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April 11, 2022 SB 22-178
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 22-0971
Sen. Gonzales
Rep. Valdez A.; Van Winkle
Date:
Bill Status:
Fiscal Analyst:
April 11, 2022
Senate Finance
Clare Pramuk | 303-866-2677
clare.pramuk@state.co.us
Bill Topic: LICENSEES ABILITY TO CHANGE MARIJUANA DESIGNATION
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☒ Local Government
☐ Statutory Public Entity
This bill allows a medical marijuana cultivation facility licensee to transfer medical
marijuana to a retail marijuana cultivation licensee and change the product designation
from medical to retail marijuana, as long as the facilities share at least one controlling
beneficial owner. The bill will increase state revenue and expenditures on an ongoing
basis.
Appropriation
Summary:
For FY 2022-23, the bill requires an appropriation of $357,839 to the Department of
Revenue.
Fiscal Note
Status:
The fiscal note reflects the introduced bill.
Table 1
State Fiscal Impacts Under SB 22-178
Budget Year
FY 2022-23
Out Year
FY 2023-24
Revenue Cash Funds $434,684 $384,007
Total Revenue $434,684 $384,007
Expenditures Cash Funds $357,839 $311,506
Centrally Appropriated $76,845 $72,501
Total Expenditures $434,684 $384,007
Total FTE 4.8 FTE 4.5 FTE
Transfers - -
Other Budget Impacts TABOR Refund $434,684 $384,007
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April 11, 2022 SB 22-178
Summary of Legislation
This bill allows a medical marijuana cultivation facility licensee to transfer medical marijuana to a
retail marijuana cultivation licensee, and allows the retail marijuana cultivation facility to receive the
medical marijuana and change the marijuana’s designation from medical to retail. The cultivation
facilities must be co-located and have at least one identical controlling beneficial owner. If a medical
marijuana and retail marijuana cultivation facility share at least one controlling beneficial owner but
cannot be co-located because of a local jurisdiction prohibition, the medical marijuana cultivation
facility must receive approval from the Marijuana Enforcement Division (MED) in the Department of
Revenue prior to making the first transfer. Subsequent transfers do not require a separate approval.
Medical marijuana must obtain passing test results before the transfer and both the medical and retail
marijuana cultivation facilities must remain at or under their respective regulated inventory limits
before and after the transfer is conducted. The retail marijuana cultivation facility is required to pay
the retail marijuana excise tax of 15 percent of the average market rate of the unprocessed marijuana.
Background
Transfers of marijuana under current law. Beginning July 1, 2022, House Bill 21-1216 allows a
medical marijuana cultivation facility to receive retail marijuana from a co-located retail marijuana
cultivation facility, and change the marijuana’s designation from retail to medical. HB 21-1216 also
allows a medical marijuana products manufacturer to receive retail marijuana that has been extracted
and is in concentrated form from a co-located retail marijuana products manufacturer and change the
marijuana’s designation from retail to medical.
Special sales tax. Medical marijuana is subject to the state’s 2.9 percent sales tax when sold to a
consumer. Retail marijuana is not subject to the state sales tax but is subject to a special 15 percent
sales tax on the final consumer purchase price, which is deposited into the Marijuana Tax Cash Fund;
10 percent of which is apportioned to local jurisdictions where retail marijuana is sold. Local
jurisdictions may also apply a special tax on retail marijuana sales.
Excise tax. Retail marijuana is subject to a 15 percent excise tax applied to the average market rate or
contract price of retail marijuana. The lesser of the first $40 million collected from the excise tax is
transferred to the Public School Capital Construction Assistance Fund and the remainder collected
goes to the State Public School Fund.
Cultivations eligible for transfers. There are an estimated 217 medical marijuana cultivation facilities
that are co-located with a retail cultivation and will be eligible to change the designation of marijuana
transferred within the facility. There are an estimated 152 medical marijuana cultivation facilities that
are not co-located with a retail marijuana cultivation facility due to local prohibitions on retail
marijuana. Transfers from these facilities will require approval from the MED prior to the first transfer
under the bill.
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April 11, 2022 SB 22-178
Assumptions
The fiscal note assumes that co-located facilities will make approximately 2,000 transfers per month
and that approximately 100 facilities that are not co-located will seek approval to make transfers.
