ordinances in order to stay compliant. The rule may be hidden in zoning rules and charts, business licensing provisions and other areas. If you have any difficulty learning about the local limitations, you should consult with qualified legal counsel to make sure you know what is expected from your local authorities. Be advised that violation of this state law can result in criminal, not just civil, prosecution including felony charges.

Federal Law

No discussion of marijuana law would be complete without a discussion about federal marijuana laws and policies. Even though the State of Colorado has decriminalized marijuana use and possession, marijuana is still illegal under federal law. According to the Controlled Substances Act (CSA), marijuana is a schedule 1 drug, making marijuana possession, distribution and use felonies with a mandatory prison sentence. For example, under the CSA possessing fifty (50) marijuana plants carries a sentence of up to five (5) years in prison. Many, many people believe that as long as you cultivate less than 100 plants it is not federally illegal or that you will not be prosecuted. That is completely untrue. Under the CSA, the federal government can prosecute you for a single joint or even a seed.

Up until this point, the federal government has opted not to enforce federal laws regarding marijuana use and possession for operations functioning under state law. However, this choice is left to the federal executive branch (headed by the President) and may be changed at any time. If the federal government chooses to enforce the CSA, it is possible that all marijuana growers and users would be subject to federal prosecution. Such a change in policy could happen with little or no warning.

If you have any questions about this research or seek additional information not included above, please do not hesitate to contact our office. Again, you can stay on top of the legal issues and any marijuana news through our blog and newsfeed: www.marijuanalawscolorado.com.

Stay legal and stay safe.

Marijuana Regulations Completed, a few points.

Since my last blog entry, there have been a few changes to HB-1317, the bill which regulates retail marijuana businesses. The bill has now passed both the House and Senate and is on the Governor’s desk for his signature. Once that is completed, the bill will become a law (those of you familiar with School House Rock already know that!). The changes include:

1. There will be a 9 month waiting period for new businesses, instead of 90 days. If you do not already own a MMJ business, you will be able to apply on 9/1/14. Prospective business owners can file a notice of intent to own a MJ business after 1/1/14 and must provide a deposit that will be applied to the application fee. The deposit amount is not specified.
2. The bill expressly outlaws the “collective model” and requires that any sale or other distribution of MJ be done only by a licensed MJ business.
3. The MED is required to implement a “seed to sale” tracking system for all MJ sold. This idea was previously shelved by MED.
4. No delivery of MJ.
5. There is a THC content limit for edible MIP products.

There are two other bills that were passed, HB-1318 and SB-283. Here 5 things you should know about each of them.

HB-1318, “the tax bill”:

1. There is a 15% excise tax that will be assessed for wholesale sales of MJ to Retail Marijuana Centers (RMC).
2. The excise tax will be based on an average market price established by the State. The tax must be collected by the wholesaler and a report for such sales filed once a month.
3. The excise tax will apply to the transfer of MJ from the grow to the retail center even if the business owns both the grow and retail center.
4. There is a 10% State sales tax for MJ sold by the RMC. This can be raised to 15% without voter approval.
5. The sales tax will be shared with local governments, but local governments are also permitted to impose additional local taxes.

SB-283, the miscellaneous bill:

1. Local governments may ban the use of butane and compressed gas for use in extraction.
2. The bill creates a responsible vendor program that will require training. There will be created a “certified trainer” and all vendors must be certified.
3. Marijuana business contracts shall not be void despite the federal argument that all such businesses and their contracts are illegal.
4. There will be no exception to the state smoking laws that will permit a private club or other such business to permit MJ use.
5. No open containers of MJ in vehicles. The MJ must be in an unopened, sealed container or be placed in the trunk of your car.

