COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:5400H.01I Bill No.:HB 2704 Subject:Drugs and Controlled Substances; Crimes and Punishment; Criminal Procedure;
Agriculture; Department of Agriculture; Health Care; Taxation and Revenue -
Income; Courts
Type:Original Date:March 7, 2022Bill Summary:This proposal modifies and establishes provisions relating to marijuana.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND
AFFECTED
FY 2023FY 2024FY 2025Fully
Implemented
(FY 2028)
General Revenue
Fund
Unknown,
greater than
($87,035,279)
Unknown, less
than $19,342,075
Unknown, less
than $19,972,657
Unknown, less
than $20,172,215
Total Estimated
Net Effect on
General
Revenue
Unknown,
greater than
($87,035,279)
Unknown, less
than
$19,342,075
Unknown, less
than
$19,972,657
Unknown, less
than
$20,172,215
Numbers within parentheses: () indicate costs or losses. L.R. No. 5400H.01I
Bill No. HB 2704
Page 2 of
March 7, 2022
HWC:LR:OD
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND
AFFECTED
FY 2023FY 2024FY 2025Fully
Implemented
(FY 2028)
Cannabis
Freedom
$0
Less than
$47,461,497 to
$79,457,473
Less than
$47,461,497 to
$79,457,473
Less than
$47,461,497 to
$79,457,473
School District
Trust
$2,942,196 to
$4,626,709
$3,922,928 to
$6,168,946
$3,922,928 to
$6,168,946
$3,922,928 to
$6,168,946
Conservation
Commission
$367,774 to
$578,338
$490,366 to
$771,118
$490,366 to
$771,118
$490,366 to
$771,118
Park, Soil &
Water
$294,220 to
$462,671
$392,293 to
$616,895
$392,293 to
$616,895
$392,293 to
$616,895
Highway(Up to $397,549)(Up to $460,624)(Up to $465,315)(Up to $479,694)Total Estimated
Net Effect on
Other State
Funds
Less than
$5,667,718
Less than
$87,014,432
Less than
$87,014,432
Less than
$87,014,432
*Oversight notes, any “excess moneys” remaining in the Cannabis Freedom Fund is to be split
equally between teachers’ salaries, first responders’ pensions and the Missouri Veterans
Commission.
ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND
AFFECTED
FY 2023FY 2024FY 2025Fully
Implemented
(FY 2028)
Total Estimated
Net Effect on
All Federal
Funds $0$0$0$0 L.R. No. 5400H.01I
Bill No. HB 2704
Page 3 of
March 7, 2022
HWC:LR:OD
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND
AFFECTED
FY 2023FY 2024FY 2025Fully
Implemented
(FY 2028)
General Revenue
-13 FTE-9 FTE-16 FTE-16 FTE
Cannabis
Freedom 431 FTE431 FTE431 FTE431 FTE
HighwayUp to 6 FTEUp to 6 FTEUp to 6 FTEUp to 6 FTETotal Estimated
Net Effect on
FTEUp to 424 FTEUp to 428 FTEUp to 421 FTEUp to 421 FTE
☒ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☒ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND
AFFECTED
FY 2023FY 2024FY 2025Fully
Implemented
(FY 2028)
Local
Government
$11,857,051-
$18,383,024
$15,809,401-
$24,510,699
$15,809,401-
$24,510,699
$15,809,401-
$24,510,699 L.R. No. 5400H.01I
Bill No. HB 2704
Page 4 of
March 7, 2022
HWC:LR:OD
FISCAL ANALYSIS
ASSUMPTION
Due to time constraints of 15 days from the introduction of this bill to hearing (including a
holiday), Oversight assumes some agencies may not have had time to adequately collect,
evaluate, and formulate all of the information that should have been included in their response to
the fiscal note request. As a result, Oversight likewise has had limited time to perform analysis
and review of the information provided. Therefore, Oversight has presented this fiscal note on
the best information available. Upon the receipt of any additional information, Oversight will
review to determine if an updated fiscal note should be prepared and seek the necessary approval
to publish a new fiscal note.
§143.121 – Medical and recreation marijuana expense deduction
Officials from the Department of Revenue (DOR) state this provision would allow medical
marijuana businesses and recreational marijuana businesses a subtraction from the federal
adjusted gross income the amount that would have been allowed from the computation of the
taxpayer’s federal taxable income if the income were not disallowed solely from them being a
medical marijuana business. Under federal law, marijuana is a controlled substance and
businesses selling it are not allowed some deductions that other businesses are entitled to. Since
marijuana is allowed to be sold in Missouri, this would allow them to adjust their federal
adjusted gross income before calculating their Missouri adjusted gross income.
This would require the DOR to make an independent interpretation of federal law on what would
or would not be an allowable federal deduction. The DOR is unable to calculate the amount of
income and deductions that these businesses could possibly be allowed to deduct under this
proposal. The DOR assumes this could result in an Unknown, potentially significant, negative
fiscal impact to general revenue and total state revenue.
This provision would become effective August 28, 2022, for all expense as of January 1, 2022
and would allow people to start filing for this immediately. For fiscal note purposes only, DOR
will assume they file their amended returns starting in FY 2023.
This would require a change to the Form MO-A and the MO-1120. The Form MO-A has a
selection of check boxes for a set of “other” subtractions, so a new line would not necessarily be
required. The Form MO-1120 does not currently have this checkbox option, so it would either
require a new line or a reformatting of the subtractions in Part 2.
Additionally, this would require DOR to update its individual income tax computer system.
These changes are estimated to cost $11,579. L.R. No. 5400H.01I
Bill No. HB 2704
Page 5 of
March 7, 2022
HWC:LR:OD
The DOR notes if may need the following FTE if the volume of returns justify the FTE.
• 1 FTE Revenue Processing Technician for every 14,700 errors created
• 1 FTE Revenue Processing Technician for every 5,700 pieces of correspondence
generated
• 1 temporary employee for new line item
Oversight does not have any information to the contrary. Given the small number of potential
qualifiers for the proposed deduction, Oversight assumes the DOR has sufficient staff and
resources available to absorb the costs associated with this section and will reflect no fiscal
impact for DOR for this section.
§143.2200 – Deduction of denied license
DOR officials state this provision would allow a deduction from Missouri adjusted gross income
of the amount of a license application fee paid under the medical marijuana laws, if the applicant
was denied the issuance of a medical marijuana license. This provision says it is effective with
tax years starting January 1, 2023.
This provision is a part of a proposal that is establishing recreational cannabis for all over the age
of 21. These recreational cannabis laws do not have limits on the number of establishments that
can grow or sell marijuana and it appears a license will only be denied for failure to file a
complete application.
Under the current medical marijuana laws there were a limited number of licenses given, so
businesses could apply and be denied. This provision appears to want to help those that applied
for the medical marijuana licenses and were denied due to the limited number of licenses issued.
The deduction authorized by §143.2200 begins to take effect for tax years beginning on or after
January 1, 2023, and applies to amounts spent by the taxpayer on a denied license application “in
a given tax year[,]” which presumably means the tax year for which the deduction is taken. The
State appears to currently only be issuing transportation and seed-to-sale licenses at this point in
time, while the “application period has closed for cultivation, testing, manufacturing and
dispensary license[s]”. If that remains the situation in 2023 and beyond, the number of
individuals that may financially benefit from this deduction – and in turn the fiscal impact of this
aspect of the proposal – could be limited, although still potentially existent.
However, since this proposal does not start until tax years beginning on or after January 1, 2023,
only those applying for the transportation and seed-to sale licenses would be eligible for this
deduction if they are denied the license. This could result in an unknown loss to general revenue.
Oversight does not have any information to the contrary. Oversight will present an unknown
loss to General Revenue (GR) for this section of the proposal. L.R. No. 5400H.01I
Bill No. HB 2704
Page 6 of
March 7, 2022
HWC:LR:OD
§§191.255, 196.1176, 557.059, and 579.015 – Marijuana-related offenses/disclosure of
information a felony
DOR officials state provisions of §191.255 makes it a felony, notwithstanding any other
provision of law to the contrary, for a state agency or its employees “disclosing to the federal
government […] the statewide list or any individual information of persons who have applied for
or obtained a qualifying patient identification card, a qualifying patient cultivation card, or a
primary caregiver identification card [as described in the constitutional provision relating to
medical marijuana.]” Read literally, this would mean that DOR and other state agencies are
unable to share any individual information – from any source – with federal agencies so long as
the individual has obtained one of those specified cards. This could significantly impact DOR’s
working relationship with the IRS by prohibiting the sharing of individual information with the
IRS simply because an individual has applied for or obtained a qualifying patient identification
card, qualifying patient cultivation card, or primary caregiver identification card.
This could result in an unknown negative impact on general revenue from the DOR being unable
to do collections from the IRS for outstanding tax debt owed the state.
