SB 1406: Virginia Cannabis Regulation Bill Summary

SB 1406 would replace cannabis prohibition with a system to legalize, tax, and regulate cannabis for adults 21 and older. It includes expungement of past cannabis offenses, establishes a social equity program to promote participation in the industry from those hardest hit by the war on cannabis, and dedicates 30% of tax revenue to a Cannabis Equity Reinvestment Fund. Unfortunately, it also re-criminalizes some low-level conduct.

SB 1406 passed the Senate in a 23-15 vote on February 5, 2021. It now heads to the House.

Adult-Use Legal Possession and Cultivation

Adults who are 21 or older could possess up to one ounce of cannabis or the equivalent amount of cannabis products, as determined by regulators.
Adults could securely and discreetly cultivate up to two mature and two immature cannabis plants at their primary residence. (The four-plant cap also applies to households.) Each plant must have a tag with information about the grower.
Possessing more than an ounce would be punishable by a civil fine of up to $25.
Possessing more than five pounds could result in up to 1-10 years in prison.

Penalty Increases

Public consumption of cannabis would carry a criminal fine of up to $250.
The penalty for a person who is 18-21 possessing cannabis would increase to up to a $250 civil fine — or substance abuse education — for a first offense, a criminal fine of up to $500 for a second offense, and a misdemeanor carrying up to six months in jail for a third or subsequent offense.
Possessing marijuana on school grounds would carry up to six months in jail.
Bringing any cannabis into Virginia would be punishable by up to a year in jail.
- These offenses are currently punishable by fine of up to $25.

Expunging Cannabis Convictions

The bill provides for automatic expungement of misdemeanor charges by July 1, 2022. Expungement by petition would be available starting in July 2021.
Allows petitions for expungement for felonies five years post-sentence completion.

State Regulation and Licensing, Inclusion, and Equity

An new Cannabis Control Authority would be charged with regulating the adult-use cannabis market. It would be governed by a five-member Board of Directors.
Regulators would issue at least five types of cannabis licenses: retail, cultivation, product manufacturing, wholesaler, and testing. They could limit license numbers.
- Anyone issued more than one type of license would have to: 1) pay a $1 million fee, which will be allocated to social equity start-up, training, and/or community reinvestment; and 2) submit and implement an equity and inclusion plan.
- Class A cultivation licenses would have a maximum amount of square feet or plants. Class B cultivation licenses would be limited to 1% THC and would not be capped.
  - No person could hold an interest in more than five cultivators before 2024.
Promotes inclusion in licensing by prioritizing social equity applicants.
- The bill defines “social equity applicants” as having 66% or more owners or full-time employees who have a prior cannabis conviction, have a close relative with a cannabis conviction, or live in an area with disproportionate cannabis arrests or that is economically distressed. The definition also includes applicants 66% owned by graduates of Virginia HBCUs and applicants that distribute at least 50% of profits to members of ethnic groups that were disproportionately policed.
- Social equity applicants will be given preference in licensing from July 1, 2023 until December 31, 2023. Fees would be reduced and loans would be available.
Creates a Cannabis Business Equity and Diversity Support Team to identify barriers to inclusion, offer technical assistance, conduct outreach, and develop requirements for diversity plans. Those wanting more than one license must implement such plans.
A Cannabis Control Advisory Board would advise on regulatory programs and a Cannabis Public Health Advisory Council would make public health recommendations.
The bill includes requirements for seed-to-sale tracking, packaging, and labeling — including warning and potency labels — and requires state-created information on risks to be available at the point-of-sale. Products could not include nicotine or alcohol.
- Delivery, internet-based sales, and on-site consumption would be banned.
- Retailers could sell other, non-cannabis products, but not alcohol or tobacco.
- Edibles would be limited to five milligrams per serving and 50 mg per package.
The Board would develop additional rules, including for outdoor cultivation, testing, sanitation, and to restrict advertising.

Timeline

Simple possession would be legalized effective July 1, 2021.
Rules are by July 1, 2023, and retail sales would begin no earlier than January 1, 2024.

Local Role

Localities could ban cannabis stores by voter referrenda.
Localities can determine operating hours and ban open cannabis products in public.

Fees, Taxation, and Revenue

A state tax of 21% at the point of retail sale would be levied, in addition to standard 6% sales taxes. The taxes do not apply to medical sales from dispensaries.
Localities could impose a tax of up to 3% on sales to consumers in the municipality.
Fees would be determined by the Board and can be increased based on inflation.
After covering regulatory costs, the revenue would be allocated to: pre-K education for at-risk children (40%), a Cannabis Equity Reinvestment Fund (30%), substance abuse treatment and prevention (25%), and public health initiatives (5%).
The Cannabis Equity Reinvestment Fund, administered by a 20-member Cannabis Equity Reinvestment Board, would direct funds to:
- Scholarship programs for historically marginalized populations, including those who were in foster care and those who have been impacted by substance use. This can include family members being incarcerated for a cannabis offense;
- Grants to support jobs training and placement, workplace development, youth mentoring, and reentry services;
- Contributions to the state’s Indigent Defense Fund in localities that increase public defender funding; and
- No- and low-interest loans for social equity applicants via the Cannabis Equity Business Loan Fund.

Miscellaneous