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OLR Bill Analysis
sHB 5329
AN ACT CONCERNING CANNABIS.
SUMMARY
This bill makes several changes to the regulation and licensing of
adult use (recreational) cannabis. It:
1. imposes additional (a) limitations on when cannabis may be
gifted, sold, or transferred; and (b) penalties for violating these
restrictions;
2. allows a cultivator to create up to two equity joint ventures,
which must be approved by the Social Equity Council and
licensed by the Department of Consumer Protection (DCP);
3. sets a deadline of within 14 months from when DCP granted the
license for certain producers or dispensary facilities to create the
needed equity joint ventures (two for producers and one for
dispensary facilities) before being liable for the full conversion
fee;
4. prohibits the Social Equity Council from approving any equity
joint venture applicant that shares any individual owner with
another equity joint venture that meets the social equity applicant
criteria;
5. prohibits cannabis billboard advertisements;
6. exempts certain outdoor business signs posted at a cannabis
establishment from certain signage requirements;
7. eliminates the density cap that prohibits a municipality from
granting zoning approval for more retailers or micro-cultivators
based on the number of municipal residents; and 2022HB-05329-R000202-BA.DOCX
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8. establishes a working group to study regulating hemp and the
possibility of including it in the state’s cannabis program.
EFFECTIVE DATE: July 1, 2022, except the provisions on equity joint
ventures, the municipal density cap, and the working group are
effective upon passage.
§§ 2-4 — PROHIBITION ON CERTAIN GIFTS, SALES, AND
TRANSFERS
Currently, consumers (i.e., people age 21 or older) may give cannabis
to other consumers for free (i.e., without compensation or consideration)
if the giver reasonably believes that the other person may possess the
cannabis without exceeding the Responsible and Equitable Regulation
of Adult-Use Cannabis Act’s possession limit. The bill limits this
allowance by prohibiting individuals from gifting, selling, or
transferring cannabis to another person:
1. to induce, or in exchange for, any donation for any purpose,
including any charitable donation or any donation made to gain
admission to any event;
2. at any location, other than a dispensary facility, retailer, or
hybrid-retailer, (a) where a consumer may purchase any item
other than cannabis, a cannabis product, or services related to
cannabis, or (b) that requires consideration, including
membership in any club, to gain admission to the location; or
3. as part of any giveaway associated with attendance at any event,
including a door prize, goodie bag, or swag bag.
The bill allows people with a bona fide social relationship to give
cannabis to one another if the gift is made without consideration and is
not associated with a commercial transaction.
Fines
In addition to any existing penalty, anyone who violates this
provision is subject to:
1. a municipal fine the bill allows to be locally adopted, which may 2022HB-05329-R000202-BA.DOCX
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be up to $2,500 per violation (see below);
2. a Department of Emergency Services and Public Protection
(DESPP) fine of $2,500 per offense, which is payable by mail
without appearing in court; and
3. an administrative hearing held by the Department of Revenue
Services (DRS) commissioner for failing to pay taxes, which may
result in a civil penalty of up to $1,000 per violation.
Under the bill, “per offense” and “per violation” mean either per
transaction or per day the violation continues, as the DESPP or DRS
commissioner determine for the respective violation.
The bill allows any municipality to establish, by ordinance, a fine for
violating the bill’s gift, sale, and transfer provisions (§ 3). Any police
officer or other person the municipal chief executive officer authorizes
may issue a citation to anyone who commits a violation. Any
municipality that adopts this type of ordinance must also adopt a
citation hearing procedure. Any municipal fine must be deposited into
the municipality’s general fund or in a designated special fund.
§§ 5-8 — EQUITY JOINT VENTURE
Cultivators (§ 5)
The bill allows a licensed cultivator to create up to two equity joint
ventures, subject to Social Equity Council approval and DCP licensing
requirements. The equity joint venture must be in any cannabis
establishment business other than a cultivator license. By law, a
“cannabis establishment” is a producer, dispensary facility, cultivator,
micro-cultivator, retailer, hybrid retailer (i.e., licensed to sell both
recreational cannabis and medical marijuana), food and beverage
manufacturer, product manufacturer or packager, delivery service, or
transporter.
Application Procedure and Contents. Substantially similar to
existing law for equity joint ventures for producers and dispensary
facilities, the bill requires the equity joint venture applicant to submit to
the council information that allows the council to determine the 2022HB-05329-R000202-BA.DOCX
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venture’s ownership terms, including the organizing documents
outlining each backer’s ownership stake, initial investment, and payout
information. They may also include evidence of business formation,
ownership allocation, ownership and financing terms, and proof of
social equity applicant involvement.
Upon receiving the council’s written approval, the equity joint
venture applicant must apply for a DCP license in the same form as
required by other cultivators, except the application is not subject to the
lottery.
Ownership and Location Limits. The bill prohibits a cultivator,
including its backer, from increasing its ownership in an equity joint
venture to more than 50% in the seven years after DCP issues a license.
It also prohibits equity joint ventures that share a common cultivator or
backer from being located within 20 miles of another commonly owned
equity joint venture.
Financial Ratio. The bill requires an equity joint venture applicant to
pay 50% of any applicable fee (the full fee is $25,000 for a provisional
license and $75,000 for a license or renewal) for the first three renewal
cycles and then the full amount after that.
