New Jersey: Overview of the Cannabis Industry in New Jersey

Authored By: Daniel McKillop

dmckillop@sh-law.com

 

New Jersey’s Medical Cannabis Program

The New Jersey Compassionate Use Medical Cannabis Act, N.J.S.A. 24:6I-1 et seq. (the “Act”), was enacted and signed into law by Governor Jon S. Corzine in January 2010, days before Governor Chris Christie took office.

Pursuant to the Act, New Jerseyan’s with one of several qualifying conditions may purchase up to two ounces of medical cannabis upon the approval of a physician who is registered with the program.

These conditions include

amyotrophic
lateral sclerosis
multiple sclerosis
terminal cancer
muscular dystrophy
inflammatory bowel disease (including Crohn’s disease)
terminal illness with a prognosis of less than 12 months of life

The following conditions apply, if resistant to, or if the patient is intolerant to, conventional therapy: seizure disorder (including epilepsy), intractable skeletal muscular spasticity, glaucoma, and post-traumatic stress disorder (PTSD).

If severe or chronic pain, severe nausea or vomiting, cachexia or wasting syndrome results from the condition or treatment thereof, the following conditions also qualify: positive status for HIV, AIDS, and cancer.

Patients are required to purchase their medical cannabis from a registered “alternative treatment center” (“ATCs”). The Act authorized establishment of six non-profit ATCs in New Jersey, with two ATCs to be located in each of the northern, central, and southern portions of the State. The Act allows for establishment of additional non-profit or for-profit ATCs after the first six ATCs are operational.

To date, only five of the six medical cannabis ATCs allowed for by the Act are operational in New Jersey. Since its inception, only approximately 12,500 patients and 1,000 physicians have registered with the New Jersey medical cannabis program, notwithstanding the fact that New Jersey has a population of nearly 9 million and approximately 28,000 actively practicing physicians. In short, although New Jersey’s medical cannabis program is more than seven years old, it is still nascent at best.

Shifting Political Perspective

The underdevelopment of the medical cannabis program and the illegality of adult use in New Jersey is due in large part to the anti-cannabis position of the Christie administration. However, Governor Christie’s final term expires in January 2018.

Virtually all of the gubernatorial candidates vying to replace Governor Christie favor expansion of the medical cannabis program and legalization of cannabis for adult use.

Senior members of the New Jersey Legislature, including Senate President Steven Sweeney. Also, as discussed below, Senate Judiciary Chairman Nicholas Scutari has introduced a new bill legalizing recreational use and has pledged to enact this legislation in early 2018.

To that end, more than 20 cannabis-related bills have been proposed and are currently pending in the Legislature.

Proposed Cannabis Legislation

Of the proposed cannabis bills, three in particular would significantly expand the current cannabis industry in New Jersey.

1. Assembly Bill 4026

A4026 would revise the Act in several respects, including by permitting patients to access medical cannabis in any quantity, form, strain, or potency appropriate to the patient’s treatment needs, mandating the promulgation of standardized dosage units, authorizing the registration of secondary caregivers to assist qualifying patients with the use of medical cannabis in schools and at certain facilities, and providing certain additional legal protections.

2. Assembly Bill 2068

A2068 is designed to legalize adult use of cannabis in New Jersey for persons age 21 and over. Specifically, A2068 would legalize:

1. Possessing, using, displaying, purchasing, or transporting cannabis accessories or one ounce or less of cannabis;

2. Possessing, growing, processing, or transporting no more than six cannabis plants, with three or fewer being mature, flowering plants, and possession of the cannabis produced by the plants on the premises where the plants were grown, provided that the growing takes place in an enclosed, locked space, is not conducted openly or publicly, and is not made available for sale;

3. Transfer of one ounce or less of cannabis without remuneration to a person who is 21 years of age or older;

4. Consumption of cannabis, provided that nothing in the bill would permit consumption that is conducted openly and publicly or in a manner that endangers others; or

5. Assisting another person who is 21 years of age or older in any of the acts described above;

6. manufacture, possession, or purchase of cannabis accessories or the sale of cannabis accessories to a person who is 21 years of age or older;

7. displaying, or transporting cannabis or cannabis products; purchase of cannabis from a cannabis cultivation facility; purchase of cannabis or cannabis products from a cannabis product manufacturing facility; or sale of cannabis or cannabis products to consumers, if the person conducting the activities described in this subsection has obtained a current, valid license to operate a retail cannabis store or is acting in his or her capacity as an owner, employee or agent of a licensed retail cannabis store;

8. cultivating, harvesting, processing, packaging, transporting, displaying, or possessing cannabis; delivery or transfer of cannabis to a cannabis testing facility; selling cannabis to a cannabis cultivation facility, a cannabis product manufacturing facility, or a retail cannabis store; or the purchase of cannabis from a cannabis cultivation facility, if the person conducting the activities described in this subsection has obtained a current, valid license to operate a cannabis cultivation facility or is acting in his or her capacity as an owner, employee, or agent of a licensed cannabis cultivation facility;