Oversight does not have any information to the contrary. Oversight will present an unknown
loss to GR for this section of the proposal.
Officials from the Office of the State Public Defender (SPD) state the proposed legislation
removes marijuana from the list of controlled substances under §579.015, and therefore, could
decrease the number of persons who are eligible for representation by SPD. The fiscal impact of
this legislation on SPD is unknown as the number of additional cases eligible for representation
as the result of the legislation is unknown, but it is anticipated that any decrease would be less
than $250,000.
Oversight does not have any information to the contrary. Therefore, Oversight will reflect an
unknown savings, less than $250,000 annually, to GR as the fiscal impact for SPD for this
proposal.
Officials from the Department of Corrections (DOC) state FN 5400-01I (HB 2704) modifies
and establishes provisions relating to marijuana, making the responsible use of marijuana legal as
of 8/28/2022. Marijuana will no longer be listed among Missouri’s drug schedule and will no
longer be considered a controlled substance. As a result of this bill, any conviction, remaining
sentence, ongoing supervision, or unpaid court-ordered restitution of any person who on August
28, 2022, is or will be serving a sentence of incarceration, probation, parole, or other form of
community supervision as a result of the person's conviction of an offense or municipal violation
involving a nonviolent marijuana-related offense or violation that was committed prior to
obtaining a patient identification card under Article XIV, Section 1 of the Constitution of L.R. No. 5400H.01I
Bill No. HB 2704
Page 7 of
March 7, 2022
HWC:LR:OD
Missouri, or prior to the enactment of §§196.3000 to 196.3048, shall have the conviction,
remaining sentence, ongoing supervision, or unpaid court-ordered restitution vacated.
This bill also prohibits any state agency or its employees from disclosing to the federal
government, any federal government employee, or any unauthorized third party the statewide list
or any individual information of persons who have applied for or obtained a qualifying patient
identification card, a qualifying patient cultivation identification card, or a primary caregiver
identification card, as those cards are described in Article XIV, Section 1 of the Constitution of
Missouri relating to the right to access medical marijuana. The violation of this portion of the bill
will be guilty of a new Class E felony.
This bill also introduces language known as the "Cannabinoid Product Labeling Act". It creates a
definition for Cannabinoid products as well as establishes language to regulate it. Any dealer of
Cannabinoid products that violates the guidelines in this bill will be guilty of a Class D
misdemeanor.
Operational Impact
§191.255 – Disclosure of statewide list/information
For each new nonviolent class E felony, the DOC estimates one person will be sentenced to
prison and two to probation. The average sentence for a nonviolent class E felony offense is 3.4
years, of which 2.1 years will be served in prison with 1.4 years to first release. The remaining
1.3 years will be on parole. Probation sentences will be 3 years.
The cumulative impact on the department is estimated to be 2 additional offenders in prison and
7 additional offenders on field supervision by FY 2025.
C
hange in prison admissions and probation openings with legislation-Class E Felony (nonviolent)
F
Y2023
F
Y2024
F
Y2025
F
Y2026
F
Y2027
F
Y2028
F
Y2029
F
Y2030
F
Y2031
F
Y2032
N
ew Admissions
C
urrent Law
0 0 0 0 0 0 0 0 0 0
A
fter Legislation
1 1 1 1 1 1 1 1 1 1
P
robation
C
urrent Law
0 0 0 0 0 0 0 0 0 0
A
fter Legislation
2 2 2 2 2 2 2 2 2 2
C
hange (After Legislation - Current Law)
A
dmissions
1 1 1 1 1 1 1 1 1 1
P
robations
2 2 2 2 2 2 2 2 2 2
C
umulative Populations
P
rison
1 2 2 2 2 2 2 2 2 2
P
arole
0 0 1 1 1 1 1 1 1 1
P
robation
2 4 6 6 6 6 6 6 6 6
I
mpact
P
rison Population
1 2 2 2 2 2 2 2 2 2
F
ield Population
2 4 7 7 7 7 7 7 7 7
P
opulation Change
3 6 9 9 9 9 9 9 9 9 L.R. No. 5400H.01I
Bill No. HB 2704
Page 8 of
March 7, 2022
HWC:LR:OD
§196.1173 – Dealer disclosures/sales
The portion of the bill that adds a Class D misdemeanor will have no impact to the department
since misdemeanors fall outside DOC’s purview.
§557.059 – Marijuana-related offense discharges
There are currently 774 offenders in prison in who were admitted only on drug sentences, and
16,148 offenders under some type of supervision based only on drug-related sentences. Using the
estimate of 3.5% of all drug sentences are related specifically to marijuana, DOC estimates 27
could be immediately discharged from prison and 565 offenders could be immediately
discharged from supervision as a result of the passage of this bill if they successfully petition the
court after receiving a patient identification card under Article XIV, Section 1 or the Constitution
of Missouri.
§579.015 – Decriminalization of marijuana
The estimate of the number of offenders who will be impacted by the decriminalization of
marijuana can be calculated from the sentencing records maintained by the DOC, but with an
important qualification. Most offenders sentenced for drug offenses in Missouri are sentenced for
the production, sale, distribution or possession of a controlled substance, but the drug type is not
always part of the sentence information that the DOC receives. In some cases the drug type is
known and is included in the offender management database, but the proportion of cases in
which the drug related to the offense is known is a minority of the cases. Given that the drug
associated with the offense is unknown by the DOC in the majority of cases, the estimation of
the total impact that follows will use the proportions of cases in which the associated drug is
known to determine the number of cases in which the associated drug is unknown that are likely
related to marijuana. Therefore, DOC assumes 3.5% of all prison admissions related to drug
sentences are related to marijuana (see table 1).
Table 1. FY 2017 through FY 2021 admissions to prison on only drug-related sentences in which the
drug associated with the offense is known. (Drug offenses and drug types are identified in the data
system through the use of the NCIC categories, modifiers associated with a sentence, and the
description of the offense.)
M Marijuana1043.5%Ot Other Drug2,89296.5%To Total2,996100.0%
There were 713 offenders with new commitments to prison in FY 2021 who were admitted only
on drug sentences. The average length of those sentences was 5.7 years. Based on DOC’s
assumption that 3.5% of those sentences are related to marijuana, DOC estimates 25 admissions
for sentences for offenses related only to marijuana. L.R. No. 5400H.01I
Bill No. HB 2704
Page 9 of
March 7, 2022
HWC:LR:OD
In FY 2021, there were 539 offenders released from prison who had been incarcerated for new
commitments to prison only on drug sentences. Their average length of time served to first
release was 1.1 years, which is what DOC assumes for all new commitments in FY 2021 in
estimating its impact.
Based on DOC’s analysis of new probation cases related to drug sentences received by the
department in FY 2021, approximately 7.6% of the cases in which the associated drug is known
are related to marijuana (see table 2). Therefore, DOC assumes 7.6% of all new probation cases
are based on drug sentences related to marijuana.
Table 2. FY 2021 probation cases related only to drug sentences in which the drug associated with
the offense is known. (Drug offenses and drug types are identified in the data system through the
use of the NCIC categories, modifiers associated with a sentence, and the description of the offense.)
M Marijuana2187.6%Ot Other Drug2,66792.4%To Total2,885100.0%
There were 4,656 offenders with new probation cases in FY 2021 whose cases were only on drug
sentences. Based on DOC’s assumption that 7.6% of those sentences are related to marijuana,
DOC estimates 354 new probation cases related only to marijuana. The average length of those
sentences was 5.4 years. Given the possibility of earned compliance credit, DOC applies a 3 year
sentence in its estimation of impact.
The estimated cumulative impact of this part of the proposal on department operations is 65
fewer people in prison and 1,140 fewer people under supervision in the field by FY 2028.
C
hange in prison admissions and probation openings with legislation
F
Y2023
F
Y2024
F
Y2025
F
Y2026
F
Y2027
F
Y2028
F
Y2029
F
Y2030
F
Y2031
F
Y2032
N
ew Admissions
C
urrent Law
2
5
2
5
2
5
2
5
2
5
2
5
2
5
2
5
2
5
2
5
A
fter Legislation
0 0 0 0 0 0 0 0 0 0
P
robation
C
urrent Law
3
54
3
54
3
54
3
54
3
54
3
54
3
54
3
54
3
54
3
54
A
fter Legislation
0 0 0 0 0 0 0 0 0 0
C
hange (After Legislation - Current Law)
A
dmissions
-
25
-
25
-
25
-
25
-
25
-
25
-
25
-
25
-
25
-
25
P
robations
-
354
-
354
-
354
-
354
-
354
-
354
-
354
-
354
-
354
-
354
C
umulative Populations
P
rison
-
25
-
50
-
65
-
65
-
65
-
65
-
65
-
65
-
65
-
65
P
arole
0 0 -
10
-
35
-
60
-
78
-
78
-
78
-
78
-
78
P
robation
-
354
-
708
-
1,062
-
1,062
-
1,062
-
1,062
-
1,062
-
1,062
-
1,062
-
1,062
I
mpact
P
rison Population
-
25
-
50
-
65
-
65
-
65
-
65
-
65
-
65
-
65
-
65
F
ield Population
-
354
-
708
-
1,072
-
1,097
-
1,122
-
1,140
-
1,140
-
1,140
-
1,140
-
1,140
P
opulation Change
-
379
-
758
-
1,137
-
1,162
-
1,187
-
1,205
-
1,205
-
1,205
-
1,205
-
1,205 L.R. No. 5400H.01I
Bill No. HB 2704
Page 10 of 35
March 7, 2022
HWC:LR:OD
Combined Estimated Cumulative Impact
The combined estimated cumulative impact of creating a new class E felony as well as the
decriminalization of marijuana is estimated to be 63 fewer offenders in prison and 1,133 fewer
offenders on field supervision by FY 2028.