State Revenue
The bill increases state revenue by $434,684 in FY 2022-23 and $384,007in FY 2021-22 to the Marijuana
Cash Fund. This revenue is subject to TABOR. The bill will also increase tax revenue as explained
below.
Fee impact on marijuana licensees. Colorado law requires legislative service agency review of
measures which create or increase any fee collected by a state agency. These fee amounts are estimates
only, actual fees will be set administratively by the DOR based on cash fund balance, estimated
program costs, and the estimated number of licensees subject to the fee. It is not known which fees
will be increased to fund the bill; as a result, the table below identifies the total fee increase necessary
to cover the bill’s expenditures.
Table 2
Fee Impact on Marijuana Licensees
Fiscal Year Type of Fee Total Fee Increase
FY 2022-23 Marijuana Licensing Fees $434,684
FY 2023-24 Marijuana Licensing Fees $384,007
Tax revenue. The bill will increase revenue to the Marijuana Tax Cash Fund from the retail marijuana
special sales tax, and to the Public School Capital Construction Assistance Fund from the retail
marijuana excise tax. Once the Public School Capital Construction Assistance Fund receives
$40 million, the remainder collected from the excise tax is transferred to the State Public School Fund.
The tax revenue will depend on the amount of marijuana that has its designation changed and has not
been estimated.
State Expenditures
The bill increases state expenditures in the Department of Revenue by $434,684 in FY 2022-23 and
$384,007 in FY 2023-24 from the Marijuana Cash Fund. Expenditures are shown in Table 3 and
detailed below.
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April 11, 2022 SB 22-178
Table 3
Expenditures Under SB 22-178
FY 2022-23 FY 2023-24
Department of Revenue
Personal Services $320,359 $305,431
Operating Expenses $6,480 $6,075
Capital Outlay Costs $31,000 -
Centrally Appropriated Costs
1
$76,845 $72,501
Total Cost $434,684 $384,007
Total FTE 4.8 FTE 4.5 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
Department of Revenue. The MED requires 4.8 FTE in FY 2022-23 and 4.5 FTE in FY 2023-24 to
implement the bill. This includes compliance, analytical, legal, scientific, and administrative staff.
Initially, staff will be involved in rulemaking, and processing requests for transfers from facilities that
are not co-located. Staff will also monitor compliance with transfer requirements including testing,
and ensure that taxes are properly assessed on re-designated marijuana. The fiscal note assumes that
not all transfers will be done in compliance with the bill and MED rules and will require additional
staff to investigate and enforce compliance. Because the transfer of marijuana between physical
facilities increases the risk of contamination and diversion, the MED requires a science researcher to
determine whether a recall is indicated and to distribute a health and safety advisory to the public if
necessary. Standard operating and capital outlay costs are included.
Centrally appropriated costs. Pursuant to a Joint Budget Committee policy, certain costs associated
with this bill are addressed through the annual budget process and centrally appropriated in the Long
Bill or supplemental appropriations bills, rather than in this bill. These costs, which include employee
insurance and supplemental employee retirement payments, are shown in Table 2.
Other Budget Impacts
TABOR refunds. The bill is expected to increase the amount of state revenue required to be refunded
to taxpayers by the amounts shown in the State Revenue section above. This estimate assumes the
March 2022 LCS revenue forecast. A forecast of state revenue subject to TABOR is not available
beyond FY 2023-24. Because TABOR refunds are paid from the General Fund, increased cash fund
revenue will reduce the amount of General Fund available to spend or save.
Local Government
This bill may increase sales tax revenue to some local jurisdictions based on a number of factors but
primarily whether transfers and changes in designations of medical marijuana to retail marijuana
occur in a jurisdiction. Page 5
April 11, 2022 SB 22-178
Technical Note
The Marijuana Cash Fund is not expected to end the fiscal year with a surplus, so there may be a delay
in implementation so that the MED can increase existing fees or establish new fees to cover the costs
of this bill.
Effective Date
The bill takes effect July 1, 2022.
State Appropriations
For FY 2022-23, the bill requires an appropriation of $357,839 from the Marijuana Cash Fund to the
Department of Revenue, and 4.8 FTE.
State and Local Government Contacts
Counties Municipalities Revenue
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit: leg.colorado.gov/fiscalnotes.