State Rules on Amendment 64 Completed

The State of Colorado recently passed HB-13-1317, 1318 and Senate Bill 13-283.  The bills create a licensing a regulatory scheme for recreational marijuana businesses and address the interaction with medical marijuana businesses.  The bills can be viewed in their entirety here:

http://www.leg.state.co.us/clics/clics2013a/csl.nsf/fsbillcont3/807A035CD583C95E87257B1F005CDB59?Open&file=1317_01.pdf

20 things you should know about the bill:

1. The Medical Marijuana Enforcement Division (MMED) will be changed to the Marijuana Enforcement Division (MED) and  will regulate both MJ and MMJ.
2. Existing MMBs can apply to convert after 10/1/13 and the conversion application is $500.  The businesses can begin operation as a MJ business after 1/1/14, assuming that local approval is also obtained during this timeframe.  The MMB may continue to operate as a MMJ business until such time as the application is approved at both the state and local level.  It is not clear whether the businesses themselves or the people who are currently licensed will be permitted to convert.�
3.  Everyone else can apply 9 months later, i.e., 9/1/14 and the application is $5000;
4. There is no vertical integration requirement for recreational marijuana businesses (RMB) after the first 9 months, i.e., 9/1/14.  After that, growers can be “grow only” businesses and sell to all RMBs and to infused product manufacturers.  RMBs can sell to anyone over the age of 21.  Existing MMJ business cannot be separated into a cultivation operation and retail sales operation.
5. Local approval still required for all MJ and MMJ business licensing.
6. In order to work at and/or manage a RMB, the person must be a Colorado resident and a person must be a 2 yr. state resident to own such a business.
7.  The RMB can sell up to ¼ oz  to non-residents over the age of 21.
8. The RMB cannot sell ANY product containing alcohol or nicotine.  This may impact some MIPs who make alcohol-based tincture.�
9. All MJ must be packaged and sealed at the point of sale in a non-transparent container.  There are also stringent labeling standards, including THC and cannabinoid content.
10. MED will issue further regulations by 7/1/13.
11. There is a 1000 ft. buffer between schools, alcohol and drug treatment facilities.  The definition of a school includes a residential child care facility.
12. Once the MMB elects to convert to a RMB, the plants and product automatically become retail plants and product.  It i possible that there will be limits on the number of plants or amount of product the business can possess.  The City of Boulder is proposing its own limits (500 plants) and the state law supports such limitation decisions by local licensing authorities.
13. A MMB can operate both a medical and non-medical MMB at same location only with local approval do so and would be required to create physical separation between the two businesses, including separate entrances.
14. An employer is not required to tolerate MJ use in the work place and each business is free to set its own drug policy, including zero tolerance.
15. There are a lot of lot of marketing prohibitions and you should carefully review this section if you plan to advertise.
16. There will be created a licensure class system. The licenses could be issued based on square footage, number lights, amount of lumens, the measured “lit canopy,” the number of plants or combination. Stay tuned.
17. MED is permitted to limit the number of licenses issued and also gives this power to local authorities.
18. Failure to pay taxes can result on denial – be careful to be current with the IRS.
19. The lifetime drug felony ban on ownership was changed to 10 years from the date the matter was concluded, including the completion of probation or parole.
20. Licensee may move his permanent location to any other place in Colorado with local approval.  It is unclear whether this can be made part of the conversion process or is to be done after the process is complete.

Medical Marijuana and Probation

Well, it finally came to pass. On February 2, 2012, the Colorado Court of Appeals issued a decision on the use of medical marijuana on probation. Unfortunately, the Court of Appeals determined that probations CANNOT use medical marijuana while on probation. The case, People v. Watkins, 2012CA15, was decided on the basis that a probationer cannot violate any law during probation.

The Court of Appeals reasoned that the phrase “cannot violate any law during probation” includes violation of federal law. As you should all know by now, any use, possession, sale, or cultivation of marijuana, medical or otherwise, continues to be a violation of federal criminal law.

It is curious that the Court of Appeals fell back on federal criminal law to resolve this question. The Colorado state courts, including the Court of Appeals, do not have the authority to enforce federal criminal law. It would seem that, in order to rely on federal criminal law, it would be necessary to have a contemporaneous federal criminal case.