* If this impact statement has changed from statements submitted in previous years, it could be
due to an increase/decrease in the number of offenders, a change in the cost per day for
institutional offenders, and/or an increase in staff salaries.
If the projected impact of legislation is less than 1,500 offenders added to or subtracted from the
department’s institutional caseload, the marginal cost of incarceration will be utilized. This cost
of incarceration is $22.616 per day or an annual cost of $8,255 per offender and includes such
costs as medical, food, and operational E&E. However, if the projected impact of legislation is
1,500 or more offenders added or removed to the department’s institutional caseload, the full
cost of incarceration will be used, which includes fixed costs. This cost is $88.12 per day or an
annual cost of $32,162 per offender and includes personal services, all institutional E&E,
medical and mental health, fringe, and miscellaneous expenses. None of these costs include
construction to increase institutional capacity.
DOC’s cost of probation or parole is determined by the number of P&P Officer II positions that
are needed to cover its caseload. The DOC average district caseload across the state is 51
offender cases per officer. An increase/decrease of 51 cases would result in a cost/cost avoidance
equal to the salary, fringe, and equipment and expenses of one P&P Officer II.
Increases/decreases smaller than 51 offender cases are assumed to be absorbable.
C
hange in prison admissions and probation openings with legislation
F
Y2023
F
Y2024
F
Y2025
F
Y2026
F
Y2027
F
Y2028
F
Y2029
F
Y2030
F
Y2031
F
Y2032
N
ew Admissions
C
urrent Law
5
2
2
5
2
5
2
5
2
5
2
5
2
5
2
5
2
5
2
5
A
fter Legislation
1 1 1 1 1 1 1 1 1 1
P
robation
C
urrent Law
9
19
3
54
3
54
3
54
3
54
3
54
3
54
3
54
3
54
3
54
A
fter Legislation
2 2 2 2 2 2 2 2 2 2
C
hange (After Legislation - Current Law)
A
dmissions
-
51
-
24
-
24
-
24
-
24
-
24
-
24
-
24
-
24
-
24
P
robations
-
917
-
352
-
352
-
352
-
352
-
352
-
352
-
352
-
352
-
352
C
umulative Populations
P
rison
-
51
-
48
-
63
-
63
-
63
-
63
-
63
-
63
-
63
-
63
P
arole
0 0 -
9
-
34
-
59
-
77
-
77
-
77
-
77
-
77
P
robation
-
917
-
704
-
1,056
-
1,056
-
1,056
-
1,056
-
1,056
-
1,056
-
1,056
-
1,056
I
mpact
P
rison Population
-
51
-
48
-
63
-
63
-
63
-
63
-
63
-
63
-
63
-
63
F
ield Population
-
917
-
704
-
1,065
-
1,090
-
1,115
-
1,133
-
1,133
-
1,133
-
1,133
-
1,133
P
opulation Change
-
968
-
752
-
1,128
-
1,153
-
1,178
-
1,196
-
1,196
-
1,196
-
1,196
-
1,196 L.R. No. 5400H.01I
Bill No. HB 2704
Page 11 of 35
March 7, 2022
HWC:LR:OD
In instances where the proposed legislation would only affect a specific caseload, such as sex
offenders, the DOC will use the average caseload figure for that specific type of offender to
calculate cost increases/decreases.
# to
prison
Cost per
year
Total Savings
for prison
Change
in
probation
& parole
officers
Total
savings for
probation
and parole
# to
probation
& parole
Grand Total -
Prison and
Probation
(includes 2%
inflation)
Year 1-51($8,255)$350,838(17)$975,845(917)$1,326,683Year 2-48($8,255)$404,165(13)$905,089(704)$1,309,254Year 3-63($8,255)$541,076(20)$1,407,453(1,065)$1,948,528Year 4-63($8,255)$551,897(21)$1,493,743(1,090)$2,045,640Year 5-63($8,255)$562,935(21)$1,509,849(1,115)$2,072,785Year 6-63($8,255)$574,194(22)$1,598,821(1,133)$2,173,015Year 7-63($8,255)$585,678(22)$1,616,126(1,133)$2,201,804Year 8-63($8,255)$597,391(22)$1,633,605(1,133)$2,230,996Year 9-63($8,255)$609,339(22)$1,651,317)(1,133)$2,260,656Year 10-63($8,255)$621,526(22)$1,669,207(1,133)$2,290,733
Oversight does not have any information to the contrary. Therefore, Oversight will reflect the
estimated savings to General Revenue provided by DOC for fiscal note purposes.
§§195.006, 195.017 and 195.815 – Recreational cannabis/background checks
Officials from the Department of Health and Senior Services (DHSS) state §195.815 proposed
changes would have minimal impact to DHSS’ Section for Medical Marijuana Regulations
(SMMR) processes regarding criminal background checks.
Oversight does not have any information to the contrary. Oversight assumes the DHSS has
sufficient staff and resources to absorb the minimal additional responsibilities required by this
proposal and will reflect no fiscal impact for this section for DHSS.
§196.1173 – Labeling of cannabis
DOR officials state this provision would designate cannabinoid oil product as a “food” under
Section 196. Section 144.014.1 imposes a 1% state sales tax on the retail sale of food. Section
144.014.2 defines food as products for which SNAP benefits can be used. In order to be subject
to the 1.225% food sales tax rate the food must be products and types of food for which food
stamps may be redeemed pursuant to 7 U.S.C. Section 2012. Federal statutes do not include
cannabinoid oil products as food and, therefore, these products would be subject to the 4.225%
state sales tax rate. L.R. No. 5400H.01I
Bill No. HB 2704
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March 7, 2022
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Allowing additional products to be considered taxable will result in an increase of revenue to the
state and local sales tax funds. The impact will be shown below in Section 196.3021 regarding
the taxation of cannabis.
Officials from the City of Kansas City and the Kansas City Firefighter’s Pension System both
state the preemption provision would have a negative fiscal impact by prohibiting Kansas City
from levying a tax.
Oversight does not have any information to the contrary. However, Oversight assumes the
4.03% (weighted average) of the special tax on sales of marijuana products collected and
distributed by DOR to cities and counties would compensate the City of Kansas City for any
taxes that could not be implemented because of the preemption provision in the proposal.
Therefore, Oversight will present the increase from the special tax collected by DOR as the
impact to local governments.
Oversight notes the provisions of §196.3021.3 provide that any excess moneys remaining the
fund (Cannabis Freedom Fund) after all costs have been paid shall be divided equally between
teachers’ salaries, first responders’ pensions, and the Missouri Veterans Commission. Any
contributions from the Cannabis Freedom Fund to the Kansas City Firefighter’s Pension System
would help offset the pre-emption provision.
§§196.3000 – 196.3048 Cannabis Enforcement Authority (Missouri Department of Agriculture)
Officials from the Missouri Department of Agriculture (MDA)
the addition of seven (7) regional offices [St. Louis (163 FTE), Kansas City (115 FTE), Jefferson
City (65 FTE), Springfield (22 FTE), Poplar Bluff/Cape Girardeau (22 FTE), St. Joseph (22
FTE), and Kirksville/Hannibal (22 FTE)] for 431 new FTEs. The estimated costs for rental
space/ capital improvements is 431 FTE X 230 sq.ft. X $18/sq.ft. (average) or $1,784,340
annually.
MDA is a consolidated agency for ITSD purposes and ITSD will need to provide expertise in the
selection and implementation of a seed-to-sale tracking system from an outside source.
Contracted IT services are estimated to cost $61,000,000 annually for an over-the-counter seed-
to-sale tracking system and annual maintenance/updates to the system.
Set up of this program (cost of the legislation) is estimated to cost $152,259,394 annually. It is
expected at some time in the future the program will be supported by fees from the regulated
entities. However, since the proposal does not provide upfront funding for program activities,
MDA requests ten percent (10%) of the projected budget from General Revenue to initiate
regulatory activities.
