Bill H.4440

FILED ON: 2/1/2022

HOUSE . . . . . . . . . . . . . . . No. 4440

The Commonwealth of Massachusetts

_______________

In the One Hundred and Ninety-Second General Court
(2021-2022)

_______________

An Act relative to social equity and host community agreements in the cannabis industry.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:

SECTION 1. Section 1 of chapter 64N of the General Laws, as appearing in the 2020 Official Edition, is hereby amended by adding the following 2 subsections:-

(c) “Social equity business”, a marijuana establishment with at least 51 per cent majority ownership of individuals who are eligible for the social equity program under section 22 of chapter 94G or whose ownership is qualified as an economic empowerment priority applicant as defined in 935 CMR 500.

(d) “Social equity program”, the program administered by the Massachusetts cannabis control commission, pursuant to section 22 of chapter 94G, to provide training and technical assistance to eligible applicants, potential applicants, and licensees from communities that have previously been disproportionately harmed by marijuana prohibition and enforcement.

SECTION 2. Section 2 of said chapter 64N, as so appearing, is hereby amended by inserting after the word “products”, in line 6, the following words:-

; provided however, that 1 per cent of the 10.75 per cent of total sales price collected from a marijuana retailer that is a social equity business, as defined in section 1, shall be distributed to the city or town that hosts said social equity business, with the remaining 9.75 per cent being distributed to the marijuana regulation fund as provided in section 14 of chapter 94G.

SECTION 3. Section 3 of Chapter 94G is hereby amended by striking subsection (b) and inserting in place thereof the following:-

(b) The city council of a city and the board of selectmen or town council of a town shall, upon the filing with the city or town clerk of a petition meeting the requirements of this subsection and signed by not fewer than 10 per cent of the number of voters of such city or town voting at the preceding biennial state election, request that the question of whether to allow, in such city or town, the sale of marijuana and marijuana products for consumption on the premises where sold be submitted to the voters of such city or town, shall cause the following question to be placed on the ballot:

“Shall this [city or town] allow the sale of marijuana and marijuana products, as those terms are defined in G.L. c.94G, §1, for consumption on the premises where sold, a summary of which appears below?”

A fair and concise summary of the question shall be prepared by the city solicitor or town counsel.

If a majority of the votes cast in the city or town are not in favor of allowing the consumption of marijuana or marijuana products on the premises where sold, such city or town shall not have authorized the consumption of marijuana and marijuana products on the premises where sold.

The petition shall be on a form prepared by the secretary of the commonwealth, and shall be submitted forthwith after filing to the board of registrars or election commissioners who shall have seven days after receipt to certify the signatures of registered voters. Upon certification of the signatures, the question shall be placed upon the ballot at the next occurring regular municipal or state election, provided that the question may only appear on a municipal ballot for an election to be held at least 35 days after certification. To have the question appear on the biennial state election, the city or town clerk must provide notice, including the ballot question and summary as prepared by the city solicitor or town counsel, to the secretary of the commonwealth no later than the first Wednesday in August before that election.

As an alternative to a local voter initiative petition, a city or town may, through an ordinance or by-law, allow the consumption of marijuana or marijuana products on the premises where sold. No local voter initiative shall be required if the sale of marijuana and marijuana products for consumption on the premises is authorized by local law.

SECTION 4. Section 3 of chapter 94G of the General Laws, as so appearing, is hereby amended by striking out subsection (d) and inserting in place thereof the following subsection:-

(d)(1) A marijuana establishment or a medical marijuana treatment center, as defined in section 1 of chapter 94I, seeking to operate or continue to operate in a municipality which permits such operation shall negotiate and execute an agreement with the host community setting forth the conditions to have a marijuana establishment or medical marijuana treatment center located within the host community which shall include, but not be limited to, all stipulations of responsibilities between the host community and the marijuana establishment or medical marijuana treatment center.