Additionally, it stands to reason that Colorado courts are limited to enforcing Colorado criminal laws. As you know, Amendment 18/20 creates an exception to criminal law where patients and/or their primary caregivers are acting within the parameters of the Amendment. Probation is a creature of Colorado criminal law. As such, it is arguable that the Colorado court cannot impose any restrictions on compliant medical marijuana activities as a condition of probation – again, a creature of Colorado criminal law.

It appears that things are going to get worse before they get better for medical marijuana patients. Colorado courts are now relying on federal law to justify their limitations on medical marijuana activities, rather than enforcing Colorado laws using Colorado statutes and constitutional amendments. I suggest you contact your U.S. congress person and U.S. senator to let them know that a federal change is needed if Colorado medical marijuana laws are to have any meaning or protection.

6/20/11 meeting with Dan Hartman/MMED, practical issues

Yesterday I met with the Director of the Medical Marijuana Enforcement Division to answer the numerous questions I receive from the businesses we represent. The issues and the answers are set forth below:

1. Transfer of “banned” businesses to new jurisdictions:

Will there be continued operation of the transferred business based on prior 7/1/10 compliance? Yes, as long as there is local approval. Mr. Hartman recommends that the “banned business” request withdrawal of the application, along with an explanation of the banned/transfer reason. If the application is not withdrawn, it must be denied. Then, once the transfer and local approval are complete, you can request that the withdrawal of the application be rescinded. Once the rescinded application is reinstated, you may resume operation.

Also, if the banned/tranferred business is sold before the transfer is complete, the business will not be able to operate. Mr. Hartman’s reasoning is that this provision is designed to help people who suffered local ban, not speculators who seek to profit from this unfortunate situation.

Further, both the MMC/MIP and OPC must be transferred, not the OPC only.

2. Security system and other ongoing compliance issues:

Are there approved providers? No, and there will not be any. Mr. Hartman states that the specifications are published and must be followed. As long as the specifications are followed, the provider of the service is not relevant. He did state that ADT appears to be ready to supply MMC/MIP/OPC security needs.

What if the system is not in place yet? This will be ok, as long was you have something in place and are under contract by 7/1/11to meet the specifications.

What if the system is not adequate, will there be a chance to correct it? Yes.

Does the security system have to have its own room? No, as long as the DVR(s) is locked in a secure box, bolted into the wall, floor, etc.

3. Point of Sale system:

Are there approved providers? No, but various companies are prepared for compliance, (MJ Freeway is one example). Mr. Hartman advised that “a big chief tablet” is ok, as long as you are tracking the necessary information. What the state requires will be published shortly and I will send out an email link to this information.

4. Employees deemed unacceptable by MMED:

Will there be an opportunity to terminate the employee if deemed unacceptable? Yes.

5. Ongoing construction, permits, etc.:

Does all construction work need to be completed by 7/1/11? No. You must be making a concerted effort to complete the work and permits should be requested by 7/1/11. However, if the local licensing authorities require the work to be completed and deny you for this reason, the state will not interfere and will enforce the denial.

6. License fees:

What are the licensing fees? These are not set, but MMCs will be less than the application fee, OPCs and MIPs will be more (perhaps even double). The license will be good for one year and will begin when the state notifies you that the fee is due and payable.

7. Key employees:

What is a key employee versus support? The answer is “case by case” and the answer will turn on how the employee is used, whether there is any contract with employee in place (key), and the businesses decision to classify someone as an “independent contractor” will have little or no bearing.

Also, payment of growers “by the pound” will be under serious scrutiny. If that is the arrangement, Mr. Hartman advises that this arrangement makes the grower an owner and the business will be required to revise its ownership structure, corporate documents, etc., accordingly. Mr. Hartman advises that you should pay the grower a salary and that bonuses are ok.

