Coronavirus and Cannabis: California Regulatory Updates

By Sahar Ayinehsazian, Tim Long, Christina Sava, Kelsey Middleton

Jun 30, 2020

This VS Insight is dedicated to updates regarding the coronavirus and cannabis in California. For updates on other states or coronavirus-related issues, see our main post on the subject, "Coronavirus and Cannabis: Monitoring the Impact."

Cannabis regulations are in flux across the U.S. as officials at every level of government work to contain the new coronavirus (COVID-19). Vicente Sederberg is closely monitoring the situation, and we are communicating with regulators to understand how these local, state and federal responses may affect cannabis business operators, medical patients, and other cannabis consumers. We are committed to doing everything we can to keep our clients and the public updated as we learn of new developments, but please note this is an extremely fluid situation and there is a lot we do not know. This VS Insights post is for informational purposes only and not for the purpose of providing legal or tax advice. We strongly encourage you to contact an attorney if you are seeking advice regarding any specific legal or tax issue.


Latest Updates

June 30, 2020

  • Gov. Newsom issued Executive Order N-71-20, affecting the expiration date of Medical Marijuana Identification Cards (MMIC) issued under Health and Safety Code section 11362.71, which concerns identification cards for persons authorized to engage in the medical use of cannabis and their designated primary caregivers. The new executive order extends the timelines in Executive Order N-65-20 for an additional 60 days.

    • MMICs that would otherwise have expired between March 4, 2020 and any day within 120 days from May 19, 2020 remain valid for 120 days from May 19, 2020.

    • Retailers licensed by the Bureau must accept MMICs that have an expiration date on or after March 4, 2020, as valid during the 120-day period provided by the executive order.

    • The executive order only applies to MMICs issued under Health and Safety Code section 11362.71 and does not apply to medicinal cannabis recommendations obtained from a patient's physician.

May 19, 2020

  • Gov. Newsom issued Executive Order N-65-20, extending the expiration date of medical marijuana identification cards issued under California Health and Safety Code Section 11362.71 (concerning identification cards for persons authorized to engage in the medical use of cannabis and their designated primary caregivers). Identification cards that would otherwise have expired between March 4, 2020 and any day within 60 days from the date of the Order, will remain valid for 60 days after the Order.

May 14, 2020

  • The three state cannabis licensing authorities announced today that businesses with state commercial cannabis licenses expiring between now and the end of June 30, 2020, may request 60-day deferrals of their license fee payments. This adds financial assistance to the relief provided to licensees from specific regulatory requirements. The license fee deferrals are intended to provide immediate financial assistance to state cannabis licensees impacted by COVID-19. Though deemed an “essential business” under Executive Order N-33-20, the cannabis industry is excluded from federal or banking-dependent assistance for small businesses, due to cannabis’ status as a Schedule I controlled substance. The BCC will begin accepting requests for fee relief immediately. Licensee fee deferrals may be requested by any licensee expiring between now through June 30, 2020. With a deferral, the license fee will be due 60 days from the date of the license expiration. Refunds will not be given for fees that have already been paid.

    • How to Request Regulatory Relief: Licensees must submit a written request for regulatory relief to be considered for a license fee deferral. Here’s how to submit your request:

      1. Submit a complete renewal application to the Bureau.
      2. Complete the Bureau Notification and Request Form (Form 27), Section A, and note the details of your specific request in the comments section.
      3. Email your completed Bureau Notification and Request Form to BCC@dca.ca.gov. This request must be submitted by an owner of the business, who is currently listed on the license record. 
    • Other Requests for Regulatory Relief: A licensee who is unable to comply with a licensing requirement due to the pandemic may submit a disaster relief request to their respective licensing authority. The disaster relief provisions for each licensing authority can be found in the regulations as follows:
      • BCC: California Code of Regulations, title 16, section 5038
      • CDFA: California Code of Regulations, title 3, section 8207
      • CDPH: California Code of Regulations, title 17, section 40182

May 6, 2020

  • Gov. Newsom issued Executive Order N-61-20, which waives penalties for property taxes paid after April 10 for taxpayers who demonstrate they have experienced financial hardship due to the COVID-19 pandemic through May 6, 2021. This will apply to residential properties and small businesses. Additionally, the executive order extends the deadline for certain businesses to file Business Personal Property Statements from May 7 to May 31, 2020, to avoid penalties.