(2)(i) Notwithstanding any general or special law to the contrary, an agreement between a marijuana establishment or a medical marijuana treatment center and a host community may include a community impact fee for the host community; provided, however, that no agreement shall include a community impact fee after the fifth year of operation of a marijuana establishment or a medical marijuana treatment center; provided further, that the community impact fee shall be reasonably related to the costs imposed upon the municipality in the preceding year by the operation of the marijuana establishment or medical marijuana treatment center, in addition to costs that would be created by a non-cannabis business entity, as documented pursuant to subparagraph (iii), and shall not amount to more than 3 per cent of the gross sales of the marijuana establishment or medical marijuana treatment center or be effective for longer than a single 5-year term; provided further, that the 5-year term shall commence on the date the marijuana establishment or medical marijuana treatment center is granted a final license by the commission; and provided further, that a host community shall not mandate a certain percentage of total sales as the community impact fee.

(ii) Notwithstanding any general or special law to the contrary, the community impact fee shall encompass all payments and obligations, including, but not limited to, monetary payments, in kind contributions and charitable contributions by the marijuana establishment or medical marijuana treatment center to the municipality or any other organization pursuant to negotiations with the host community; provided, that any payment of the community impact fee shall be due annually to the host community, with the first payment occurring no sooner than upon the first renewal by the commission of a final license to operate the marijuana establishment or medical marijuana treatment center; provided, further, that any other contractual financial obligation that is explicitly or implicitly a factor considered in or is a condition of an agreement shall not be enforceable; and provided further, that nothing shall preclude a marijuana establishment or a medical marijuana treatment center from voluntarily providing or require a marijuana establishment or a medical marijuana treatment center to provide organizations with in-kind contributions and charitable contributions after the execution of the host agreement.

(iii) Any cost to a city or town imposed by the operation of a marijuana establishment or medical marijuana treatment center shall be documented by the city or town and transmitted to the licensee not later than 1 month after the date of the annual renewal of a final license to operate the marijuana establishment or medical marijuana treatment center, and shall be a public record as defined by clause Twenty-sixth of section 7 of chapter 4.

(iv) A licensee may bring a breach of contract action against a city or town and recover damages, attorneys’ fees, and other costs associated with community impact fees, if the information documented and transmitted by a city or town pursuant to clause (iii) is not reasonably related to the actual costs imposed upon the city or town in the preceding year by the operation of the marijuana establishment or medical marijuana treatment center. Any decision of the commission relative to a hearing conducted pursuant to this clause shall be appealable to the superior court in the county in which the municipality is located and the court shall renew the decision de novo.

(3) The commission shall review each agreement required by this subsection prior to a licensee’s submission of a complete marijuana establishment license application; provided, that the commission shall not approve a final license application unless the commission certifies that the agreement complies with this section.

(4) Terms and conditions related to the community impact fee shall be severable from an agreement. If a term or condition related to the community impact fee is struck by the commission, all remaining provisions of the agreement shall remain in full force and effect. No applicant, licensee or holder of a provisional or final certificate of registration shall be denied a license, registration or renewal thereof by the commission on the sole basis of an agreement containing an invalid term or condition related to the community impact fee.

(5) An agreement required by this subsection may be waived at the discretion of the host community; provided, however, that the host community shall submit to the commission a written waiver executed by the host community and the marijuana establishment or medical marijuana treatment center.

(6) Notwithstanding any general or special law to the contrary, all host communities shall establish procedures and policies to promote and encourage full participation in the regulated marijuana industry by people from communities that have previously been disproportionately harmed by marijuana prohibition and enforcement and to positively impact those communities; provided, that the commission shall, pursuant to subsection (a1/2) of section 4 this chapter, establish a minimum acceptable standard for such procedures and policies. If a municipality does not establish procedures or policies and fails to provide documentation and notice to the commission under this section by or before July 1, 2023, the host community shall deposit the community impact fees received from the marijuana establishment or medical marijuana treatment center operating within its community into the Cannabis Social Equity Trust Fund established in subsection (c) of section 14 until such policies and procedures are implemented.