MDA officials state revenues for the recreational marijuana program would need to fully fund
the program for years subsequent to the initial implementation. Year one would need to be fully
funded by general revenue. L.R. No. 5400H.01I
Bill No. HB 2704
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An estimated 5,474 marijuana retail facilities would be licensed; therefore, the license cost of
$28,807 per facility, per year, would need to be collected to fully fund this program in year two
and years to follow.
Sales tax revenue would also be generated through this program. There is no way to estimate the
sales tax revenue for the state of Missouri without knowing the established sales tax rate for
recreational marijuana. (NOTE: See Sales Tax estimates provided by DOR beginning on page 14
of this fiscal note)
Based on the information provided by MDA, Oversight notes personnel service costs with fringe
benefits for 431 FTE totals $51,883,170 annually. Equipment and expense costs, including rent,
professional services and contracted IT services, are estimated to cost $100,467,224 annually
(total of all costs = $152,259,394). None of these costs include increases for inflation in
subsequent years. Therefore, for fiscal note purposes, Oversight will present MDA costs as
“likely to exceed” the amounts provided by MDA for all years after FY2023. Oversight also
assumes that all expenses will be paid from the Cannabis Freedom Fund. It is assumed that
General Revenue funds will be required to set up the program since no license fee revenue will
have been collected while the program is being established. Oversight will show a transfer from
General Revenue to the Cannabis Freedom Fund in an amount to cover costs.
Oversight further assumes that MDA will implement annual license fees in amounts for the
various licensees necessary to cover the costs to operate the program. Oversight assumes the
actual number of licenses for all businesses associated with selling legalized marijuana will be
greater than the number assumed by MDA and that actual licensing fees per licensee will be
lower, but the total fees collected will cover the cost of operating the program. However, for
fiscal note purposes, Oversight assumes license/fee revenue of $157,689,518 (5,474 retail
facilities x $28,807 license fee per facility) and unknown penalties beginning in FY2024.
Oversight notes the provisions of §196.3021.3 provide that any excess moneys remaining the
fund (Cannabis Freedom Fund) after all costs have been paid shall be divided equally between
teachers’ salaries, first responders’ pensions, and the Missouri Veterans Commission. Since it is
unknown the amount of operating revenue MDA will need each year to fund operations, it is
unknown what amount of funds remaining in the Cannabis Freedom Fund will be determined to
be “excess moneys”. Therefore, for fiscal note purposes, Oversight will not show a transfer out
of the fund for teachers’ salaries, first responders’ pensions or the Missouri Veterans
Commission.
§196.3018 – Asset forfeiture
DOR officials state this provision would prohibit the use in Missouri of “asset or civil
forfeiture” “in association with legal marijuana cultivation, use, sale, or possession.” It should be
noted that DOR does use some of these legal mechanisms in order to ensure that taxpayers
satisfy all their tax debt. Due to the vagueness of which mechanisms are no longer allowed, this L.R. No. 5400H.01I
Bill No. HB 2704
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could fiscally impact the DOR’s ability to collect outstanding tax debt. This could result in an
unknown negative impact on the Department.
Oversight does not have any information to the contrary. Oversight will present an unknown
loss to General Revenue (GR) for this section of the proposal.
§196.3021 – Sale of marijuana for medical use
DOR officials state this provision sets the tax rate of 12% percent on marijuana sold for personal
use and retains the 4% tax for medical use. The medical marijuana tax will continue to go into
the Missouri Veteran’s Health Care Fund while the new 12% tax will go into the Cannabis
Freedom Fund created in this provision.
This provision assesses the special tax but does not state it is an excise tax or sales tax. So it is
considered a special tax. Since marijuana will be considered a new product to be sold in
Missouri, the businesses will also be required to collect sales and use tax on the marijuana. This
provision allows for the assessment of state and local sales tax on the marijuana also.
To calculate the fiscal impact of this proposal DOR used the following data.
Based on a study completed by Gallup in 2019 and again in 2021, they found that 12% of the
nation’s adults smoke marijuana regularly. Based on information published by the US Census
Bureau there are approximately 4,525,345 individuals at age 21 or above in the State of
Missouri; 12% of the total number of adults aged 21 or older would equal 543,041 adults
(4,525,345 x 0.12).
A report published by Headset Inc., a new market insights from Seattle-based Cannabis
Intelligence Company, believes that the average cannabis consumer spends roughly $645 on
marijuana and related products per year. Based on information provided in the report, the largest
pool of individuals surveyed spent $1,000 or above each year on marijuana and marijuana
products.
This proposal begins on the effective date of the proposal, August 28, 2022. It should be noted
that the special tax and the sales tax are distributed by the state one month behind the collection
due to processing. Therefore, only nine months of impact would be expected in FY 2023.
Special Tax- Low Amount
If the 12% of adults in Missouri, age 21 and older, spend $645 each year on marijuana and
included in this amount is the tax (passed on from seller to purchaser) and assuming the tax is
12%, the DOR estimates that $42,031,373would be collected and deposited into the Cannabis
Freedom Fund.
$645*12% = $77.40 x 543,041 = $42,031,373 L.R. No. 5400H.01I
Bill No. HB 2704
Page 15 of 35
March 7, 2022
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If the average amount spent each year on marijuana by adults in Missouri, over the age of 21, is
$645 and not included in this amount is the tax, the DOR estimates that $47,765,886 would be
collected and deposited into Cannabis Freedom Fund.
($645 / 88% = $733 x 12% =$87.96 x 543,041 = $47,765,886
DOR estimates the fiscal impact as $42,031,373 to $47,765,886 once fully implemented in FY
2025.
Special Tax- High Amount
If the $1,000 included tax (assumed at 12 percent), the DOR estimates that $65,164,920 would
be collected and deposited into the Cannabis Freedom Fund. ($1,000*12% = $120 x 543,041)
If the $1,000 does not include tax, the DOR estimates that $74,027,349 would be collected and
deposited into Cannabis Freedom Fund. ($1,000 / 88% = $1,136 x 12% = $136.32 x 543,041)
DOR estimates the fiscal impact as $65,164,920 to $74,027,349 once fully implemented in FY
2025.
FY 2023(9 months)FY 2024 FY 2025LowHighLowHighLowHigh$31,523,530$55,520,512$42,031,373$74,027,349$42,031,373$74,027,349
State and Local Sales Tax
Since this is a new product it will be subject to state and local sales tax. The state sales tax rate is
4.225% and the Department uses a 4.03% weighted average for calculating the local sales tax
rate.
Assuming the special tax price is included in the price of the marijuana, DOR would expect the
purchase price would be $722.40 ($645 + $77.40 special tax) on the low end, and total sales
would equal $392,292,818 ($772.40 x 543,041). Therefore, the total state sales tax collected
would be $16,574,372 ($392,292,818 x 4.225% state sales tax rate).
FundFull Year Low ImpactGeneral Revenue (3%)$11,768,785School District Trust (1%)$3,922,928Conservation Commission
(0.125%)
$490,366Park, Soil & Water (0.1%)$392,293Local (4.03% weighted)$15,809,401
The high end estimate is expected to generate total sales of $608,205,920 [($1,000 spending
+$120 special tax) x 543,041]. This would generate state sales tax of $25,696,700. L.R. No. 5400H.01I
Bill No. HB 2704
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FundFull Year Low ImpactGeneral Revenue (3%)$18,506,837School District Trust (1%)$6,168,946Conservation Commission
(0.125%)
$771,118Park, Soil & Water (0.1%)$616,895Local (4.03% weighted)$24,510,699
So the potential impact from the sales tax is:
FundFY 2023 (9 mo. collection)FY 2024 +General Revenue$8,826,589 - $13,880,128$11,768,785 - $18,506,837School District Trust$2,942,196 - $4,626,709$3,922,928 - $6,168,946Conservation
Commission
$367,774 - $578,338$490,366 - $771,118Park, Soil & Water$294,220 - $462,671$392,293 - $616,895Locals$11,857,051 - $18,383,024$15,809,401 - $24,510,699
Oversight notes that the Conservation Sales Tax funds are derived from one-eighth of one
percent sales and use tax pursuant to Article IV Section 43 (a) of the Missouri Constitution, thus
Missouri Department of Conservation’s (MDC) sales taxes are constitutional mandates.
Therefore, Oversight will reflect the B&P’s and DOR’s fiscal impact estimates for MDC’s funds.
Oversight notes the Park, Soil, and Water Sales Tax funds are derived from the one-tenth of one
percent sales and use tax pursuant to Article IV Section 47 (a) thus Department of Natural
Resources (DNR) sales taxes are constitutional mandates. Therefore, Oversight will reflect the
B&P’s and DOR’s fiscal impact estimates for DNR’s funds.
DOR states this proposal requires the special 12% marijuana tax to be handled the way DOR
does the cigarette tax with stamps. The seller pays the tax and is provided stamps of proof of the
tax paid. The seller then can charge the buyer to reimburse the tax to the seller. This is how
DOR does the cigarette tax.
