Cannabis Landscape: Social Equity Updates

CannaBlog by Cory Parnell, COO of Bridge West CPAs & Advisors to the Cannabis Industry

Across the United States, one of the principal drivers in legislative agendas is an awareness of the need for greater social equity. Cannabis is no different and, what’s more—because the laws governing legal cannabis are in a period of rapid implementation and revision—social equity in cannabis is currently one of the major drivers of this movement.

As specialized cannabis CPAs and advisors, it is an especially exciting and dynamic time to track the action throughout the nation. In this CannaBlog, we take a whirlwind tour of several updates in the legal landscape surrounding social equity as it pertains to cannabis. Hang on to your hats, because there’s a lot to share!

Social Equity in Cannabis: Updates in The Northeast

Much of the action in cannabis legalization is taking place in the Mid-Atlantic region, with New York, New Jersey, Pennsylvania, and Connecticut coordinating a regional approach to adult-use cannabis. On an individual level, Connecticut and New York have seen the biggest recent changes to their social equity approaches to cannabis.

Connecticut

It’s arguably Connecticut that’s pushed the ball forward farthest in terms of social equity. Last year, the state decreed that at least half of all cannabis business licenses would be allocated to applicants who met Connecticut’s social equity criteria. Since then, though, the state’s Social Equity Council has run into stiff opposition to certain policies, such as caps on annual income for social equity license applicants.

Over and above the ambitious social equity licensing goal, the state is incentivizing “hybrid” (that is, medical and adult-use) businesses by cutting associated licensing fees. These fees are currently set at $3 million for producers and $1 million for dispensaries. Theyare reduced by a full 50%, provided the venture includes social equity partners.

New York

In New York, the Marihuana Regulation & Taxation Act (MRTA) includes a robust cannabis social equity program. The Act pledges to “promote racial, ethnic, and gender diversity when issuing licenses for adult-use cannabis related activities.” It includes provisions for providing mentoring for such applicants, as well as those who qualify as a minority or women-owned business, a distressed farmer, or service-disabled veterans.

When it comes to tendering a successful cannabis license application, navigating the regulations around such social equity programs can be demanding. Without a doubt, the process requires finesse and a knowledge of current regulations.

Social Equity in Cannabis: Updates in The Midwest and West

West of the Mississippi, social equity progress holds promise but remains a mixed bag. Several states’ social equity cannabis programs are hitting snags.

Colorado

As the first state in the world to legalize adult-use cannabis, Colorado holds a special place in the cannabis realm. Still, it’s important to recognize that the barriers to licensure are still higher for social equity applicants. To that end: In 2021 the state launched the Cannabis Business Office. Tasked with incentivizing participation from populations who have historically been marginalized, the state will offer grants, low-interest loans, and technical assistance to qualifying entrepreneurs.

Arizona and California

Elsewhere, the issue of prior cannabis convictions is erecting major hurdles for some applicants. As stories from both Arizona and California attest, even minor cannabis-related convictions can throw a major wrench in the works for business license applicants. In the case of Arizona, critics of the current social equity program claim that corporations and investors are taking advantage of the system by enrolling minority applicants more or less as tokens.

Illinois

On the bright side, not all the news is grim. At present, Illinois is a bit of a poster child for social equity in cannabis. In 2020, in an effort to address the aforementioned problem of prior criminal records hampering hopeful license applicants, Governor Pritzker signed off on half a million cannabis-related criminal record expungements. The state has also made headlines for its robust grant programs designed to redress justice system excesses.

Bridge West CPAs: Experts in Cannabis and Hemp Accounting, Tax, and Advisory Services

If you’re considering entering the cannabis or hemp industries, it’s critical to understand the accounting, tax, regulatory, and social landscape. Similarly, you need a skilled and knowledgeable cannabis CPA and advisor to help you navigate the challenges and optimize the opportunities.

We are Bridge West CPAs, and we bring invaluable industry expertise when it comes to advising cannabis businesses. We help operators and entrepreneurs manage the special challenges inherent to the cannabis and hemp industries. If you’re ready to put our experience to work on your behalf, reach out. We’d love to talk.