(7) If a licensee submits a petition to the commission and demonstrates that a host community has not provided the documentation and notice or implemented the policies and procedures required by paragraph (6), a social equity program participant or an economic empowerment priority applicant may petition the commission to consider the application without verifying compliance with this subsection or paragraph (1) of subsection (b) of section 5. The commission may act on the application in accordance with subsection (a) of section 5; provided that the commission verifies with the municipality that the applicant is in compliance with local zoning laws and the host community agreement requirement or receives written documentation of a waiver prior to granting the applicant their final license.

(8) The commission shall promulgate rules and regulations necessary to carry out this subsection, including but not limited to paragraph (6).

SECTION 5. Subsection (a) of section 4 of said chapter 94G, as so appearing, is hereby amended by striking out clauses (xxvii) and (xxviii) and inserting in place thereof the following 6 clauses:-

(xxvii) monitor any federal activity regarding marijuana;

(xxviii) adopt, amend or repeal regulations for the implementation, administration and enforcement of this chapter;

(xxix) review and certify host community agreements pursuant to paragraph (3) of subsection (d) of section 3;

(xxx) regulate and enforce all host community agreements described in section 3;

(xxxi) approve procedures and policies enacted by municipalities to promote and encourage full participation in the regulated marijuana industry during negotiations of host community agreements with social equity program participants and economic empowerment priority applicants, including a minimum acceptable standard for said policies; and

(xxxii) prioritize social equity program participants and economic empowerment priority applicants and any other class of applicants the commission deems eligible for expedited review during an evaluation of applications.

SECTION 6. Subsection (a 1/2) of said section 4 of said chapter 94G, as so appearing, is hereby amended by striking out clauses (xxxiii) and (xxxiv) and inserting in place thereof the following 6 clauses:-

(xxxiii) requirements that prohibit marijuana product manufacturers from altering or utilizing commercially-manufactured food products when manufacturing marijuana products unless the food product was commercially manufactured specifically for use by the marijuana product manufacturer to infuse with marijuana; provided, however, that a commercially-manufactured food product may be used as an ingredient in a marijuana product if: (i) it is used in a way that renders it unrecognizable as the commercial food product in the marijuana product; and (ii) there is no statement or advertisement indicating that the marijuana product contains the commercially-manufactured food product;

(xxxiv) energy and environmental standards for licensure and licensure renewal of marijuana establishments licensed as a marijuana cultivator or marijuana product manufacturer;

(xxxv) criteria for allowing marijuana establishments and medical marijuana treatment centers to satisfy their positive impact plan requirement for licensure in part by donating a percentage of their revenue to the Cannabis Social Equity Trust Fund;

(xxxvi) requirements and procedures for host community agreements, including without limitation criteria for calculating community impact fees, consistent with subsection (d) of section 3;

(xxxvii) criteria for reviewing and certifying host community agreements and community impact fees; and

(xxxviii) requirements for procedures and policies enacted by municipalities to promote and encourage full participation in the regulated marijuana industry during negotiations of host community agreements with social equity program participants and economic empowerment priority applicants; provided, that the commission shall promulgate advisory guidelines and best practices for municipalities, including but not limited to a minimum acceptable standard for said policies.

SECTION 7. Subsection (b) of section 14 of said chapter 94G, as so appearing, is hereby amended by inserting, in line 15, after the word “132B”, the following words:-

; provided, however, that 20 per cent of the fund shall be transferred to the Cannabis Social Equity Trust Fund established in subsection (c).