The cost for the DOR to buy the cigarette stamps is $245,000 annually. Additionally the DOR
has 2 FTE that run the cigarette stamp program. It is assumed DOR would need at least the 2
Association Customer Service Representatives (ACSRs; annual salary $27,776 each) to handle
the processing of the form, phone calls and stamps and the $245,000 to fund the marijuana
program. This provision allows the DOR to receive funding from the Cannabis Freedom Fund to
pay for the administrative costs.
This allows the DOR to establish the method for collection the sales tax. DOR assumes it would
collect it in the same manner as the current state and local sales tax. DOR assumes no additional
administrative impact for the collection of the sales tax. L.R. No. 5400H.01I
Bill No. HB 2704
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However, this would create a new special tax that is collected. The Department assumes it will
run the program similar to its other excise programs (like motor fuel) and will need a need a new
marijuana database for tracking payments and the stamps. ITSD provided DOR with the below
impact for the creation of the new database.
Additionally, this will require new marijuana reporting form(s) and application form(s).
ITSD estimates it will require 311.04 consultant hours for the creation of the marijuana database,
including requirements gathering, analysis, design, development, test, implementation and
project management. The consultant rate of $95/hour based is based on current contract(s)
pricing as it is assumed that any new IT project/system will be bid out, as all ITSD resources are
at full capacity. Therefore, the total cost to General Revenue in FY2023 for the new database is
estimated to be $29,549 (311.04 consultant hrs x $95/hr).
DHSS officials state section 196.3021.5: Sale of marijuana for medical use to licensed medical
marijuana patients shall not be subject to any additional tax under the Cannabis Freedom Act.
SMMR does not anticipate any reduction/increase in tax revenue to the Veterans’ Health and
Care Fund based on the proposed language.
Oversight does not have any information to the contrary. Therefore, Oversight will reflect a zero
impact in the fiscal note for this section of the proposal for the DHSS.
§196.3036 – Marijuana licenses
DHSS officials state section 196.3036: Entities may concurrently apply for both adult use and
medical marijuana licenses. SMMR does not anticipate this provision will require changes to the
processes or application requirements of medical marijuana licensees. In the event SMMR
accepts applications for medical marijuana licenses, it will need to collaborate with the Cannabis
Enforcement Agency to ensure entities applying for adult use are aware they can apply for
medical marijuana licenses at the same time.
For fiscal note purposes DHSS discussed with Legislative Oversight that “Department” and
“Authority” in the proposed legislation related to adult use is the Department of Agriculture.
DHSS, SMMR will need to collaborate with the Cannabis Enforcement Agency to coordinate
regulatory processes when entities are licensed as both adult use and medical marijuana facilities.
The department anticipates being able to absorb these costs.
Oversight does not have any information to the contrary. Oversight assumes the DHSS has
sufficient staff and resources to absorb the minimal additional responsibilities required by this
proposal and will reflect no fiscal impact for this section of the proposal for DHSS.
DOR officials state §§196.3024 – 196.3036 and §§196.3042 – 196.3048 are about the use of
cannabis and licensing of cannabis facilities. These section will not have a fiscal impact on the
DOR. L.R. No. 5400H.01I
Bill No. HB 2704
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March 7, 2022
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Oversight does not have any information to the contrary. Therefore, Oversight will reflect a zero
impact in the fiscal note for this section of the proposal for the DOR.
§196.3039 – Statewide hospitality license
DOR officials state this provision allows certain businesses (bars and restaurants) to apply for
and receive a “hospitality business license” to sell cannabis or cannabis products for
consumption on their premises or a catering business to sell cannabis or cannabis products at a
private event. This new license will not impact the collection of sales and excise taxes for the
sale of cannabis and cannabis products because all the hospitality license does is alert the
authority that businesses other than cannabis dispensaries will be selling cannabis at retail.
These other businesses would be required to collect the sales and excise tax if they sell cannabis.
Oversight does not have any information to the contrary. Oversight assumes any impact to DOR
is being reflected in their response to §196.3021.
§§362.003 – 370.070 – Cannabis businesses and financial institutions
DOR officials state these sections allow financial institutions to offer bank accounts to
businesses that are in the cannabis business. Additionally, it provide protections for the cannabis
businesses and financial institutions. These sections are not expected to have an impact on the
DOR.
Oversight does not have any information to the contrary. Therefore, Oversight will reflect a zero
impact in the fiscal note for these sections of the proposal for the DOR.
§487.205 – Family court decisions
DOR officials state this provision does not allow a family court to consider cannabis use by a
person over the age of 21 when making decisions. This section is not expected to have an impact
on the DOR.
Oversight does not have any information to the contrary. Therefore, Oversight will reflect a zero
impact in the fiscal note for this section of the proposal for the DOR.
§§544.186, 577.059 & 610.135 – Expungement of cannabis convictions
Officials from the Department of Public Safety - Missouri Highway Patrol (MHP)
currently there are 65,496 conviction records in the Traffic Arrest System (TAS) that meet the
criteria of this proposed legislation. To process 65,496 court orders, the Patrol will require a
minimum of six (6) FTE to process the court orders within an approximate twelve-month
timeframe (5 Patrol Records Division (PRD) Technicians III @ $38,184 annually; 1 PRD
Program Supervisor @ $47,448 annually) . L.R. No. 5400H.01I
Bill No. HB 2704
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1 full-time employee (FTE) = 1,864 hours (average work hours per year) x 60 minutes per hour
= 111,840 minutes per year.
30 minutes = estimate of the amount of time per petition to log, process, research, review, and
expunge the information/record when the order is received.
1 FTE can process 3,728 expungements per year = 111,840/30.
Oversight does not have any information to the contrary. However, Oversight assumes if all of
the conviction records currently in the TAS are expunged in one year, the number of FTE
requested by MHP may be reduced. Therefore, for fiscal note purposes, Oversight will present
MHP’s fiscal impact/number of FTE as “Up to” the amount provided.
DOR officials state these provisions will allow the courts to expunge all marijuana related
offenses or violations from a person’s records.
Courts order a driver license suspension/revocation to individuals convicted of possession of
controlled substances, both over and under the age of 21, pursuant to the Abuse and Lose. If a
possession of marijuana offense is expunged through the court, and such offense has resulted in
an Abuse and Lose suspension/revocation, an expungement order from the court reversing the
suspension/revocation would be necessary for the DOR to comply with requiring restoration to
the status that such person occupied as if such event had never taken place.
The DOR receives only about 20 court orders a month. There were approximately 167 court
orders received in FY 2021 under the Abuse and Lose actions. The DOR would not be able to
accurately identify how many of the above actions on record would be eligible for expungement,
as the orders do not specify the violation that warranted the suspension/revocation.
An Associate Customer Service Representative can process 50 court-ordered expungements per
day. The DOR does not feel that a significant increase in expungements will be received based
on this proposal. If the increase is more significant than anticipated, additional FTE will be
requested through the appropriation process.
To implement the proposed legislation, the DOR would be required to:
FY 2022 – Driver License Bureau
Research/Data Analyst 10 hrs. @ $25.01 per hr. =$250
Administrative Manager 10 hrs. @ $23.35 per hr. =$233
=$483 L.R. No. 5400H.01I
Bill No. HB 2704
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The DOR presumes it will be able to absorb the above listed costs. If multiple bills pass which
require DOR resources, the DOR could request additional FTE and related equipment and
expenses through the appropriation process.
Sections 302.420 and 302.541 allow the DOR to collect a reinstatement fee on Abuse and Lose
suspensions/revocations, which is $45 per reinstatement. The proposed legislation may result in
the loss of reinstatement fees associated with the expungement of active actions on record. The
DOR is unable to accurately identify the amount of potential revenue lost, as it is unable to
identify how many of the above actions on record would be eligible for expungement. The loss
in reinstatement fees should be minimal.
This proposal could also prevent the State of Missouri from obtaining Impaired Driving federal
grant funding. This funding is distributed through MODOT and the DOR defers to them for any
fiscal impact.
Oversight does not have any information to the contrary. Oversight assumes the DOR has
sufficient staff and resources available to absorb the minimal costs associated with
expungements and the loss of reinstatement fees and will reflect no fiscal impact for DOR
related to these provisions of the proposal. However, if multiple proposals pass which require
DOR resources, DOR could request additional funding through the appropriations process.
Oversight notes §610.135.5 excludes the expungement of records relating to commercial
drivers’ license holders. DOR deferred to MODOT regarding the potential fiscal impact of these
provisions. MODOT officials assume the proposal will have no fiscal impact on their
organization (see below, in Bill as a whole). Therefore, Oversight assumes this proposal would
have no fiscal impact on Impaired Driving federal grant funding.