9. packaging, processing, transporting, manufacturing, displaying, or possessing cannabis or cannabis products; delivery or transfer of cannabis or cannabis products to a cannabis testing facility; selling cannabis or cannabis products to a retail cannabis store or a cannabis product manufacturing facility; the purchase of cannabis from a cannabis cultivation facility; or the purchase of cannabis or cannabis products from a cannabis product manufacturing facility, if the person conducting the activities has obtained a current, valid license to operate a cannabis product manufacturing facility or is acting in his or her capacity as an owner, employee, or agent of a licensed cannabis product manufacturing facility;

9. possessing, cultivating, processing, repackaging, storing, transporting, displaying, transferring or delivering cannabis or cannabis products if the person has obtained a current, valid license to operate a cannabis testing facility or is acting in his or her capacity as an owner, employee, or agent of a licensed cannabis testing facility; and

9. leasing or otherwise allowing the use of property owned, occupied or controlled by any person, corporation or other entity for any of the activities conducted lawfully in accordance with subsections f through j.

Beyond the foregoing, A2068 would require the Division of Alcoholic and Beverage Control, renamed in the bill to the Division of Alcoholic Beverage and Cannabis Control, to adopt regulations necessary for implementation of the bill. A2068 would also require local governmental entities to enact an ordinance or regulation specifying the process by which applications would be submitted to it for a license to operate a cannabis establishment within its boundaries should the Division fail to adopt regulations or to process and issue licenses. Local governmental entities would also be able to enact ordinances or regulations that do not conflict with A2068 pertaining to several aspects of cannabis industry operations within its borders, including the time, place, manner and number of cannabis establishment operations within its boundaries, schedules of annual operating, licensing, and application fees, and penalties for violation of its related ordinances or regulations.

Notably, A2068 would establish a tax levied upon cannabis sold or otherwise transferred by a cultivation facility to a product manufacturing facility or to a retail store at a rate equivalent to the rate established under the New Jersey “Sales and Use Tax Act,” P.L.1966, c.30 (C.54:32B-1 et seq.). The Department of the Treasury would establish procedures for the collection of all taxes levied, and tax revenue would be deposited in the State Transportation Trust Fund, the Drug Enforcement Demand Reduction Fund and programs supporting women’s health, family planning, postpartum depression awareness, smoking cessation, and HIV-awareness. Further, A2068 specifies that no tax would be levied upon medical cannabis intended for sale at ATCs pursuant to the Act.

3. Senate Bill 3195

On May 18, 2017, state Senate Judiciary Chairman Nicholas Scutari introduced S3195. S3195 would prohibit home cultivation of cannabis plants and would not direct sales taxes to State infrastructure or health care programs, but S3195 is otherwise largely similar to A2068. Additionally, S3195 would:

1. Create a new “Division of Cannabis Enforcement,” and provide for the Division to adopt rules and regulations necessary for implementation of the bill. These regulations are not to prohibit the operation of cannabis establishments, either expressly or through regulations that make their operation unreasonably impracticable, and must set forth:

1. 1. procedures for the application, issuance, denial, renewal, suspension, and revocation of a license to operate a cannabis establishment;

1. 2. the establishment by the Division of license application fees;

1. 3. licensing goals for minority owned and female owned businesses;

1. 4. security requirements for cannabis establishments;

1. 5. requirements to prevent the sale or diversion of cannabis and cannabis products to underage persons;

1. 6. labeling and packaging requirements; health and safety regulations and standards for the manufacture and sale of cannabis products;

1. 7. advertisement restrictions; procedures for the division to conduct unannounced visits to cannabis establishments;

1. 8. a requirement that only cannabis, cannabis based products and paraphernalia be available for sale at a cannabis establishment; and

1. 9. civil penalties for the failure to comply with established regulations;

2. Permit the possession of up to an ounce of cannabis, 16 ounces of cannabis infused product in solid form, 72 ounces in liquid form, and seven grams of “concentrate;”

3. In order to encourage early participation in and development of cannabis establishments and to undermine the illegal market, establish an escalating tax rate of 7% in the first year, 10% in the second, 15% in the third, 20% in the fourth, and 25% in the fifth year; and

4. Decriminalize the possession of up to 50 grams of cannabis, limit fines to $100, and allow for applications to the Superior Court for expungement of certain cannabis charges.

As with the other cannabis-related bills in the Legislature, S3195 will not be enacted during Governor Christie’s tenure, which expires in January 2018. However, Senator Scutari intends to provide the bill to the new governor for signature within the first 100 days of the new administration.

2018 Outlook

All of the cannabis-related bills pending in the New Jersey Legislature will continue to be reviewed and revised as they pass through relevant committees, and are unlikely to be enacted in their current forms. Further, none of the bills will be enacted during the last several months of Governor Christie’s administration. However, the uptrend in political will to seek significant expansion of the cannabis industry in New Jersey in 2018 is clear. It will be imperative for persons and entities in the Garden State seeking entry into this coming industry to remain well appraised of developments on a continuing basis.