SECTION 8. Said section 14 of said chapter 94G, as so appearing, is hereby further amended by adding the following subsection:-

(c)(1) There shall be established and set up on the books of the commonwealth a Cannabis Social Equity Trust Fund, for the purpose of making grants and loans, including no-interest loans and forgivable loans, to social equity program participants and economic empowerment priority applicants to encourage the full participation of entrepreneurs from communities that have been disproportionately harmed by marijuana prohibition and enforcement. The fund shall be administered by the executive office of housing and economic development, through the Cannabis Social Equity Trust Fund board established in paragraph (3). Monies remaining in this fund at the end of any fiscal year shall not revert to the General Fund.

(2) The executive office of housing and economic development, in consultation with the commission, shall promulgate regulations governing the structure and administration of the fund. The fund shall consist of revenues collected by the commonwealth including: (i) funds transferred pursuant to subsection (b); and (ii) any funds from private sources such as gifts, grants and donations. The regulations shall include, but not be limited to, requirements for businesses to apply to receive a grant or loan and regulations pertaining to marijuana establishments or medical marijuana treatment centers that default on their loans as defined by the Board and a process by which a license is sold as a result of a licensee’s default on a loan.

(3) There shall be a Cannabis Social Equity Trust Fund board consisting of individuals from and with experience advocating on behalf of communities that have been disproportionately harmed by marijuana prohibition and enforcement. The board shall be comprised entirely of individuals from communities that have previously been disproportionately harmed by marijuana prohibition and enforcement and shall consist of: 1 person appointed by the governor with a background in the cannabis industry, who shall serve as chair; 1 person appointed by the treasurer and receiver-general with a background in the finance industry or commercial lending industry; 1 person appointed by the attorney general with a background in business development or entrepreneurship; 1 person appointed by the senate president with relevant experience; and 1 person appointed by the speaker of the house of representatives with relevant experience. Board members shall serve 2-year terms; provided, however, that at the end of a term a board member may be reappointed once by their appointing authority; provided further, that any absence in a seat on the board shall be filled by the appropriate appointing authority within 60 days. The appointing authority may remove a board member who was appointed by that appointing authority for cause. Before removal, the board member shall be provided with a written statement of the reason for removal and an opportunity to be heard. The board shall make recommendations to the executive office of housing and economic development on regulations for the Cannabis Social Equity Trust Fund and the criteria for making loans and grant funds available. The board shall be responsible for the selection of individual fund recipients, award values, and conditions. Board members may, at the discretion of the secretary of housing and economic development, receive stipends in compensation for their time and service under section 4 of chapter 7. Board members may be employed by another business that does not conflict with the duties of their office.

SECTION 9. Said chapter 94G of the General Laws is hereby amended by adding the following section:-

Section 22. The commission shall administer a social equity program, consistent with regulations promulgated pursuant to subsection (a½)(iv) of section 4, to encourage and enable full participation in the marijuana industry by people from communities that have previously been disproportionately harmed by marijuana prohibition and enforcement and to positively impact those communities. The program shall offer technical assistance and training to entrepreneurs certified as economic empowerment priority applicants and other criteria determined by the commission. The commission may promulgate regulations necessary for the implementation of this section.

SECTION 10. Section 22 of Chapter 270 of the General Laws is hereby amended by inserting after the definition of “lodging home” the following new definition:-

““Licensed marijuana social consumption establishment”, a facility or venue approved by the Cannabis Control Commission for sale of marijuana for consumption on the premises.”

and in subsection (c) by inserting after paragraph (5) the following new paragraph:-

(5½) “A licensed marijuana social consumption establishment.”.

SECTION 11. The cannabis control commission shall establish a safe harbor period during which host communities, marijuana establishments and medical marijuana treatment centers shall renegotiate in good faith any existing host community agreement that is out of compliance with this act, to bring terms into compliance with chapter 94G of the General Laws. No party shall be permitted to bring suit for breach of contract or any other issue related to the negotiation or implementation of a host community agreement during this period.