Bill as a whole
Officials from the Department of Public Safety, Missouri Veterans Commission (MVC) state
this proposal will have a positive fiscal impact to MVC. MVC defers to DOR regarding the
amount of the fiscal impact.
Officials from the University of Central Missouri assume the proposal would have an
indeterminate fiscal impact on their organization due to uncertainty of application.
Oversight does not have any information to the contrary. However, Oversight assumes any
impact that might be incurred by the University would be minimal and absorbable within current
funding levels.
Officials from the Office of Attorney General (AGO)
arising from this proposal can be absorbed with existing personnel and resources. However, the
AGO may seek additional appropriations if there is a significant increase in litigation. L.R. No. 5400H.01I
Bill No. HB 2704
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Oversight does not have any information to the contrary. Therefore, Oversight assumes the
AGO will be able to perform any additional duties required by this proposal with current staff
and resources and will reflect no fiscal impact to the AGO for fiscal note purposes.
Officials from the Missouri Office of Prosecution Services (MOPS) state there is no
measurable fiscal impact to MOPS. The enactment of new crimes [191.255 and 196.1173.8(2)]
creates additional responsibilities for county prosecutors and the circuit attorney which may in
turn result in additional costs which are difficult to determine.
Oversight does not have any information to the contrary. Therefore, Oversight will reflect no
fiscal impact for this proposal for MOPS.
Officials from the Department of Commerce and Insurance, the Department of Elementary
and Secondary Education, the Department of Mental Health, the Department of Labor and
Industrial Relations the Department of Social Services, the Missouri Department of
Transportation, the University of Missouri System, the City of Claycomo, the Newton
County Health Department, the Phelps County Sheriff’s Department, the Kansas City
Police Department, the St. Joseph Police DepartmentSt. Louis County Police
Department, the Rock Community Fire Department Retirement Plan, the Sheriff’s
Retirement System, the Spanish Lake Fire Department Retirement Plan, the St. Joseph
Policemen’s Pension FundHermann Area Hospital DistrictMissouri State University,
St. Charles Community College, the Office of the State Treasurer and the State Tax
Commission each assume the proposal will have no fiscal impact on their respective
organizations. Oversight does not have any information to the contrary. Therefore, Oversight
will reflect a zero impact in the fiscal note for these agencies.
Officials from the Department of Natural Resources defer to the Department of Revenue for
response regarding the fiscal impact of this proposal on their organization.
Rule Promulgation
Officials from the Joint Committee on Administrative Rules assume this proposal is not
anticipated to cause a fiscal impact beyond its current appropriation.
Officials from the Office of the Secretary of State (SOS) note many bills considered by the
General Assembly include provisions allowing or requiring agencies to submit rules and
regulations to implement the act. The SOS is provided with core funding to handle a certain
amount of normal activity resulting from each year's legislative session. The fiscal impact for
this fiscal note to the SOS for Administrative Rules is less than $5,000. The SOS recognizes that
this is a small amount and does not expect that additional funding would be required to meet
these costs. However, the SOS also recognizes that many such bills may be passed by the
General Assembly in a given year and that collectively the costs may be in excess of what the
office can sustain with its core budget. Therefore, the SOS reserves the right to request funding L.R. No. 5400H.01I
Bill No. HB 2704
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for the cost of supporting administrative rules requirements should the need arise based on a
review of the finally approved bills signed by the governor.
Oversight only reflects the responses received from state agencies and political subdivisions;
however, other cities, various county officials, local public health agencies, nursing homes,
sheriffs’ departments, police departments, first responder retirement plans, schools, hospitals,
and colleges and universities were requested to respond to this proposed legislation but did not.
A listing of political subdivisions included in the Missouri Legislative Information System
(MOLIS) database is available upon request.
Officials from the Office of Administration - Budget and Planning and the Office of the State
Courts AdministratorOversight’s request for a statement of fiscal impact. L.R. No. 5400H.01I
Bill No. HB 2704
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FISCAL IMPACT –
State Government
FY 2023
(10 Mo.)
FY 2024FY 2025Fully
Implemented
(FY 2028)
GENERAL
REVENUE FUND
Income – DOR
(§196.3021) – sales tax
on recreational cannabis
p. 14-17
$8,826,589-
$13,880,128
$11,768,785-
$18,506,837
$11,768,785-
$18,506,837
$11,768,785-
$18,506,837
Transfer-out – to
Cannabis Freedom
Fund for MDA initial
program costs p. 12-13
($96,738,882 -
$120,735,864)$0$0$0
Revenue reduction –
DOR (§143.121) –
marijuana business
deductions p. 4(Unknown)(Unknown)(Unknown)(Unknown)
Revenue loss – DOR
(§143.2200) – refunds
for denied marijuana
licenses p. 5(Unknown)(Unknown)(Unknown)(Unknown)
Reduction in tax
collections – DOR
(§195.255) – non-
disclosure of info to
IRS p. 6(Unknown)(Unknown)(Unknown)(Unknown) L.R. No. 5400H.01I
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FISCAL IMPACT –
State Government
FY 2023
(10 Mo.)
FY 2024FY 2025Fully
Implemented
(FY 2028)
GENERAL
REVENUE FUND
(continued)
Savings – DOC
(§§191.255, 557.059, &
579.015) p. 7-11
Personal service$548,998$508,820$790,640$896,038 Fringe benefits$377,666$350,028$543,894$616,405 Equipment and
expense
$49,181$46,241$72,919$86,378 Reduction in
incarceration and P&P
expenditures$350,838$404,165$541,076$574,194
Total Savings – DOC$1,326,683$1,309,254$1,948,529$2,173,015 FTE Change – DOS-17 FTE-13 FTE-20 FTE-22 FTESavings – SPD
(§579.015) – reduction
in number of cases p. 6
Less than
$250,000
Less than
$250,000
Less than
$250,000
Less than
$250,000
Costs – DOR
(§196.3021) p. 16-17
Personal service($101,523)($123,601)($125,403)($129,202) Fringe benefits($81,042)($97,817)($98,394)($99,615) Equipment and
expense
($33,388)($1,473)($1,509)($1,625) ITSD/marijuana
database
($29,549)$0$0$0 Marijuana stamps($204,167)($251,125)($257,403)($277,195)Total Costs – DOR($449,669)($474,016)($482,709)($507,637) FTE Change – DOR4 FTE4 FTE4 FTE4 FTE L.R. No. 5400H.01I
Bill No. HB 2704
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FISCAL IMPACT –
State Government
FY 2023
(10 Mo.)
FY 2024FY 2025Fully
Implemented
(FY 2028)
GENERAL
REVENUE FUND
(continued)
Loss – DOR
(§196.3018) – reduction
in asset forfeiture
collections p. 13(Unknown)(Unknown)(Unknown)(Unknown)
ESTIMATED NET
EFFECT ON THE
GENERAL
REVENUE FUND
Unknown,
greater than
($87,035,279)
Unknown,
less than
$19,342,075
Unknown,
less than
$19,972,657
Unknown,
less than
$20,172,215
Estimated Net FTE
Change on the General
Revenue Fund-13 FTE-9 FTE-16 FTE-16 FTE
CANNABIS
FREEDOM FUND
Income – DOR
(§196.3021) – 12%
recreational cannabis
tax p. 14-17
$31,523,530-
$55,520,512
$42,031,373-
$74,027,349
$42,031,373-
$74,027,349
$42,031,373-
$74,027,349
Income – MDA
(§§196.3000 –
196.3048 – Licensing
fees, fines and penalties
p. 12-13$0
Unknown
exceeding
$157,689,518
Unknown
exceeding
$157,689,518
Unknown
exceeding
$157,689,518
Transfer-in – from
General Revenue - to
cover MDC program
costs p. 12-13
$96,738,882 -
$120,735,864 $0$0$0 L.R. No. 5400H.01I
Bill No. HB 2704
Page 26 of 35
March 7, 2022
HWC:LR:OD
FISCAL IMPACT –
State Government
FY 2023
(10 Mo.)
FY 2024FY 2025Fully
Implemented
(FY 2028)
CANNABIS
FREEDOM FUND
(continued)
Costs – MDA
(§§196.3000 –
196.3048 (Cannabis
enforcement authority)
p. 12-13
Likely to
exceed…
Likely to
exceed…
Likely to
exceed…
Personal service($33,898,948)($33,898,948)($33,898,948)($33,898,948) Fringe benefits($17,893,222)($17,893,222)($17,893,222)($17,893,222) Professional services
(including seed-to-sale
contracted IT services)($68,500,000)($68,500,000)($68,500,000)($68,500,000)
Equipment and
expense (including rent
and vehicle purchases)($31,967,224)($31,967,224)($31,967,224)($31,967,224)
Total Costs – MDA($152,259,394)Likely to
exceed
($152,259,394)
Likely to
exceed
($152,259,394)
Likely to
exceed
($152,259,394)
FTE Change – MDA431 FTE431 FTE431 FTE431 FTEESTIMATED NET
EFFECT ON THE
CANNABIS
FREEDOM FUND$0
Less than
$47,461,497 to
$79,457,473
Less than
$47,461,497 to
$79,457,473
Less than
$47,461,497 to
$79,457,473
Estimated Net FTE
Change on the Cannabis
Freedom Fund431 FTE431 FTE431 FTE431 FTE L.R. No. 5400H.01I
Bill No. HB 2704
Page 27 of 35
March 7, 2022
HWC:LR:OD
FISCAL IMPACT –
State Government
FY 2023
(10 Mo.)
