The Cannabis Agenda: A Closer Look at the 2022 NYS Legislative Session


2021 was a big year for cannabis in NY—and 2022 could see even more movement forward. Last week marked the beginning of the 2022 New York State legislative session, denoting the commencement of the second half of a two-year session. Accordingly, any unpassed legislation will expire upon adjournment of the session in June. And with the governor’s race and numerous state legislative elections heating up, cannabis and related legislative efforts are sure to be a hot topic on the statehouse floor as well as on the campaign trail.


In this week's Tap Root, we take a closer look some proposed legislation which could have big implications for the Empire State's cannabis programs.

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Pending Legislation of Interest

Bill Number(s)

S7518 / Number Not Yet Assigned

Primary Sponsor(s)

Cooney / Lupardo

Subject

Commercial Cannabis Tax Deductions

Introduced on

November 12, 2021 / Unknown

Referred to

Rules / Unknown

Status

In Committee

Legislative Summary

Permits deductions for commercial cannabis activity including the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery, or sale of cannabis and cannabis products, or acting as the holder of an adult-use on-site consumption license.

CCG Analysis

This piece of legislation could alleviate some of the undue tax burdens imposed by 280e, particularly detrimental to retail licensees. The bill would allow for state-level deductions for cannabis activity and seeks to decouple state tax law from federal 280E requirements. State tax law is typically coupled to the federal tax law, meaning that only where the state specifically decouples from the federal law will it differ. As the MRTA did not address decoupling from 280E in the originally enacted legislation, this bill seeks to address an overlooked issue with significant tax implications for industry operators and would allow licensed operators engaging in commercial cannabis activities, including “the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery or sale of cannabis and cannabis products, or acting as the holder of an adult-use on site consumption license,” to deduct expenditures other than costs of goods sold on their state tax filings. Under current federal law, cannabis operators can only deduct costs of goods sold on both their federal and state taxes as 280E prevents operators engaged in business activities with certain controlled substances from deducting expenditures other than costs of goods sold:

No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I or II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

As state law is currently coupled with federal, this prohibition currently applies at the state level as well. The bill would, thus, get rid of this prohibition on the state level, providing some relief in the form of lower New York state taxes (particularly for retailers whose only costs is the cannabis they buy) and may result in more competitive pricing with the illicit market. Federal tax rates, however, will continue to apply, sometimes as high as a 37% marginal rate.

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Bill Number(s)

S6243 / A6543

Primary Sponsor(s)

Hinchey / Fahy

Subject

Grower Energy Efficiency

Introduced on

April 19, 2021 / March 19, 2021

Referred to

Agriculture / Agriculture

Status

In Committee

Legislative Summary

Requires applicants for a license to grow adult-use or medical cannabis to submit an energy efficiency plan to the department of agriculture and markets; sets resource efficiency requirements for such cannabis growers.

CCG Analysis

This piece of legislation was modeled entirely after an Illinois law and mandates the use of specific cultivation equipment. While this legislation was largely an attempt to start the conversation around energy efficiency and environmental responsibility in the cannabis space. That said, the detailed requirements of the legislation, such as the required average threshold on lighting power density (LPD) of 36W/ft2, do not necessarily correspond to industry needs for a successful, high-yielding indoor grow. During a Senate Agriculture Committee hearing on April 26, 2021, the legislation was tabled and did not receive a vote. The bill mandates the development of cultivator energy efficiency plans while mandating resource efficiency requirements. All in all, while the goals of the above-described legislation are noble, the bill, in its current form, fails to account fully for industry needs and trends in connection with energy efficiency.

The legislative intent here is noble; however, the mechanism for achieving the related intended goal of energy efficient and environmentally responsible cannabis cultivation should be largely reexamined as it does not account for industry requirements.

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Bill Number(s)

S6298 / No Same As

Primary Sponsor(s)

Cooney

Subject

Social Equity

Introduced on

April 21, 2021

Referred to

Procurement and Contracts

Status

In Committee

Legislative Summary

Provides that the director of the division of minority and women's business development shall establish a procedure enabling the office to grant temporary certification to minority and women-owned business enterprise applicants which attest in the certification application that the business enterprise is intending to participate in the medical cannabis or adult-use cannabis industries.

CCG Analysis

This would expedite the process for obtaining certification as a minority or women-owned business. The current method for certifying such businesses is found in the Minority and/or Women-Owned Business Enterprise (MWBE) Certification program. From what we understand, this traditional certification method takes approximately one year or more to obtain certification. As applications for adult-use licensure will be prioritized, in part, according to an applicant’s ability to qualify as a minority or women-owned business and applications for licensure will likely be open within the year, the prospect of getting certified via the traditional process prior to applications for licensure becoming available is likely impossible barring some method of expedition. Thus, the development of a separate, cannabis-specific method of certification is needed as reliance on the traditional method would likely impede the state from meeting the legislatively enshrined social equity goals of the MRTA.

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Bill Number(s)

S6700

Primary Sponsor(s)

Cooney / No Same As

Subject

Regional Cannabis Mentors

Introduced on

May 12, 2021

Referred to

Finance

Status

In Committee

Legislative Summary

Provides for regional cannabis mentors to provide support to persons inquiring about, or participating in, the medical cannabis or adult-use cannabis industries; makes related provisions.

CCG Analysis

This legislative would provide mentoring services and the corresponding funding of such services specific to the cannabis industry. Such services are sorely needed, especially for social equity applicants and legacy operators working to transition their businesses into the legal market.

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Bill Number(s)

S7508 / No Same As

Primary Sponsor(s)

Hinchey

Subject

Packaging and Labelling

Introduced on

November 5, 2021

Referred to

Rules

Status

In Committee

Legislative Summary

Relates to the packaging of cannabis and industrial hemp products; requires the cannabis control board to develop strategic plans detailing the packaging and labeling requirements to be used prior to the retail sale of any cannabis or cannabis product; establishes a sustainable cannabis packaging incubator program.

CCG Analysis

Such legislation could promote investment in infrastructure that supports the existing packaging operators and utilizes hemp waste or biomass, simultaneously accelerating the state's industrial hemp program. That said, financial and educational support for technological and infrastructural development in the industrial hemp space is needed for successful implementation.

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Bill Number(s)

S2716 / A6465

Primary Sponsor(s)

Ritchie / Barclay

Subject

Synthetic Cannabinoid

Introduced on

January 22, 2021 / March 17, 2021

Referred to

Health / Health

Status

In Committee

Legislative Summary

Relates to defining the term synthetic cannabinoid.

CCG Analysis

This legislation seeks to amend the definition of a “synthetic cannabinoid” as defined in Article 33 of the NYS Public Health Law and effectively attempts to close the loophole allowing for the sale of psychoactive products in the cannabinoid hemp program.

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Bill Number(s)

A6830 / No Same As

Primary Sponsor(s)

Fahy

Subject

Container Recycling Program

Introduced on

April 12, 2021

Referred to

Environmental Conservation

Status

In Committee

Legislative Summary

Establishes a recycling program for containers of adult use cannabis sold in New York, and requires such containers to be made of at least fifty percent recycled materials.

CCG Analysis

This bill is a good start for moving the conversation forward about recyclable containers, and packaging generally, but may experience opposition, particularly as it encounters advocates for childproof and tamper-evident containers.