How High? Local Government’s Ability to Control & Impact the Marijuana Industry

By Patrick Connelly 

After a historic week in Springfield, Governor Pritzker is poised to sign the Cannibals Regulation and Tax Act (“the Act”) which made its final passage through the General Assembly on Friday May 31st.  The sweeping bill which goes into effect on January 1, 2020 will bring a number of critical decisions to local government doorsteps and the ability to act quickly and decisively will be key.  Local Governments must be ready to address the cannabis question on a variety of fronts including zoning, taxation, licensing, law enforcement, prosecution, and labor and employment. Over the next few weeks the attorneys at PJM Chicago will be issuing bulletins on each of these subjects. Today’s article focuses on zoning, taxation, and licensing:

The State would become just the 11th State in the Union to legalize recreational marijuana. And would allow for residents over 21 to possess up to 30 grams of cannabis and to grow up to five plants in their household for medical use. However, the proposed bill prohibits the use of cannabis in public places, which includes public buildings. Similar to liquor, the current proposal would allow for significant local control.  Local governments have been given the ability to ban or significantly limit cannabis businesses within their borders. Earlier drafts of the bill would have required lengthy time constraints or referenda to exercise such limiting authority. More specifically, local municipalities would be able to adopt reasonable zoning ordinances that are not in conflict with the proposed Act or that would not unreasonably prohibit home cultivation and use. Municipalities should look at their master plans to determine the proper locations for the various types of business that make up the cannabis industry and determine the zoning relief, if any, each such business would need to seek. For example, it is expected that there will be a rush to open ‘Cannabis Lounges’ with similar characteristics as hookah lounges that will allow on-site consumption. The Act gives each municipality broad authority to regulate such businesses and each community must balance a number of factors in making such regulatory decisions.  Though local power is plenary it is not absolute and no zoning ordinances or rules adopted regulate cannabis related businesses in a manner that is more restrictive that what is proposed within the Act.

Taxation is also a crucial element to the Act and the potential additional revenues available to municipalities should not be overlooked.  Home rule and non-home rule municipalities alike have been given the authority to impose a tax on the operation of a cannabis dispensary.  The tax rate cannot exceed 3% of the gross receipts of the sale of non-medical cannabis and can only be imposed in 0.25% increments. If imposed the burden of collection falls upon the State’s Department of Revenue which is entitled to retain 1.5% of the tax for administrative fees. Additional fees for licensing and inspections should also implemented in a manner consistent with a municipalities actual administrative costs for overseeing those respective processes.

As for licensing of cannabis businesses the Act makes it the exclusive domain of state agencies such as the Department of Agriculture (cultivation centers, processors, infusers, transporters, and craft growers) and the IDFPR (dispensaries), local governments may still enforce generally applicable business registration requirements for cannabis businesses and conduct inspections of premises to ensure compliance with local building code and charge fees commensurate with those services.

The legalization of cannabis for recreational use will impact local governments across Illinois. The attorneys at PJM Chicago are ready to advise you on the following issues, and any others that may arise:

• Whether to allow or ban the operation of cannabis businesses?
• How to classify cannabis businesses, including new categories of like processors, infusers and craft growers, under local zoning ordinances?
• What types of operating restrictions can be imposed on cannabis businesses, including whether to allow on-premises consumption?
• Whether to impose a local tax on recreational cannabis?
• How to amend and update local municipal code provisions regarding the possession and use of cannabis to ensure compliance with the Act?
• Do personnel policies and employee handbooks need to be updated to address recreational cannabis?

If you have any questions, please contact us below.