FY 2024FY 2025Fully
Implemented
(FY 2028)
SCHOOL DISTRICT
TRUST FUND (0688)
Income – DOR
(§196.3021) – sales tax
on recreational cannabis
p. 16
$2,942,196 to
$4,626,709
$3,922,928 to
$6,168,946
$3,922,928 to
$6,168,946
$3,922,928 to
$6,168,946
ESTIMATED NET
EFFECT ON THE
SCHOOL DISTRICT
TRUST FUND
$2,942,196 to
$4,626,709
$3,922,928 to
$6,168,946
$3,922,928 to
$6,168,946
$3,922,928 to
$6,168,946
CONSERVATION
COMMISSION
FUND (0609)
Income – DOR
(§196.3021) – sales tax
on recreational cannabis
p. 16
$367,774 to
$578,338
$490,366 to
$771,118
$490,366 to
$771,118
$490,366 to
$771,118
ESTIMATED NET
EFFECT ON THE
CONSERVATION
COMMISSION
FUND
$367,774 to
$578,338
$490,366 to
$771,118
$490,366 to
$771,118
$490,366 to
$771,118 L.R. No. 5400H.01I
Bill No. HB 2704
Page 28 of 35
March 7, 2022
HWC:LR:OD
FISCAL IMPACT –
State Government
FY 2023
(10 Mo.)
FY 2024FY 2025Fully
Implemented
(FY 2028)
PARK, SOIL &
WATER FUND
Income – DOR
(§196.3021) – sales tax
on recreational cannabis
p. 16
$294,220 to
$462,671
$392,293 to
$616,895
$392,293 to
$616,895
$392,293 to
$616,895
ESTIMATED NET
EFFECT ON THE
PARK, SOIL &
WATER FUND
$294,220 to
$462,671
$392,293 to
$616,895
$392,293 to
$616,895
$392,293 to
$616,895
HIGHWAY FUND
(0644)
Costs – DPS, MHP
(§§544.186, 577.059 &
610.135)Up to…Up to…Up to…Up to…
Personal service($198,640)($240,752)($243,159)($250,527) Fringe benefits($176,591)($214,029)($216,168)($222,719) Equipment and
expense
($22,318)($5,843)($5,988)($6,448)Total Costs – DPS,
MHP
(Up to
$397,549)
(Up to
$460,624)
(Up to
$465,315)
(Up to
$479,694)
FTE Change – DPS,
MHPUp to 6 FTEUp to 6 FTEUp to 6 FTEUp to 6 FTE
ESTIMATED NET
EFFECT ON THE
HIGHWAY FUND
(Up to
$397,549)
(Up to
$460,624)
(Up to
$465,315)
(Up to
$479,694)
Estimated Net FTE
Change on the Highway
FundUp to 6 FTEUp to 6 FTEUp to 6 FTEUp to 6 FTE L.R. No. 5400H.01I
Bill No. HB 2704
Page 29 of 35
March 7, 2022
HWC:LR:OD
FISCAL IMPACT – Local
Government
FY 2023
(10 Mo.)
FY 2024FY 2025Fully
Implemented
(FY 2028)
LOCAL GOVERNMENTS –
CITIES AND COUNTIES
Income – Cities and Counties
(§196.3021) – sales tax on
recreational cannabis p. 16
$11,857,051
to
$18,383,024
$15,809,401
to
$24,510,699
$15,809,401
to
$24,510,699
$15,809,401
to
$24,510,699
ESTIMATED NET EFFECT
ON CITIES AND COUNTIES
$11,857,051
to
$18,383,024
$15,809,401
to
$24,510,699
$15,809,401
to
$24,510,699
$15,809,401
to
$24,510,699
FISCAL IMPACT – Small Business
This proposal could have a significant fiscal impact on a variety of small business that go into
the recreational marijuana industry and any small business in the hospitality industry.
FISCAL DESCRIPTION
This bill establishes the "Cannabis Freedom Act".
Under the provisions of this bill, taxpayers are authorized to conduct business under the medical
cannabis provisions of the Constitution of Missouri or under the provisions of this bill may
deduct the amount that would have been deducted from the computation of the taxpayer's federal
taxable income if such a deduction were not disallowed under 26 U.S.C. Section 280E, as in
effect on January 1, 2022, because of the status of marijuana as a controlled substance under
federal law (§143.121).
For all tax years beginning on or after January 1, 2023, in addition to other deductions allowed
by law, a qualified taxpayer, as defined under the bill, may deduct from their Missouri adjusted
gross income an amount equal to the amount spent in a given year on a license application fee
required under medical cannabis provisions of the Constitution of Missouri. The Department of
Revenue shall promulgate all necessary rules and regulations for the administration of this
section. This deduction shall sunset six years after the effective date of this bill (§ 143.2200).
No state agency shall disclose to the federal government, any federal government employee, or
any unauthorized third party, the statewide list or any individual information of persons who
have applied for or obtained a qualifying patient identification card, a qualifying patient L.R. No. 5400H.01I
Bill No. HB 2704
Page 30 of 35
March 7, 2022
HWC:LR:OD
cultivation identification card, or a primary caregiver identification card, as those cards are
described in Article XIV, Section 1 of the Constitution of Missouri relating to the right to access
medical marijuana (§191.255).
This bill removes marijuana and tetrahydrocannabinols (THC), as defined, from the list of
controlled substances and removes marijuana from the offenses of possession, delivery,
distribution, manufacture, and trafficking of a controlled substance (§§195.006, 195.017,
579.015, 579.020, 579.030, 579.055, 579.065, and 579.068).
Currently, all owners, officers, managers, contractors, employees, and other support staff of
licensed or certified medical marijuana facilities must submit fingerprints to the State Highway
Patrol for state and federal criminal background checks. Additionally, the Department of Health
and Senior Services may require fingerprint submissions of owners, officers, managers,
contractors, employees, and other support staff for licensure authorizing that person to own or
work at a medical marijuana facility. This bill provides that only employees, contractors, owners,
and volunteers of medical marijuana facilities or facilities subject to the Cannabis Enforcement
Authority shall be subject to such fingerprinting. This bill provides a definition of contractor for
purposes of the provisions of this section (§195.815).
This section establishes the "Cannabinoid Product Labeling Act" and provides that the General
Assembly occupies and preempts the field of cannabinoid oil products regulation to the full
exclusion of any order, ordinance, or regulation of any political subdivision of the state, with any
existing or future orders, ordinances, or regulations becoming void. The bill shall not apply to
any hemp extract for which a registration card has been issued under §§192.945 to 192.947 or
§195.207.
This section requires cannabinoid oil products to be labeled and include necessary information,
as described in the section. This section specifies that a dealer must not prepare or sell a
cannabinoid oil product that is adulterated with a dangerous substance and a such product must
only be sold to a person over the age of 21 (§196.1173).
These sections establish the "Cannabis Freedom Act". The Cannabis Enforcement Authority
shall promulgate all necessary rules and regulations for the administration of these sections. The
provisions of these sections shall not restrict the rights of employers to maintain a drug and
alcohol-free workplace or require any employer to allow or accommodate the use of marijuana.
These provisions shall not allow the operation of motor vehicles while impaired by marijuana, or
allow individuals under the age of 21 to purchase marijuana. These provisions do not restrict the
rights of employers, schools, care facilities, or correctional facilities to prohibit or regulate
conduct otherwise allowed under these provisions. These provisions legalize the possession and
consumption of marijuana for personal use, allow for anyone 21 years of age or older to cultivate
and possess no more than 12 mature, flowering marijuana plants for noncommercial use, and
allows for the sale of marijuana products to consumers 21 years of age or older. The use or
possession of marijuana shall not impede a person's legal right to possess a firearm. It shall be
lawful for a person 21 years of age or older to transfer or gift marijuana to another adult. L.R. No. 5400H.01I
Bill No. HB 2704
Page 31 of 35
March 7, 2022
HWC:LR:OD
Marijuana farmers, manufacturers, processors, and distributors shall not be subject to special
zoning requirements or licensing fees.
Asset or civil forfeiture shall no longer be used in the state in association with legal marijuana
cultivation, use, sale, or possession.
