Cannabusiness Advisory

On December 23, 2018, the Department of Public Health will transfer oversight of the Massachusetts Medical Marijuana Program to the Cannabis Control Commission, the agencies recently announced, giving the CCC oversight of both recreational and medical marijuana programs. (The Adult-Use Act mandated that the transition occur by the end of the year.)

The DPH has run the Medical Use of Marijuana Program since its inception in 2014. To date, there are 47 registered marijuana dispensaries that have been approved for sales across Massachusetts; those RMDs serve more than 57,000 patients and over 7,000 personal caregivers. DPH and CCC officials have assured the public that patients in the medical program will not see any substantial changes as a result of the transfer.

In a statement issued last week, Public Health Commissioner Monica Bharel stated:

We want to assure medical marijuana patients in the Commonwealth that we have worked closely with the CCC and our constituents over the past several months to support a smooth transition of the program and to ensure that patient access is not impacted by this change.

Echoing Commissioner Bharel’s assurance, CCC Chairman Steven J. Hoffman publicly noted “the considerable collaboration between DPH and the CCC.” To effectuate the transition, the 22-person staff employed by DPH’s Medical Marijuana Program will become employees of the CCC, which had already begun taking measures to ensure that patients have adequate supply of medical marijuana, as some RMDs begin selling to the recreational market. For example, businesses selling both medical and adult-use products are required to set aside a percentage of their inventory for medical patients, and in co-located retail shops, medical patients have separate lines.

Nevertheless, many stakeholders in the Medical Marijuana Program had expected to see several changes made to current regulations as part of the program’s transfer to the CCC. Advocates and businesses alike have called for electronic patient registration, waiver of the annual patient registration fee, and an increase to the patient-per-caregiver limit, among other things. One group, the Massachusetts Patient Advocacy Alliance, stated that it was “extremely disappointed” that the Commission did not implement what it claims are uncontroversial changes to the program. However, Commissioner Hoffman has indicated that both budgetary realities and the Dec. 31^st transition deadline will likely preclude changes from being made until early 2019.

A Note on IRC Section 280E

As we have previously discussed, Section 280E prohibits businesses engaged in the trafficking of Schedule I or Schedule II controlled substances in contravention of state or federal law from deducting normal business expenses from gross income. Last week, U.S. Tax Court issued its decision in the years-long Harborside case. Applying IRC 280E, the court ruled that Harborside Health Center of Oakland must repay business deductions taken between 2007 and 2012, since cannabis remains a Schedule I drug under the CSA. Despite changing political winds, Section 280E continues to burden cannabis businesses operating in state-legal markets.