  • Gov. Newsom announced that workers who contract COVID-19 while on the job may be eligible to receive workers’ compensation. The governor also issued Executive Order N-62-20, which creates a time-limited rebuttable presumption for accessing workers’ compensation benefits applicable to Californians who must work outside of their homes during the stay at home order.

    • Those eligible will have the rebuttable presumption if they tested positive for COVID-19 or were diagnosed with COVID-19 and confirmed by a positive test within 14 days of performing a labor or service at a place of work after the stay at home order was issued on March 19, 2020.

    • The presumption will stay in place for 60 days after issuance of the executive order.

April 29, 2020

  • Health departments in six Bay Area counties — Alameda, Contra Costa, Marin, San Francisco, San Mateo, and Santa Clara — are extending their Shelter in Place orders until May 31 to continue slowing the spread of coronavirus.

    • Some lower-risk outdoor activities and jobs will be permitted to resume on May 4. Specifically, construction, businesses that operate primarily outdoors (such as plant nurseries, flea markets, and carwashes), and some childcare programs will be permitted to begin operations.

  • Essential businesses are still required to comply with Social Distancing Protocols, while businesses that must remain closed continue to be permitted to perform Minimum Basic Operations.

  • The counties are working on building up their testing and contact tracing capacity as they look to further reopen the local economy. Experts recommended they refrain from substantially easing shelter in place restrictions until they experience a significant decrease in hospitalizations over a 14-day period.

April 23, 2020

  • Gov. Newsom issued an executive order addressing a variety of issues in response to the COVID-19 pandemic. Among other things, it will allow certain posting, filing and notice requirements under the California Environmental Quality Act (CEQA) to be satisfied through electronic means to allow public access and involvement consistent with COVID-19 public health concerns.

April 21, 2020

  • The Governor’s Office of Business and Economic Development (GO-Biz), in partnership with the Bureau of Cannabis Control, announced $30 million in grant funding through the Cannabis Equity Grants Program for Local Jurisdictions. The program focuses on the inclusion and support of individuals in California’s legal cannabis marketplace who are from communities negatively or disproportionately impacted by cannabis criminalization. This is done through small business support services like technical assistance to individuals, reduced licensing fees or waived fees, assistance in recruitment, training, and retention of a qualified and diverse workforce, and business resilience such as emergency preparedness. At least $23 million of the funding, in the form of low/no-interest loans or grants, will be directly allocated to applicants and licensees specifically identified by local jurisdictions as being from communities most harmed by cannabis prohibition. To date, jurisdictions seeking to create this inclusive regulatory framework represent roughly a quarter of the state’s population. See GO-Biz's announcement more information, including funding amounts for local jurisdictions.

April 14, 2020

  • Governor Newsom unveiled six key indicators that will guide California’s thinking for when and how to modify the stay-at-home and other orders during the COVID-19 pandemic. The governor noted that efforts to "flatten the curve," increase preparedness of California’s health care delivery system, and other COVID-19 interventions have yielded positive results. However, these actions have also impacted the economy, poverty and overall health care in California. Any consideration of modifying the stay-at-home order must be done using a gradual, science-based and data-driven framework.

    • California’s actions will be aligned to:

      • ensure California’s ability to care for the sick within California’s hospitals;
      • prevent infection in people who are at high risk for severe disease;
      • build the capacity to protect the health and well-being of the public; and
      • reduce social, emotional and economic disruptions. 
    • The Governor said there is not a precise timeline for modifying the stay-at-home order, but that six indicators will serve as the framework for making that decision. He also noted that things will look different as California makes modifications. For example, restaurants will have fewer tables and classrooms will be reconfigured. California’s six indicators for modifying the stay-at-home order are:

      • (i) the ability to monitor and protect California’s communities through testing, contact tracing, isolating, and supporting those who are positive or exposed;
      • (ii) the ability to prevent infection in people who are at risk for more severe COVID-19;
      • (iii) the ability of the hospital and health systems to handle surges;
      • (iv) the ability to develop therapeutics to meet the demand;
      • (v) the ability for businesses, schools, and child care facilities to support physical distancing; and
      • (vi) the ability to determine when to reinstitute certain measures, such as the stay-at-home orders, if necessary.  

