On May 10, 2019, the State of California Department of Finance released the language of the Trailer Bill for this year’s Governor’s Budget. The Trailer Bill contains numerous provisions relating to Cannabis.  This blog post will focus on the Trailer Bill’s provisions pertaining to provisional licenses.

California’s regulatory framework for cannabis is the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), which establishes three licensing authorities: (1) the Bureau of Cannabis Control within the Department of Consumer Affairs, which licenses and regulates distributors, testing laboratories, retailers, microbusinesses, and event organizers; (2) CalCannabis Cultivation Licensingwithin the California Department of Food and Agriculture, which licenses and regulates cultivators; and (3) the Manufactured Cannabis Safety Branch within the California Department of Public Health, which licenses and regulates manufacturers.

Currently, MAUCRSA authorizes a licensing authority, in its sole discretion, to issue a provisional license if two conditions are met: (1) the applicant “holds or held a temporary license for the same premises and the same commercial cannabis activity” to be authorized by the provisional license, and (2) the applicant has submitted a completed license application to the licensing authority, including evidence that compliance with the California Environmental Quality Act (CEQA) is underway.  MAUCRSA does not allow a provisional license to be issued after January 1, 2020, and prohibits provisional licenses from being renewed.  The provisions are set forth in Section 26050.2 of the Business and Professions Code which is currently in effect:

(a) A licensing authority may, in its sole discretion, issue a provisional license to an applicant if the following conditions are met:

(1) The applicant holds or held a temporary license for the same premises and the same commercial cannabis activity for which the license may be issued pursuant to this section.

(2) The applicant has submitted a completed license application to the licensing authority, including evidence that compliance with the California Environmental Quality Act (Division 13 (commencing with Section 21000) of the Public Resources Code) is underway.

(b) A provisional license issued pursuant to this section shall be valid for 12 months from the date issued and shall not be renewed. Except as specified in this section, the provisions of this division shall apply to a provisional license in the same manner as to an annual license.

(c) Without limiting any other statutory exemption or categorical exemption, Division 13 (commencing with Section 21000) of the Public Resources Code does not apply to the issuance of a license pursuant to this section by the licensing authority.

(d) Refusal by the licensing authority to issue a license pursuant to this section or revocation or suspension by the licensing authority of a license issued pursuant to this section shall not entitle the applicant or licensee to a hearing or an appeal of the decision. Chapter 2 (commencing with Section 480) of Division 1.5 and Chapter 4 (commencing with Section 26040) of this division shall not apply to licenses issued pursuant to this section.

(e) This section shall remain in effect only until January 1, 2020, and as of that date is repealed.

This bill would make significant changes to the system of provisional licenses.  It would delete the existing January 1, 2020 repeal date set forth in subdivision (e) of Section 26050.2 of the Business and Professions Code, thereby “extending provisional licenses indefinitely” as noted in the Legislative Counsel’s Digest.

The  bill would also delete the existing requirement that an applicant currently hold or previously held a temporary license in order to qualify for a provisional license; provisional licenses would be opened up to those who have never held a temporary license, or those who have held a temporary license but not for the type of desired commercial cannabis activity, or who have held a temporary license at a different premises.

The bill would also allow a license application to be considered complete, even if compliance with CEQA is not complete, as long as the applicant provides “evidence that compliance is under way.”  Similarly, it would allow a license application to be considered complete, even if compliance with “local ordinances enacted pursuant to Section 26200” is not complete, as long as the applicant provides “evidence that compliance is under way.”

The phrase “evidence that compliance is under way” is not further defined and appears to allow ample bureaucratic leeway.

Currently, provisional licenses are valid for twelve months and cannot be renewed; the bill would allow provisional licenses to be renewed annually, in the sole discretion of the licensing authority, “until the licensing authority issues or denies the provisional licensee’s annual license.”  Proposed Business & Professions Code § 26050.2, subdivision (c).

The bill would authorize a licensing authority, in its sole discretion, to “revoke or suspend a provisional license if the licensing authority determines the licensee failed to actively and diligently pursue the requirements for the annual license, or for any other reason.” Proposed Business & Professions Code § 26050.2, subdivision (d). This provision seems intended to disfavor applicants who slack off after securing a provisional license by failing to “actively and diligently” pursue an annual license; however, the catchall clause (allowing revocation or suspension “for any other reason”) seems vague, over broad, and susceptible to constitutional challenge.

Could a licensing authority, in its sole discretion revoke or suspend a provisional license for “any other reason” whatsoever? Not really.  If a decision-maker at the licensing authority were to revoke a provisional license simply because one of the owners had the last name of Washington, and the decision-maker did not like anyone with the last name of Washington, would that be a valid reason to revoke a provisional license?  What if the revocation were, hypothetically, based on an owner’s race, gender, sexual orientation, or other protected classification?  Would that be considered a permissible reason for revocation? Hopefully not; the proposed catchall clause could be much clearer.

The bill requires in mandatory language (“shall”) the cancellation of a provisional license in four situations: issuance of an annual license, denial of an annual license, abandonment of an application for licensure, or withdrawal of an application for licensure.

Finally, refusal to issue a provisional license, or the revocation or suspension by a licensing authority of a provisional license, would not entitle the applicant or licensee to a hearing, or an appeal of the decision, or related procedural protections.

In sum, the Governor’s Trailer Bill would transform provisional licenses from a short-term fix to a permanent solution that would give licensing authorities (the Bureau of Cannabis Control within the Department of Consumer Affairs, CalCannabis Cultivation Licensing within the California Department of Food and Agriculture, and the Manufactured Cannabis Safety Board within the California Department of Public Health) “sole discretion” over annually renewable provisional licenses, which would be opened up not only to those who hold or have held a temporary state license, but also to those who never obtained a temporary license.

Stay tuned for more updates regarding the Governor’s Trailer Bill and provisional licensing.

This information is provided as an educational service and is not intended as legal advice. For questions regarding provisional licenses, annual licenses, MAUCRSA, or similar topics, please contact the Law Offices of Omar Figueroa at (707) 829-0215 or info@omarfigueroa.com to schedule a confidential legal consultation.

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