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March 6, 2024 HB 24-1061
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 24-0021
Rep. Ricks; English
Date:
Bill Status:
Fiscal Analyst:
March 6, 2024
House Business & Labor
John Armstrong | 303-866-6289
Emily Dohrman | 303-866-3687
Bill Topic: MARIJUANA INDUSTRY & SOCIAL EQUITY
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☒ Local Government
☐ Statutory Public Entity
The bill changes several provisions for social equity licensees in the marijuana
industry. The bill will increase state and local revenue and expenditures beginning in
FY 2024-25.
Appropriation
Summary:
For FY 2024-25, the bill requires an appropriation of $486,457 to multiple state
agencies.
Fiscal Note
Status:
The fiscal note reflects the introduced bill.
Table 1
State Fiscal Impacts Under HB 24-1061
Budget Year
FY 2024-25
Out Year
FY 2025-26
Out Year
FY 2026-27
Revenue General Fund - ($250,000) ($500,000)
Marijuana Cash Fund $310,584 $411,771 $435,504
Total Revenue $310,584 $161,771 ($64,496)
Expenditures General Fund $79,611 $7,328 $7,328
Marijuana Cash Fund $310,584 $411,771 $435,504
Marijuana Tax Cash Fund $96,263 $89,593 $89,593
Centrally Appropriated $47,073 $90,423 $98,499
Total Expenditures $533,530 $599,115 $630,923
Total FTE 3.0 FTE 5.2 FTE 5.6 FTE
Transfers - - -
Other Budget TABOR Refund $310,584 $161,771 ($64,496)
General Fund Reserve $11,942 $1,099 $1,099 Page 2
March 6, 2024 HB 24-1061
Summary of Legislation
The bill makes a number of changes to the licensing and regulation of marijuana social equity
licensees.
New license types. The bill creates the following new marijuana licenses beginning
April 1, 2025:
Medical Marijuana Independent Deliverer and Retail Marijuana Independent Deliverer
Licenses must be issued to social equity licensees. These licenses authorize the delivery of
marijuana products to private residences, marijuana hospitality businesses, and hotels,
provided the local jurisdiction has authorized marijuana delivery. The bill specifies that
certain places are prohibited from receiving marijuana deliveries or may opt out of deliveries.
Licensees must abide by Marijuana Enforcement Division (MED) requirements for all
marijuana products, including tracking, labeling, sales limits, identity verification, and
taxation.
Accelerator Hospitality Business, Accelerator Independent Deliverer, and Accelerator
Transporter Licenses must be issued to social equity licensees who participate in the
accelerator program and are eligible to receive technical support and reduced application
fees from the Department of Revenue (DOR) and the Office of Economic Development and
International Trade (OEDIT).
Changes to social equity licenses. Effective April 1, 2025, the bill removes the requirement that
a social equity license applicant be a Colorado resident. In addition, the bill allows veterans who
were discharged due to marijuana possession and individuals who receive low-income
government assistance through certain federal programs to obtain a social equity license.
Current social equity licensees and those who receive a social equity license between the bill’s
effective date and March 31, 2025, are not subject to these eligibility changes, unless their
qualification is based on income.
Removal of delivery surcharge. Under current law, medical and retail marijuana stores may
obtain a permit to deliver products if they include a $1 surcharge on any delivery. This surcharge
is remitted to the county or municipality where the store is located. The bill eliminates this
surcharge.
Expansion of grant program. OEDIT currently manages a grant program to provide funds to
social equity licensees. The bill allows OEDIT to award up to $500,000 in funds to local
jurisdictions that have social equity licensees, subject to available funding.
Accelerator program tax credit. The bill creates an income tax credit for tax years 2026
through 2036 of $50,000 for income taxes incurred by persons and businesses that possess an
accelerator-endorsed license. If the credit exceeds the income tax liability, the excess may be
carried over to a future tax year for up to five years. DOR must conduct similar reporting for this
tax credit as their other income tax credits. Page 3
March 6, 2024 HB 24-1061
Rulemaking. The bill requires DOR to adopt new rules, including determining eligibility
requirements for the new licenses; allowing current marijuana businesses to sell products to new
delivery licensees; and creating incentives for social equity and accelerator licenses, including fee
reductions. The DOR must also adopt rules to allow marijuana hospitality licensees with mobile
facilities to temporarily suspend license privileges to conduct non-marijuana commercial
activities.
Reporting. The DOR must submit a report on social equity licensees to the legislature by
January 31, 2026, and each year thereafter, that includes recommendations for new license types
and funding sources for the social equity license program. The DOR must convene a working
group to develop these recommendations.
Sunset review. The Department of Regulatory Agencies (DORA) must include recommendations
concerning social equity licenses in the sunset review of the Colorado Marijuana Code,
scheduled for September 1, 2028.