April 3, 2020

  • Governor Newsom issued an executive order expanding consumer protection against price gouging as California continues to respond to the COVID-19 pandemic. The order generally prohibits sellers of any kind from increasing prices on food, consumer goods, medical or emergency supplies, and certain other items by more than 10%. The order also gives additional tools to the California Department of Justice and Attorney General’s Office, among others, to take action against price gougers.

  • Governor Newsom announced a new relief effort that gives all businesses with less than $5 million in annual taxable sales the ability to defer payment on up to $50,000 in sales and use tax liability without incurring any penalties or interest. The action builds on Executive Order N-40-20, issued by Governor Newsom on March 30, which provided all small business taxpayers an additional 90 days to file and pay taxes administered by the California Department of Tax and Fee Administration (CDTFA). CDTFA administers California's sales and use, fuel, tobacco, alcohol, and cannabis taxes, as well as a variety of other taxes and fees that fund specific state programs.

    • Under the program, qualifying businesses can enter into payment plans to distribute up to $50,000 of sales tax liability over a 12-month period, interest-free. For taxpayers choosing to defer their 1st quarter 2020 liability, for example, up to $50,000 of the obligation would now be paid in 12 equal monthly installments, with the first payment not due until July 31, 2020.

    • Payment plan requests can be made through the CDTFA’s online services system in the coming months. Interested persons may fill out this form and the CDTFA will provide notification when the system becomes available. Alternatively, you may contact the CDTFA’s customer service center at 1-800-400-7115 (CRS:711) if you are interested in being notified.

    • Businesses not within these parameters can contact the CDTFA Customer Service Center at 1-800-400-7115 or their local CDTFA office. CDTFA retains administrative flexibility to assist businesses needing relief in the case of disasters.

April 2, 2020

  • Governor Newsom announced that the state is allocating $50 million to the California Infrastructure and Economic Development Bank for loan guarantees to small businesses to help eliminate barriers to capital for individuals who do not qualify for federal funds, including low wealth and undocumented immigrant communities. The state is also allowing small businesses to defer payment of sales and use taxes of up to $50,000, for up to 12 months.

  • Governor Newsom issued an executive order that will restrict water shutoffs to homes and small businesses while the state responds to the COVID-19 pandemic. The order protects consumers who may not be able to pay for their water service from shutoffs. Already, over 100 public and private water systems across California have voluntarily suspended water shutoffs for non-payment as a result of COVID-19. Under the order, the State Water Resources Control Board will issue best practices and guidelines on support for the state’s water systems during this time.

March 30, 2020

  • Governor Newsom signed an executive order that, among other things:

    • Provides tax extensions for businesses: The order allows the California Department of Tax and Fee Administration (CDTFA) to offer a 90-day extension for tax returns and tax payments for all businesses filing a return for less than $1 million in taxes. That means small businesses will have until the end of July to file their first-quarter returns. The order also extends the statute of limitations to file a claim for refund by 60 days to accommodate tax and fee payers.

    • Eases certain corporate formality requirements: The order provides, “For any shareholder meetings that already have been scheduled, or must occur before June 30, 2020, the requirements in Corporations Code sections 20 and 600 to request and receive the consent of shareholders for meetings of shareholders to be held by electronic transmission or by electronic video screen communication are hereby suspended, and the requirement in Corporations Code section 601 to provide written notice of such meetings is hereby suspended, to the extent that a corporation has provided notice to its shareholders that a meeting will occur at a physical location and subsequently provides notice by a press release, website posting and other means reasonably designed to inform shareholders that the meeting will occur by electronic transmission or by electronic video screen communication.”