8. Business under denial/appeal, i.e., City of Boulder:

What is the state going to do about businesses locally denied (not banned), where an appeal is pending and the local licensing authority permits continued operation? This is a tricky one. The state will honor the continued operation order until such time as the business prevails or appeals to the district court. An order from the district court permitting continued operation will be required. The license will be issued by the state as a “provisional license” and the state will await final outcome of the case.

Further, Mr. Hartman advised that he will be speaking with the City of Boulder to discuss this matter (and others). Stay tuned, as I expect this policy to change (for better or worse) once the situation between the City and the State is further clarified.

9. Transactions of businesses:

Do all of the various sales, mergers and tranfers of MMBs have to be completed by 7/1/11? No. However, be reminded that any transfer requires (1) local approval; (2) state approval, including a meeting with the parties with MMED before the sale/merger/transfer occurs. Simply put, you need MMED’s blessing before the transaction can occur.

10, Sales below cost/free:

Does the “sales below cost or for free” provisions of HB1043 preclude the incentive programs, i.e. “buy one get one, free pre-rolled,” etc.? No, and there will be new rules developed in connection with the industry to help clarify this situation.

However, Mr. Hartman advised that MMED will take a very dim view of businesses “flooding” the market with cheap meds to drive out other businesses. Beware.

11. Independent contractors, i.e., trimmers, growers, etc.

What do independent contractors, vendors, etc., need to file with MMED? Everyone needs some sort of license to handle meds. If you are an employee, the employee application needs to be completed. If you are a vendor, the vendor application:

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251721405112&ssbinary=true

If you are an independent contractor, i.e,, trimmer, etc., you need to complete an occupational license application. It is unclear what this means. If you fall into this category, we can schedule a meeting with MMED to discuss your situation.

Again, the relationship between the individual and the MMB will be viewed by its substance, not what you call it. Be careful.

12. Contracts between MMC and MIP:

Is there an approved contract, recommended language or necessary inclusions for the contracts between MMCs and MIPs? No. The contract should deal with the amount paid for the trim, the weights to be delivered, the parties, etc. Also, be advised that the parties cannot pay “in product.”

13. Inventory and MIP sales:

Does the trim, etc., sold to MIPs count against allowable inventory, 70/30? Yes and no. If the MMC sells trim to the MIP, i.e., 10 lbs, and the MIP makes the infused product and provides all of the infused product to the MMC, then no. However, if the 10 lbs. sold to the MIP is then used to make infused products sold to other MMCs, even if 1/2 of the infused product goes back to the selling MMC, then all 10 lbs. counts against the selling MMCs 70/30 inventory numbers. Be aware that this is somewhat different from prior information provided by MMED.

14. MIP issues, misc.:

Does the use of alcohol in infused products require a liquor license required? Not as far as MMED is concerned. However, Mr. Hartman advised that the Liquor board may have a very different view and a big problem with this. I suggest a candid discussion with the liquor board be had before proceeding further with alcohol infused product manufacturing.

Does the liquid weight versus MMJ weight count against an MMC’s allowable inventory? This was not a clear answer. In general, no. However, if the MIP product is clearly labled “2 ounces, 1 gram, etc. MMJ in each product,” Mr. Hartman advises that he would have no choice but to count it against allowable inventory.

What about MIPs in jurisdictions with no MIP approval process, i.e., Fort Collins? If there is no local approval, there will be no state approval. Sorry to all the Fort Collins’ MIPs.

15. Expanded plant and ounce recommendations:

Is a MMC ok to honor the recommendation and incorporate patient center assignments of this variety into its allowable inventory? Yes.

Does the MMC have any duty to investigate the propriety of the recommendation? No. However, Mr. Hartman advises that the expanded plant recommendations will be under great scrutiny by the Department of Health and that doctor recommendations patterns are likely to be tracked. In these cases, the doctors will be required to medically justify the recommendations. Be advised that this is going to be a big deal

If patient designates “self and MMC” can both the patient and MMC grow 6 plants? This answer was not clear. In general, yes, but it appears that this issue has not been considered by MMED and is likely to see revision in the near future.