Background
Social equity licensees. Under current law, Colorado residents may qualify for a social equity
license if they have not previously had a marijuana license revoked, and meet at least one of the
following criteria:
resided for at least 15 years between 1980 and 2010 in an area designated as an opportunity
zone, or as a disproportionate impacted area as defined in rule by the MED;
the applicant or their immediate family was arrested for or convicted of a marijuana offense
or was subject to civil asset forfeiture related to a marijuana investigation; or
the applicant's household income in the previous year did not exceed an amount
determined by the DOR.
Social equity licensees have the option of applying for any other marijuana business license, or
joining the accelerator program. Under the accelerator program, the social equity licensee may
partner with an accelerator-endorsed licensee who provides technical and capital support to the
social equity licensee.
Accelerator-endorsed licensees. Accelerator-endorsed licensees may be retail marijuana
cultivation facilities, manufacturing facilities, or stores. Licensees may qualify for an accelerator
endorsement if they have been involved in the marijuana industry for at least two years, have
not had their license revoked in the past two years, and submit an equity assistance proposal.
An accelerator-endorsed licensee may receive additional privileges such as being designated a
social equity leader, receiving compliance assistance and education engagement from DOR, and
being able to request certain fee exemptions.
Number of social equity and accelerator-endorsed licensees. As of February 2023, there are
93 approved social equity licensees, and 0 accelerator-endorsed licensees. Page 4
March 6, 2024 HB 24-1061
State Revenue
On net, the bill increases revenue to the Marijuana Cash Fund by an estimated $311,000 in
FY 2024-25 and by $412,000 in FY 2025-26 from changes in licensing fees. The bill also reduces
General Fund revenue by $250,000 in FY 2025-26 and $500,000 in FY 2026-27 and ongoing, as a
result of the accelerator program tax credit.
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. The fee amounts shown
in Table 2 are estimates only; actual fees will be set administratively by MED based on cash fund
balance, program costs, and the number of licenses subject to the fee.
Reduced social equity licensing fees. The bill requires DOR to adopt rules reducing costs
for social equity license applicants. Under current law, the fees collected from social equity
licenses total approximately $311,000 annually. The fiscal note assumes that in order to
comply with the bill, DOR will decrease all application fees for social equity licensees by half.
In FY 2025-26, the number of expected applicants is assumed to increase by 20 percent as
knowledge of the economic benefit to business owners for obtaining a social equity license
grows. DOR is expected to raise fees on other license types to account for this revenue
reduction.
Increased marijuana licensing fees. Current expenditures for licensing and enforcement of
marijuana businesses, including for social equity licensees, are funded from fee revenue to
the Marijuana Cash Fund. Because the bill increases MED expenditures, as discussed in the
State Expenditures section below, the DOR will raise fees for other marijuana licenses to
account for the increase in expenditures.
Table 2
Licensing Revenue Impacts of HB 24-1061
Year Fee Total Fee Revenue
FY 2024-25 Reduced Social Equity Fee Revenue
($155,780)
Increased Fees Accounting for Social Equity Reductions $155,780
Increased Fees Accounting for Bill’s Expenditures
$310,584
Total Revenue $310,584
FY 2025-26 Reduced Social Equity Fee Revenue
($187,000)
Increased Fees Accounting for Social Equity Reductions $187,000
Increased Fees Accounting for Bill’s Expenditures
$411,771
Total Revenue $411,771
Marijuana accelerator program participation tax credit. The marijuana accelerator program
participation tax credit allows accelerator-endorsed licensees that have provided assistance to
social equity licensees for the previous twelve months to claim a $50,000 income tax credit. The Page 5
March 6, 2024 HB 24-1061
credit may be carried forward for up to five years. The fiscal note assumes that approximately
ten accelerator-endorsed licensees will claim the tax credit in tax year 2026, the first year the
credit is available. This results in a decrease in General Fund revenue of $250,000 in FY 2025-26
(a half-year impact) and $500,000 in FY 2026-27 and ongoing.
State Expenditures
The bill increases state expenditures in the DOR and OEDIT by $534,000 in FY 2024-25,
$599,000 in FY 2025-26, and $631,000 in FY 2026-27. The DOR’s marijuana-related expenditures
are paid from the Marijuana Cash Fund and its tax credit-related expenditures are paid from the
General Fund. OEDIT’s expenditures are paid from the Marijuana Tax Cash Fund. Expenditures
are shown in Table 3 and detailed below.
Table 3
Expenditures Under HB 24-1061
FY 2024-25 FY 2025-26 FY 2026-27
Department of Revenue
Personal Services $107,722 $285,031 $321,591
Operating Expenses $1,920 $4,864 $5,376
Capital Outlay Costs $26,680 $13,340 -
Marijuana Licensing Programming $36,000 $1,000 $1,000
Tax Credit Programming/Reporting (GF) $79,611 $7,328 $7,328
Legal Services $138,262 $107,537 $107,537
Centrally Appropriated Costs
1
$27,530 $70,879 $78,955
FTE – Personal Services 1.5 FTE 3.8 FTE 4.2 FTE
FTE – Legal Services 0.6 FTE 0.5 FTE 0.5 FTE
DOR Subtotal $417,724 $489,979 $521,787
Office of Economic Development
Personal Services $88,441 $88,441 $88,441
Operating Expenses $1,152 $1,152 $1,152
Capital Outlay Costs $6,670 - -
Centrally Appropriated Costs
1
$19,544 $19,544 $19,544
FTE – Personal Services 0.9 FTE 0.9 FTE 0.9 FTE
OEDIT Subtotal $115,806 $109,136 $109,136
Total Cost $533,530 $599,115 $630,923
Total FTE 3.0 FTE 5.2 FTE 5.6 FTE
1
Centrally appropriated costs are not included in the bill's appropriation. Page 6
March 6, 2024 HB 24-1061
Department of Revenue. The MED and the Taxation Division requires staff and computer
programming to implement the bill.