The commission shall review all host community agreements that have received their final license and commenced operations as of the effective date of this act and strike any provision of a host community agreement that is not in compliance with subsection (d) of section 3 of said chapter 94G. Following the review, each host community that is not in compliance shall, in a timely manner and subject to the safe harbor period provisions established by the commission, renegotiate the host community agreement with the marijuana establishment or medical marijuana treatment center; provided, that the 5-year term during which a host community may receive a community impact fee pursuant to paragraph (2)(i) of subsection (d) of section 3 of said chapter 94G shall commence on the date the marijuana establishment or medical marijuana treatment center was first granted a final license by the commission. On receipt of notice from the municipality and the applicant or licensee that a renegotiated agreement has been executed, the commission shall review and certify the renegotiated agreement pursuant to paragraph (3) of said subsection (d) of said section 3 of said chapter 94G.

After the safe harbor period, if a host community and marijuana establishment or medical marijuana treatment center that has received its final license and commenced operations, but whose host community agreement has not been certified by the commission, do not successfully renegotiate the host community agreement, the marijuana establishment or medical marijuana treatment may do either or both of the following: (1) bring suit against the host community for breach of contract and recovery of reasonable attorney’s fees; (2) relocate to a new city or town and receive expedited review of their application by the commission; provided, that once the marijuana establishment or medical marijuana treatment center enters into a host community agreement with the new city or town and the agreement is certified by the commission, pursuant to paragraph (3) of said subsection (d) of said section 3 of said chapter 94G, the commission shall reissue the final license in a timely manner.

After the safe harbor period, if a host community and marijuana establishment or medical marijuana treatment center whose host community agreement was found by the commission to be out of compliance with the provisions of section 3 of chapter 94G do not successfully renegotiate the host community agreement , the host community who has an executed host community agreement with a marijuana establishment or medical marijuana treatment center who has commenced operations may: (1) bring suit against the marijuana establishment or medical marijuana treatment center for breach of contract; or (2) negotiate a new host community agreement with another marijuana establishment or medical marijuana treatment center and receive expedited review of that application by the commission; provided, that once the host community enters into a new host community agreement with a marijuana establishment or medical marijuana treatment center, and the agreement is certified by the commission pursuant to paragraph (3) of said subsection (d) of said section 3 of said chapter 94G, the commission shall reissue the final license in a timely manner.

If a host community and a marijuana establishment or medical marijuana treatment center that has not commenced operations as of the effective date of this act but that have executed a host community agreement, either party may petition the cannabis control commission to review the host community agreement, during the safe harbor period, for compliance with subsection (d) of section 3 of chapter 94G, and the commission may strike any provision that is not in compliance. Following the petitioned review by a host community, marijuana establishment, or medical marijuana treatment center, each host community whose terms were found to be not in compliance shall, in a timely manner, renegotiate in good faith the host community agreement with the marijuana establishment or medical marijuana treatment center; provided, that the 5-year term during which a host community may receive a community impact fee pursuant to paragraph (2)(i) of subsection (d) of section 3 of said chapter 94G shall commence on the date the marijuana establishment or medical marijuana treatment center was first granted a final license by the commission. On receipt of notice from the municipality and the applicant or licensee that a renegotiated agreement has been executed, the commission shall review and certify the renegotiated agreement pursuant to paragraph (3) of said subsection (d) of said section 3 of said chapter 94G.

The commission shall, pursuant to section 3 of chapter 94G, review the host community agreements of all new applications received after the effective date of this act.

SECTION 12. The comptroller shall transfer $10 million dollars from the General Fund to the Cannabis Social Equity Trust Fund, established in section 14(c)(1) of chapter 94G, no later than 60 days after the effective date of this act.

SECTION 13. Initial appointments to the Cannabis Social Equity Trust Fund board established in section 14 of chapter 94G of the General Laws shall be made not later than 60 days after the effective date of this act.

SECTION 14. The cannabis control commission shall update all regulations to reflect the changes in this act.

SECTION 15. Section 4 of this act shall take effect as of December 15, 2016.