16. Sales Taxes:

What is the form of monthly reporting to MMED? This will be handled by the sales tax folks, not the MMCs/MIPs. However, monthly, not quarterly payments are required.

17. Other:

Does a scale need to be attached and incorporated into the point of sale system? No.

Can someone own a % of both a MMC and a doctor referral business even if no $ is exchanged between MMC and the doctor referral business? No. Mr. Hartman believes this is not appropriate. I am not sure if his opinion will be legally supported, since the only prohibition is payments from MMCs to doctors/doctor referral businesses.

Can investors receive a % of the profit? Yes, but there are then deemed owners, not investors and must follow all of the MMC/MIP ownership rules (residency, felony rules, and local/state approval of their ownership).

Can existing MMC’s apply for new retail locations in 2011? No. New OPC locations in 2011? No.

How is the MMC going to verify patient center assignment? MMED and the Department of Health are working on this. For now, keep track yourself, including accurate records

What will MMED do about MMCs/MIPs currently in litigation between partners for pending licensees? Mr. Hartman will issue the license provided both parties are license eligible. So, if the litigation is between owners with felonies and owners without felonies, the license will be denied. The same is true for residents and non-residents. Mr. Hartman wants notice of the lawsuit and periodic status reports. He does not want copies of pleadings.

Lifetime drug felony; reiteration: 35 day rule

CRS 12-43.3-307(1) (h) states that a license shall not be issued to a “person who has discharged a sentence in the five years immediately preceeding the application date for a conviction of a felony or a person who at any time has been convicted of a felony pursuant to any state, federal law regarding the possession, distribution, manufacturing, cultivation or use of a controlled substance.” This change added “manufacturing” and “cultivation” to the license prohibiting offenses and did not limit the lifetime prohibition.

However, the state may grant a license to “an employee if the employee has a state felony (not federal) conviction based on possession or use of a controlled substance that would not be a felony if the person were convicted of the offense on the date he or she applied for licensure.” I anticipate this was amended to: (1) ensure that employees were specifically included in the prohibition portions of this section; and (2) to recognize the reclassification of marijuana charges from felonies to misdemeanors. I assume that the reclassification would have to be in the state where the conviction was entered. This means that if the conviction was in Florida and is still a felony in Florida, but not in Colorado, it is still a felony for purposes of licensure.

Finally, I want to take the opportunity to re-clarify the “35 day” rule based on ongoing confusion. Up to this point, the State prohibited selling to new patients who were not in possession of their card (see, MMED’s 9/27/10 Memorandum regarding its position on the 35 day rule, http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251659488306&ssbinary=true).

CRS 12-43.3-402(5) was changed to state that “the employee of the medical marijuana center making the sale shall verify that the purchaser has a valid registration card… or a copy of a current and complete new application for the medical marijuana registry administered by the Department of Public Health and Environment that is documented by a certified mail return receipt withing the preceding 35 days and a valid identification card that matches the name on the registration card.” The “certified mail return receipt” is the green postcard that is signed by the Department mailed to the sender, not the USPS receipt for paying the certified mail postage fee. Also, in such a case, the employee must contact the Department of Public Health and Environment to determine whether the purchaser’s application has been denied. This section does not apply to license renewal applications and these patients must have their card.

New MMJ regulations, HB 1043

Despite partisan bickering regarding other issues facing Colorado, the legislature passed HB 1043 with virtually no opposition (what a change from last summer!). Please understand that HB 1043 amends CRS 12-43.3-101 et seq. (HB 1284) and the two documents should be read together to fully understand MMJ business and caregiving regulations.