A tax shall be levied on the sale of marijuana and marijuana products at a rate not to exceed
12%. All tax revenues collected shall be deposited into the "Cannabis Freedom Fund", as
established under the bill, and used to pay for costs associated with the implementation,
administration, and enforcement of the provisions of these sections. Excess moneys remaining in
the Fund shall be divided equally between teachers' salaries, first responders' pensions, and the
Missouri Veterans Commission. These provisions shall not prohibit any state or local sales taxes.
Any sale of marijuana for medical use shall not be subject to the tax established herein.
These provisions establish the "Cannabis Enforcement Authority", under the Department of
Agriculture. The Authority shall have oversight and auditing responsibilities and shall implement
an inventory tracking system. The Authority shall require business records be kept for all
transactions. Inventory shall be tracked and updated after each individual sale and reported to the
Authority. The Authority shall require a seed-to-sale tracking system that tracks marijuana from
either the seed or immature plant stage until the marijuana or marijuana product is sold to a
consumer, as described in the bill.
These provisions establish the marijuana business license, which includes annual licenses for the
following categories: marijuana commercial growers, marijuana processors, marijuana retailers,
marijuana sellers, and marijuana transporters. Grower, processor, retailer, and transporter
prospective licensees must first apply for a temporary marijuana business license prior to
issuance of an annual license. Such temporary license shall be valid for 180 days, subject to
extension, and shall not obligate the Authority to issue an annual license.
The Authority shall develop a website for marijuana business applications. Applications must
meet general requirements as provided in the bill and all applicants shall undergo a background
check. The Authority shall review, approve or reject, and mail such approval or rejection within
90 days of receipt of the application.
In addition to these general requirements, these provisions also provide for additional
requirements for applicants for temporary licenses or renewal of annual licenses. A licensed
commercial grower shall sell only at the wholesale level to a licensed retailer, grower, or
processor. Licensed commercial growers and processors shall complete and submit monthly
yield and sales reports to the Authority, as described in the bill. The Authority shall have
oversight and auditing responsibility to ensure all marijuana grown by a licensed commercial
grower is accounted for and all marijuana processors producing products with marijuana as an
additive are in compliance with the requirements of the bill. L.R. No. 5400H.01I
Bill No. HB 2704
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March 7, 2022
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In addition to the application requirements established under these provisions, licensed
commercial growers and processors shall demonstrate that they have a bank account and shall
provide growth estimates, processing estimates, and predicted electrical and water usage to grow
or process marijuana.
The Authority may issue temporary or annual processor licenses based on the level of risk posed
by the type of processing being conducted as either a nonhazardous marijuana processor license
or a hazardous marijuana processor license. The Authority shall establish standards for licensed
processors for the preparation of edible marijuana products.
A marijuana transporter license shall allow the holder to transport marijuana from a Missouri-
licensed marijuana retailer, licensed commercial grower facility, or licensed processor facility to
a Missouri-licensed marijuana retailer, licensed commercial grower facility, or licensed
processing facility. All marijuana or marijuana products shall be transported in a locked
container labeled as "Marijuana or Derivative". No business may possess, sell, or transfer
marijuana without a valid transporter license. A transporter licensee may contract with multiple
marijuana businesses. A transporter licensee shall use the seed-to-sale tracking system
promulgated by the Authority. The Authority shall issue transporter agent licenses to individual
agents, employees, and owners of a transporter license in order for that individual to qualify to
transport marijuana. Such agent license shall be subject to an annual fee of $25. The
transportation and inventory tracking of marijuana and marijuana products shall comply with
requirements as provided for in the bill.
In addition to failure to meet the requirements established under the bill, grounds for denial for a
temporary or annual license shall include: unlawful sales or purchases, fraudulent acts, falsified
records or misrepresentation to the Authority, grossly inaccurate or fraudulent reporting,
threatening or harming any marijuana patient, caregiver, consumer, medical practitioner, or
employee of the Authority, use of prohibited substances for processing in residential areas, and
endangering public health and safety.
An entity holding a medical marijuana business license issued by the Department of Health and
Senior Services may only apply for a marijuana business license under the provisions of this bill
after August 28, 2024. Thereafter, an entity may concurrently submit an application to obtain a
license for a medical marijuana dispensary facility and license for a marijuana business.
The Authority shall by rule create a statewide hospitality business license allowing a business, as
described in the bill, to sell marijuana or marijuana products at a private event. The Authority
shall maintain a list of businesses licensed under these provisions. Such businesses shall submit
an application to the Authority with a fee in a form and manner as determined by the Authority.
This license shall be valid for two years. Any business that does not have a hospitality business
license that knowingly allows guests to consume marijuana on its premises, or a licensed
hospitality business that does not comply with the requirements under these provisions, shall be
subject to fines and penalties as provided for in the bill. L.R. No. 5400H.01I
Bill No. HB 2704
Page 33 of 35
March 7, 2022
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If marijuana is decriminalized on a federal level, any licensed marijuana business in the state
may engage in interstate commerce, and the state may enter into any interstate compact or
agreement relating to marijuana (§§196.3000 to 196.0348).
No bank, trust company, association, or credit union shall be prohibited, penalized, have any
adverse action taken against it, or otherwise discouraged from providing financial services to
facilities licensed under the provisions of this bill or under Article XIV, Section 1 of the
Constitution of Missouri or to any service provider to such a facilities.
Furthermore, banks, trust companies, associations, and credit unions are permitted to receive the
savings of, make loans to, deposit the funds of, and invest funds of customers who operate as a
facility licensed under the provisions of this bill or under Article XIV, Section 1 of the
Constitution of Missouri. No such institution acting pursuant to this bill shall be liable under
state law for contracting with such facilities (§§362.105, 369.144, 369.326, 370.064, and
370.070).
A family court participant shall not be required to refrain from using marijuana or consuming
marijuana in accordance with the provisions of this bill or in accordance with Article XIV,
Section 1 of the Constitution of Missouri as a term or condition of successful completion of the
family court program. A family court participant who is a qualified patient with a valid medical
marijuana certification or who uses or consumes marijuana in accordance with the provisions of
this bill shall not be in violation of the terms or conditions of the family court on the basis of his
or her participation in Missouri's medical marijuana program (§487.205).
The odor of marijuana alone shall not provide a law enforcement officer with probable cause to
conduct a warrantless search of a motor vehicle, home, or other private property (§ 544.186).
Any conviction, remaining sentence, ongoing supervision, or unpaid court-ordered restitution of
any person incarcerated, on probation or parole, or other form of community supervision
resulting from a conviction of a nonviolent marijuana-related offense shall have such conviction,
remaining sentence, ongoing supervision, or unpaid court-ordered restitution vacated if the
person files a petition in the court in which the person was convicted of the offense or violation.
The lawful possession or use of marijuana shall not result in any punitive action with regard to
probation or parole status. No condition of probation or parole shall consist of restricting the
possession or use of marijuana, and no revocation or extension of probation or parole shall be
imposed as a consequence of the lawful possession or use of marijuana.
Any person who was convicted of a nonviolent marijuana-related offense may petition the court
to have such offense expunged so long as the offense or violation was prosecuted under the
jurisdiction of a Missouri court and all nonviolent marijuana-related offenses are listed in the
petition of expungement (§§559.023, 557.059, and 610.135).
This bill contains penalty provisions. L.R. No. 5400H.01I
Bill No. HB 2704
Page 34 of 35
March 7, 2022
HWC:LR:OD
This legislation is not federally mandated and would not duplicate any other program, but would
require additional capital improvements or rental space.
SOURCES OF INFORMATION
Attorney General’s Office
Department of Commerce and Insurance
Department of Elementary and Secondary Education
Department of Health and Senior Services
Department of Mental Health
Department of Natural Resources
Department of Labor and Industrial Relations
Department of Corrections
Department of Revenue
Department of Public Safety –
Missouri Highway Patrol
Missouri Veterans Commission
Department of Social Services
Missouri Department of Agriculture
Missouri Department of Transportation
Office of the Secretary of State
Office of the State Public Defender
University of Missouri System
City of Claycomo
City of Kansas City
Newton County Health Department
Phelps County Sheriff’s Department
Kansas City Police Department
St. Joseph Police Department
St. Louis County Police Department
Kansas City Firefighter’s Pension System
Rock Community Fire Department Retirement Plan
Sheriff’s Retirement System
Spanish Lake Fire Department Retirement Plan
St. Joseph Policemen’s Pension Fund
Hermann Area Hospital District
Missouri State University
University of Central Missouri
St. Charles Community College
Office of the State Treasurer
Joint Committee on Administrative Rules
Missouri Office of Prosecution Services
State Tax Commission L.R. No. 5400H.01I
Bill No. HB 2704
Page 35 of 35
March 7, 2022
HWC:LR:OD
NOT RESPONDING
Office of Administration - Budget and Planning
Office of the State Courts Administrator
Julie MorffRoss StropeDirectorAssistant DirectorMarch 7, 2022March 7, 2022