  • The California Franchise Tax Board (FTB) issued FTB NOTICE – 2020-02.

    • The purpose of the Notice is to allow an extension of time for taxpayers to:

      • claim a refund;
      • file a protest of a Notice of Proposed Assessment (NPA) with the Franchise Tax Board (FTB); and
      • file an appeal or a petition for rehearing with the Office of Tax Appeals (OTA). 
    • It also allows an extension of time for the FTB to issue an NPA.

March 21, 2020

  • The Bureau of Cannabis Control issued a notice clarifying that “because cannabis is an essential medicine for may residents, licensees may continue to operate at this time so long as their operations comply with local rules and regulations.” This notice follows Governor Newsom’s March 19th “Stay at Home” order, which requires, in part, all non-essential businesses to halt operations until further notice. The Bureau’s notice further specifies that licensee’s continuing operations must adopt social distancing and anti-congregation measures and follow the CDC’s Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease. VS’s social distancing guidelines for businesses can be found here.

  • The California Bureau of Cannabis Control continues to be very responsive to licensees’ requests for temporary relief from various regulations, including permitting temporary “curbside pickups,” as long as such pickups occur under video surveillance or are monitored by the retailer’s security personnel. 

March 20, 2020

  • The California Department of Public Health designated a list of “Essential Critical Infrastructure Workers” who may continue to work in light of Governor Newsom’s March 19th order. This list includes cannabis retailers as a part of the “Essential Workforce.”

March 19, 2020

  • Gov. Gavin Newsom executed a statewide “Stay at Home” order directing all residents to stay at home except as needed to maintain continuity of operations of federally identified critical infrastructure sectors until further notice. This order does not specifically touch on cannabis operations.

  • Los Angeles County executed a “Safer at Home” order directing all residents to stay inside their homes, limiting all movement outside of their homes to what is absolutely necessary for essential needs, and for all non-essential businesses to halt operations until April 17. The order deems “Healthcare Operations” to be a category of essential businesses that may continue operations. Included within the definition of Healthcare Operations are “cannabis dispensaries with a medicinal cannabis license.” The order does not specify whether cannabis retailers with both medicinal and adult-use cannabis licenses must stop adult-use sales.

March 18, 2020

  • The California Bureau of Cannabis Control has been very responsive to licensees’ requests for temporary relief from various regulations, including permitting temporary “curbside pickups,” as long as such pickups occur under video surveillance or are monitored by the retailer’s security personnel. The Bureau is expected to distribute additional guidelines for operations in light of COVID-19.

  • The Franchise Tax Board (FTB) announced updated special tax relief for all California taxpayers due to the COVID-19 pandemic.

    • FTB is postponing until July 15 the filing and payment deadlines for all individuals and business entities for:

      • 2019 tax returns;
      • 2019 tax return payments;
      • 2020 1st and 2nd quarter estimate payments;
      • 2020 LLC taxes and fees; and
      • 2020 Non-wage withholding payments.
    • Taxpayers do not need to claim any special treatment or call FTB to qualify for this relief. The FTB administers two of California’s major tax programs: Personal Income Tax and the Corporation Tax.

March 17, 2020

  • Orange County and San Diego County issued emergency orders directing all residents to stay inside their homes and all non-essential businesses to halt operations. While the orders specify “Healthcare Operations” may continue to operate, they do not specifically address cannabis businesses.

  • Santa Cruz County has clarified that cannabis retailers are defined as an essential business and may remain open, with retail sales permitted solely via delivery (per a licensee’s licensing restrictions) and parking lot pickups.

  • San Francisco’s Department of Public Health clarified that “cannabis is an essential medicine for many San Francisco residents [and that] dispensaries can continue to operate as essential businesses during this time, while practicing social distancing and other public health recommendations.”

  • Santa Clara counsel James Williams has stated that dispensaries may remain open as essential businesses “for medical purposes, not recreational.”