In any event, the following is a summary of the new law applicable to MMJ businesses:

1. Pending licensees will be able to continue to operate while local and state licensing authorities are completing the pending application process;
2. There will be no new licenses issued until 7/1/12, i.e., another 1 year moratorium;
3. Businesses issued their licenses will be apply to apply for changes to the license, a new license or license type (i.e., size of center). It is not clear whether this means the licensed businesses can add OPCs or MMCs. I will speak with the state and let everyone know what “change” and “new” mean to MMED;
4. Pending licensees in “banned” municipalities can apply for a new license with a local licensing authority and transfer to the new location. Good news for all those folks who encountered fear, ignorance and local politics! It is unclear how this will actually work and whether the business can continue to operate post-transfer. I will speak with the state and let everyone know;
5. MMCs (not MIPs) can sell up to 6 clones to patients and up to 1/2 of the # of plants that exceed 6, based on a doctor’s recommendation. The definition of clone or “immature plant” is 8″ x 8″ in a 2″ x 2″ container and has nothing to do with rootedness;
6. The 2 year residency requirement only applies to owners and no longer applies to employees;
7. MMCs can sell to patients with an application, ID and recommendation while the state is processing the application (no more 35 day rule), However, the MMC is required to call CDPHE and confirm that the application has not been denied. Also, MMCs cannot sell to a patient with a renewal application, only a new application;
8. MMCs can use an automated dispensing machine. I am not sure why anyone would want to, since patient loyalty and customer service is what will distinguish success from failure;
9. Laboratories must obtain an occupational business license (according to MMED, the same applicant licensee requirements will apply) and CANNOT have any interest in a MMC or MIP;
10. No sales below cost or giving MMJ away unless it is to a patient who has been determined indigent by the State. This means no more “give aways” or “two for one” deals. Spread the word, so that this practice is ceased and everyone is on the same page;
11. An OPC can provide MMJ to more than 1 MMC, as long as the holder of the OPC is a common owner of all of the MMCs. What this really means is that multiple MMC locations, commonly owned, can use one OPC facility;
12. MIP products must be sealed and labeled. It is not yet clear what the label will say or whether the packaging must conceal the product inside;
13. The bill confirms that MIPs can never sell MMJ and are limited to growing up to 500 plants (there is a business need waiver process for more than 500 plants); and
14. No agricultural zoned cultivation. It is unclear whether the “no agricultural zone” issue applies to PCs or patients. I will look into this; and
15. MMCs can trade MMJ in equal amounts, but the MMJ cannot be “re-traded.”

Regarding primary caregivers:

1. The PC must register with the State the location of the cultivation and provide registration information for the PC’s patients;
2. The PC must comply with local regulations, including zoning. For instance, Boulder only permits care/cultivation for 1 patient in a residential zone. This provides the local governments some “teeth” for their widely different primary caregiver rules;
3. PCs may delegate duties to another PC, provided that the original PC maintains an ongoing relationship with the patients.

1st lawsuit against MMED successful

It has been awhile since my last blog. As you may have guessed, I am working hard on MMC/MIP compliance issues, including numerous meetings with the new director of the Medical Marijuana Enforcement Division, Mr. Dan Hartman. Over the last several months working with Mr. Hartman and his predecessor, Mr. Matt Cook, I have developed an insight into how MMED may address each situation. This allows me to understand how MMED is “thinking” and help predict future rules and changes.

In any event, there are times when we must stand up for our rights and challenge the laws as written and as interpreted by MMED. Accordingly, in December, I filed the first lawsuit against MMED based its denial of a client’s MMC business application. The lawsuit was over whether an applicant must file an MMC business application by 8/1/10 or “within 30 days of receiving local approval.” The statute provided for both, alternative, filing deadlines. MMED determined that only the 8/1/10 filing deadline was applicable and issued a cease and desist order. However, “the law is the law” and MMED entered into a settlement which accepted the application filing and my client was permitted to open their business. While not every case will be successful, it is always important to try.

2011 MMJ Update

As most of you know, DOR has drafted various rules regarding regulation of MMJ businesses. Public comment is invited and there is hearing scheduled on 1/27 and 1/28. For those of you who do not have a copy, you can view the document at:

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251678551504&ssbinary=true.