Producers and Dispensary Facilities (§§ 6 & 7)
Ownership. By law, producers seeking a license expansion and
dispensary facilities seeking to convert to a hybrid retailer can pay
reduced fees in exchange for creating a certain number of equity joint
ventures (i.e., two for producers and one for dispensaries). Under
current law, these equity joint ventures require the social equity
applicant to own at least 50% of the business. The bill instead requires
the equity joint venture to be at least 50% owned and controlled by an
individual or individuals who meet, or the equity joint venture
applicant is an individual who meets, the social equity applicant criteria.
By law, a social equity applicant is an individual who (1) had average
household income of less than 300% of the state median over the three
tax years immediately before the application and (2) was a resident of a 2022HB-05329-R000202-BA.DOCX
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disproportionately impacted area for at least (a) five of the 10
immediately preceding years or (b) nine years before he or she turned
age 18. It can also be a person (e.g., business entity) that is at least 65%
owned and controlled by an individual or individuals who meet these
criteria.
Fee Deadline. Under current law, if a producer or dispensary pays
the reduced conversion fee but does not subsequently create the
required equity joint ventures, it is liable for the full fee amount (i.e., $3
million for producers and $1 million for dispensary facilities). The bill
specifies that (1) this must be done within 14 months after DCP
approves the license expansion or conversion and gives a final license
and (2) the amount due is minus the paid reduced conversion fee.
Limitations. The bill limits producers and dispensary facilities that
receive approval to expand or convert to creating two equity joint
ventures. They may not apply for, or create, any additional equity joint
ventures if, upon the bill’s passage, the producer or facility has created
at least two equity joint ventures that have received a provisional
license.
Financial Ratio. The bill requires an equity joint venture applicant to
pay 50% of any applicable fee for the first three renewal cycles and then
the full amount thereafter. By law, the reduced conversion fee is $1.5
million for producers and $500,000 for dispensary facilities, with an
annual renewal fee of $75,000 for the former and $25,000 for the latter
(CGS § 21a-420e(d) and Conn. Agencies Regs., § 21a-408-29).
Sharing Ownership (§ 8)
The bill prohibits the Social Equity Council from approving any
equity joint venture applicant that shares any individual owner with
another equity joint venture that meets the social equity applicant
criteria (see above).
§ 9 — ADVERTISEMENTS
The bill prohibits cannabis establishments and any person
advertising cannabis or related services to advertise on a billboard. 2022HB-05329-R000202-BA.DOCX
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Currently, they are allowed to if the advertiser has reliable evidence that
at least 90% of the audience is reasonably expected to be at least 21.
It also specifies that it is prohibited to advertise cannabis or cannabis
paraphernalia, goods, or services through a business name or logo in a
way that targets or is designed to appeal to those under age 21.
The bill exempts outdoor business signs posted at a cannabis
establishment from the required warning against underage use if they
meet certain criteria. Under this specified criteria, the bill also deems
any outdoor sign, other than a billboard, and including any monument,
pylon, or wayfinding sign compliant with existing law’s audience
requirement (i.e., at least 90% of the audience is expected to be over age
21). To qualify for either provision, an outdoor sign must:
1. contain only the name and logo of a (a) cannabis establishment
or (b) business entity advertising cannabis paraphernalia, goods,
or services;
2. have no more than three colors; and
3. be located on (a) the cannabis establishment’s or such business
entity’s premises, regardless of whether they lease or own the
premises; or (b) a commercial property occupied by multiple
tenants, including the cannabis establishment or business entity.
§ 10 — DENSITY CAP
The bill eliminates the density cap provisions that (1) until June 30,
2024, limit the number of retailers and micro-cultivators in proportion
to the number of municipal residents and (2) after July 1, 2024, allow the
DCP commissioner to set a cap.
Under current law, until June 30, 2024, there is a density cap of one
retailer and one micro-cultivator for every 25,000 residents, as
determined by the 2020 census. Municipalities are prohibited from
granting zoning approval for more retailers or micro-cultivators than
the cap allows. Currently, beginning July 1, 2024, the DCP commissioner
may set a density cap and post it on DCP’s website. If she does, 2022HB-05329-R000202-BA.DOCX
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municipalities are then prohibited from granting zoning approval for
more establishments than the cap allows.
§ 11 — HEMP WORKING GROUP
By September 1, 2022, the bill requires the General Law Committee
chairpersons to convene a working group to study:
1. hemp regulation,
2. the possibility of including hemp in the state’s cannabis program,
and
3. any other topic relevant to hemp production and regulation.
The General Law chairpersons must serve as the working group
chairpersons, and jointly appoint as working group members:
1. representatives from DCP, the Connecticut Farm Bureau, and
cannabis industry; and
2. General Assembly members from rural districts.
The bill requires the General Law Committee’s administrative staff to
serve as the working group’s administrative staff.
By January 1, 2023, the working group must submit a report on its
findings and recommendations to the General Law Committee. The
working group must terminate on the day it submits the report or
January 1, 2023, whichever is later.
COMMITTEE ACTION
General Law Committee
Joint Favorable Substitute
Yea 15 Nay 3 (03/15/2022)