On February 3, 2023, Delegates C.T. Wilson and Vanessa E. Atterbeary introduced House Bill 556 (“Bill”) for the purpose of establishing a regulatory and licensing framework for the expanded adult-use market.

Highlights of this Bill include:

Section 4 – Title 36: Medical and Adult-use Cannabis

1. 36-401 (A-C) – Licensees physically and actively engaged in the cultivation, processing or dispensing of medical cannabis and those businesses preapproved for licensure on or before October 1, 2022, shall pay a one-time conversion fee to operate a medical cannabis and adult-use cannabis business. On or before July 1, 2023, the Cannabis Regulation and Enforcement Division (the “Division”) will convert eligible licenses that satisfy the conversion fee requirements.
2. 36-401 – There are three new types of licenses, including micro licenses, incubator space licenses and on-site consumption licenses.
   1. Micro Licenses
      1. Growers holding a micro license shall not operate more than 10,000 square feet of indoor canopy or its equivalent.
      2. Processors holding a micro license shall not process more than 1,000 pounds of cannabis per year.
      3. Dispensaries holding a micro license shall operate a delivery service that sells cannabis or cannabis products without a physical storefront, provided that the licensee employs not more than 10 employees.
   2. Incubator Space Licenses authorizes licensees to operate a facility within which a micro licensee may operate.

• On-Site Consumption Licenses authorizes licensees to operate a facility in which individuals can smoke, vape, or consume cannabis.

3. 36-401 (D) – The Division will issue additional standard licenses, micro licenses, incubator space licenses and on-site consumption licenses. The Division shall not issue more than the following number of licenses per type, which includes converted licenses.
   1. Standard Licenses: 75 Grower Licenses; 100 Processor Licenses; and 300 Dispensary Licenses
   2. Micro Licenses: 100 Grower Licenses; 100 Processor Licenses; and 200 Dispensary Licenses
4. Incubator Space Licenses: 10 Licenses
5. On-Site Consumption Facilities: 50 Licenses

4. 36-401 (E) – A person may hold an ownership interest in or control of, including the power to manage and operate, only:
   1. Standard Licenses and Micro Licensees: 1 Grow Licensee; 1 Processor Licensee; and not more than 2 Dispensary Licensees
   2. Incubator Space Licensees: Not more than 2 licensees
   3. On-Site Consumption Licensees: Not more than 2 licensees
   4. A person who owns or controls an incubator space licensee or on-site consumption licensee may not own or control any other cannabis licensee.
5. 36-401 (E) – The Division shall adopt regulations limiting a person or entity from acquiring a non-majority ownership interest in multiple cannabis businesses exceeding the above-noted limitations.
6. 36-404 (A- F) – On or before January 1, 2024, the Division shall begin issuing first round licenses.
   1. First round application submissions for all license types are limited to social equity applicants.
   2. The Division shall enter each social equity applicant that meets the minimum requirements into a lottery and issue to social equity applicants not more than:
      1. Standard Licenses: 20 Grower Licenses; 40 Processor Licenses; and 80 Dispensary Licenses.
      2. Micro Licenses: 30 Grower Licenses; 30 Processor Licenses; and 75 Dispensary Licenses.

• Incubator Space Licenses: 10 Licenses

6. Should the Office of the Attorney General determine applicants awarded the above-noted licenses (referenced in 6.b) are not diverse and a disparity study confirms such findings, remedial measures will be taken to assist minorities and women.

7. 36-404 (A- F) – On or after May 1, 2024, the Division shall begin issuing the second round of licenses.
   1. Second round application submissions for Micro Licenses are limited to social equity applicants.
8. 36-503 (C) – A cannabis licensee, including a cannabis licensee whose license was converted, may not transfer ownership or control of the license for a period of at least 5 years following licensure.
9. 36-1507 (K) – The sales and use tax rate for the sale of cannabis from a dispensary to a consumer under Title 36 of the Alcoholic Beverages and Cannabis Article is as follows:
   1. For Fiscal Year 2024, 6%;
   2. For Fiscal Year 2025, 5%;
   3. For Fiscal Year 2026, 8%;
   4. For Fiscal Year 2027, 9%;
   5. For Fiscal Year 2028 and each Fiscal Year thereafter, 10%.

The legislation addresses many issues, and the above-note summary is not intended to capture all relevant provisions. To access a copy of the Bill, visit https://mgaleg.maryland.gov/2023RS/bills/hb/hb0556f.pdf. If you would like to schedule a call to discuss how these developments may affect you or your business, please contact Jonathan Wachs at jwachs@offitkurman.com or 301-575-0302.