Next, further legislation is being proposed for MMJ businesses, caregivers, doctors and patients. The bill, HB 11-1043 is attached in PDF format. A summary of the proposed changes include:

1. Only owners of MMCs and/or MIPs will be subject to the 2 year residency requirement;
2. MIPs that cultivate their own medicine will be limited to 500 plants;
3. Primary Caregivers can work with more than 5 patients upon the granting of a waiver from the Department of Revenue. This class of Primary Caregiver will be licensed (there may be fees…) and would be able to transact with the patients of another Primary Caregiver of the same class (more than 5 patients). This section does not appear to be well thought out and is likely to be substantially revised;
4. Primary Caregivers licensed to serve more than 5 patients will be required to register the cultivation site with the Department of Revenue, disclose the patients they are working for and comply with zoning and building regulations. This appears to be limited to PCs who received a waiver to care for more than 5 patients, but could likely include all Primary Caregivers. This could result in elimination of home-based cultivation;
5. MMCs will be permitted to sell MMJ below cost or give MMJ to indigent patients. It is unclear whether this will impact the 2 oz. per patient inventory limits;
6. MMCs will be permitted to sell clones. According to the recent Dept. of Revenue rules (see above) clones are treated as plants and subject to inventory limits (6 plants per primary center assignment) and cannot be sold to patients;
7. MMCs will be able to “trade” medicine in equal amounts with another MMC, but not “re-traded.” It is unclear whether this will be included in the 30% allowable sales;
8. The prohibition for owners with a felony drug conviction in their lifetime will be reduced to a conviction within 5 years of the completion of the sentence;
9. The location of the Optional Cultivation Premises will no longer be confidential;
10. Multiple MIPs will be permitted to operate from a single facility by obtaining a “manufacturing facility license.” It is unclear how this will be enforced, fees, etc.;
11. Patients will be permitted to purchase medicine while their application is being processed (no more 35 day waiting period);
12. Labeling of medicine is going to be addressed; and
13. Doctor’s with “conditional” licenses will be permitted to request that they be able to recommend MMJ.

Finally, I trust that all of you are prospering in the New Year and that you are currently in compliance with the rules governing your business. Be reminded that compliance will be measured from 7/1/10 and you should not expect any leniency if you are not compliant at all times.

MMJ Division/Matt Cook update

I have been corresponding with Mr. Cook on various legal issues that continue to arise. I wanted to share with you his responses.

1. Is the sale of the 30% inventory from MMC to MMC retail or wholesale? A: Wholesale and that normal business records must be kept. I suggest that you verify both local approval and timely filing of the state application with any MMC you deal with. Make a copy of any licensing if possible.

2. Can MMCs sell to caregivers on behalf of the caregiver’s patients? A: No, unless the patient is homebound AND has a waiver from CDPHE.

3. If you failed to meet the 9/1 certification deadline, can you continue to operate? A: No. However, if you met the 7/1 local approval/pending local approval deadline and filed the state application by 8/1, you are still considered “established” and do not forfeit your application fees. Nonetheless, you must cease operation until the state rules on your application.

4. Will there be a license fee(s) in addition to the application fee(s)? A: Yes. The license fees will be set in the spring. Start saving your money (what little you have) now!

5. Does the 2 year residency requirement also apply to employees and managers? A: Yes. As you know, I do not necessarily agree with this, but that is the state’s interpretation until a district court judge rules otherwise. You should also assume the felon criminal conviction rules for owners applies equally to employees and managers.

6. Can municipalities impose a different standard for who is permitted to own a MMJ business? A: No, it is the state who decides this issue. For instance, Fort Collins enacted an ordinance prohibiting someone from owning a MMC/MIP if the have a felony within 10 years of the completion of the sentence (the state limits this to 5 years).

7. Can municipalites use a different standard of measurement for the distance between MMCs, schools, day cares, etc.? A: No, the “pedestrian access” standard set from in CRS 12-43.3-308(d)(II) will be applied.