  • Los Angeles Mayor Eric Garcetti ordered a moratorium on commercial evictions of tenants unable to pay rent due to circumstances related to the novel coronavirus (COVID-19) pandemic. According to the Mayor’s order on commercial evictions, which will be in place until April 19 (pursuant to an extension and subject to further extensions), “No landlord shall evict a commercial tenant in the City of Los Angeles during this local emergency period if the tenant is able to show an inability to pay rent due to circumstances related to the COVID-19 pandemic. These circumstances include loss of business income due to a COVID-19 related workplace closure, child care expenditures due to school closures, health care expenses related to being ill with COVID-19 or caring for a member of the tenant’s household who is ill with COVID-19, or reasonable expenditures that stem from government-ordered emergency measures.”  A provision in the order gives eligible tenants up to three months following the expiration of the local emergency period to repay any back due rent.

March 16, 2020

March 15, 2020

  • Los Angeles Mayor Eric Garcetti instituted an order requiring, in part, the closure of all movie theaters, live performance venues, bowling alleys, arcades and bars and nightclubs in the City of Los Angeles that do not serve food. Restaurants and bars and nightclubs that serve food may continue to operate solely for take-out and delivery purposes. The order will remain in effect until March 31. It is unclear whether this order will affect the city’s cannabis businesses.

March 12, 2020

  • Gov. Gavin Newsom issued an executive order to further enhance California’s ability to respond to COVID-19. It includes the following relief for Californians impacted by COVID-19:

    • Tax Relief: The California Department of Tax and Fee Administration (CDTFA) announced that taxpayers may request assistance—which includes extensions for filing returns and making payments, and relief from interest and penalties—by contacting the CDTFA and through the CDTFA’s online services.

    • Commercial Mortgages: Governor Newsom’s executive order calls on financial institutions holding commercial mortgages to implement an immediate moratorium on foreclosures and related evictions when the foreclosure or foreclosure-related eviction arises out of a substantial decrease in business income.

    • Labor Guidance for Employers and Workers: The California Department of Public Health (CDPH) issued a COVID-19 Resources for Employers and Workers resource guide for both employers and workers on their respective rights and obligations, in addition to resources for workers in need of support services.

    • Utilities: Governor Newsom’s executive order calls on utility providers covering electricity, gas, water, sewer, internet, landline telephone, and cell phone service to place moratoriums on service disconnections and late fees for non-payment. The California Public Utilities Commission (CPUC) announced in a March 17, 2020, press release that it would halt all customer disconnections for non-payment for all energy, water, sewer and communication companies under CPUC jurisdiction.

March 4, 2020

  • Governor Gavin Newsom declared a state of emergency to help the state prepare for the broader spread of COVID-19.

  • Now that the governor has declared a state of emergency, California employers directly affected by the emergency or disaster may request an extension of up to 60 days to file their state payroll reports and deposit state payroll taxes with the Employment Development Department (EDD), without incurring penalty or interest charges. State payroll taxes include Unemployment Insurance (UI), Employment Training Tax (ETT), State Disability Insurance, including Paid Family Leave (SDI and PFL), and Personal Income Tax (PIT).

    • The extension is granted under Section 1111.5 of the California Unemployment Insurance Code (CUIC). To request the extension:

      • Employers must first file the report(s) and/or payment(s) electronically within 60 days of the original due date.

      • Then they must send a letter to the EDD specifically requesting an extension of time under Section 1111.5 of the CUIC. The letter must provide detailed information as to why the report(s) and/or payment(s) could not be submitted in a timely manner.

      • The letter of extension should be mailed to the address specified on the corresponding form(s) (see EDD’s Information Sheet regarding requests for extensions to report and pay during a state of emergency or disaster).

    • If an employer has already been charged a late filing or payment penalty, the employer should send a written request for an extension to: Employment Development Department PO Box 826880 Sacramento, CA 94246-0001. A written request for extension must be received within 60 days from the original delinquent date of the payment or return. For questions, call the EDD Taxpayer Assistance Center, toll-free from the US or Canada: 1-888-745-3886; TTY: 1-800-547-9565.

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