Staff. DOR requires a total of 4.2 FTE ongoing to implement the bill. These additional staff
will conduct additional, more complex application reviews for new and existing social equity
licenses, investigate deliveries and file criminal motions in case of violations, adopt new
rules, and write reports as required by the bill. Costs are prorated to assume a January 2025
start date for compliance investigators, a statistical analyst, and an administrative assistant.
Costs for a policy advisor are prorated to assume a July 2025 start date and a criminal
investigator is prorated to assume a January 2026 start date. Standard capital outlay and
operating costs are included for all positions.
Marijuana licensing programming. The MED requires $36,000 in FY 2024-25 and $1,000 in
subsequent years for updates to the MyLicenseOffice system and map access.
GenTax programming and reporting. In FY 2024-25, the Taxation Division requires
$79,611 to program, test, and update database fields in its GenTax software system.
Programming costs are estimated at $30,128, representing 130 hours of contract
programming at a rate of $231.75 per hour. Costs for testing at the department include
$28,875 for 825 hours of innovation, strategy, and delivery programming support at a rate of
$35 per hour, and $13,216 for 413 hours of user acceptance testing at a rate of $32 per hour.
Expenditures in the Office of Research and Analysis are required for changes in the related
GenTax reports so that the department can access and document tax statistics related to the
new tax policy. These costs are estimated at $7,392, representing 231 hours for data
management and reporting at $32 per hour.
Legal services. The MED requires 600 hours in legal services provided by the Department of
Law in FY 2024-25, which equates to 0.6 FTE, and 480 hours beginning in FY 2025-26, which
equates to 0.5 FTE. Legal services are required to assist with any denials of applications,
enforcement of delivery provisions and violations, and the increased complexity of license
types.
Office of Economic Development and International Trade. OEDIT requires 0.9 FTE program
manager to manage local government grant applications. The $500,000 grant program for social
equity licensees in the bill has existing funding. Standard capital outlay and operating expenses
are included for staff.
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 3.
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March 6, 2024 HB 24-1061
Other Budget Impacts
TABOR refunds. The bill is expected to decrease 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 December 2023 LCS revenue forecast. A forecast of state revenue subject to TABOR
is not available beyond FY 2025-26. Because TABOR refunds are paid from the General Fund,
decreased cash fund revenue will increase the amount of General Fund available to spend or
save.
General Fund reserve. Under current law, an amount equal to 15 percent of General Fund
appropriations must be set aside in the General Fund statutory reserve. Based on this fiscal note,
the bill is expected to increase the amount of General Fund held in reserve by the amounts
shown in Table 1, decreasing the amount of General Fund available for other purposes
Local Government
The bill will decrease revenue to counties and municipalities that currently collect a $1 surcharge
on delivered marijuana products. The exact reduction will vary between local governments and
cannot be estimated. The bill will also increase workload for local marijuana licensing authorities
to update regulations to match the bill. Finally, any local government that applies for and
receives a grant from OEDIT for its social equity licensees will have an increase in revenue and
expenditures.
Technical Note
Under current law, retail marijuana is subject to a 15 percent special sales tax, and is exempt
from the state’s standard 2.9 percent sales tax. The bill states that retail marijuana is not exempt
from any state or local sales tax. This provision would make retail marijuana subject to both the
15 percent special sales tax and the standard 2.9 percent tax, rather than just the former. The
fiscal note assumes that the bill will be amended such that retail marijuana will remain exempt
from the standard 2.9 percent sales tax. If the bill is not amended, revenue subject to TABOR will
increase by more than what is reported in this fiscal note. The bill does not state where this
revenue would be deposited.
Effective Date
The bill takes effect upon signature of the Governor, or upon becoming law without his signature.
State Appropriations
For FY 2024-25, the bill requires the following appropriations to the Department of Revenue:
$79,611 from the General Fund; and Page 8
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$310,584 from the Marijuana Cash Fund and 1.5 FTE, of which $138,262 is reappropriated to
the Department of Law, with an additional 0.6 FTE.
In addition, for FY 2024-25, the bill requires an appropriation of $96,262 from the Marijuana Tax
Cash Fund to the Office of Economic Development and International Trade, and 0.9 FTE.
State and Local Government Contacts
Counties Law Municipalities
Office of Economic Development Public Health and Environment Revenue
State Auditor
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 the General Assembly website.