Alerts and Updates
Illinois Becomes the 11th State to Legalize Adult-Use Marijuana
June 4, 2019
Starting January 1, 2020, adults 21 and older will be able to possess cannabis and purchase cannabis products in a duly licensed Illinois dispensary.
On May 31, 2019, the Illinois General Assembly passed House Bill 1438, called the Cannabis Regulation and Tax Act. Governor J.B. Pritzker has stated he will sign the bill. When he does, Illinois will become the 11th state in the country to legalize cannabis and the first state to have a legislature approve commercial sales without a voter referendum, as has taken place in other states. Vermont lawmakers previously legalized possession and home grows of cannabis, but not yet commercial sales.
Legalizing marijuana in Illinois is expected to generate revenue to help restore poverty- and crime-ridden communities and fund substance abuse, mental health and law enforcement services. Adult-use cannabis sales could net Illinois about $500 million in tax revenue annually, according to some experts.
As indicated above, Governor Pritzker acknowledged that he will sign the act, tweeting on May 31, 2019:
The state of Illinois just made history, legalizing adult use-cannabis with the most equity-centric approach in the nation. This will have a transformational impact on our state, creating opportunity in the communities that need it most and giving so many a second chance. … In the interest of equity and criminal justice reform, I look forward to signing this monumental legislation.
The Illinois legislation would end cannabis prohibition and replace it with a comprehensive and highly regulated system to tax and regulate cannabis for adults 21 and over. The act is comprehensive and expands the current medical cannabis licensing system, includes automatic expungement for cannabis offenses, adds the ability for medical patients to grow at home, and offers significant benefits to communities hit hardest by inequities of past cannabis convictions. Below we set forth the key aspects of the 610-page bill which is expected to be signed by Governor Pritzker shortly.
Beginning on January 1, 2020, adults 21 or older will be able to possess and purchase cannabis products only from licensed Illinois dispensaries. The medical marijuana laws under the Compassionate Use of Medical Cannabis Pilot Program Act (Compassionate Use Act), which went into effect on January 1, 2014, in Illinois, will remain in place despite the new law. Currently, Illinois has 20 existing licensed medical marijuana cultivation facilities and 55 dispensaries across the state for medical marijuana under the Compassionate Use Act. Companies that currently hold licenses to cultivate or dispense medical marijuana will be included in an early approval process that will allow those companies to obtain adult-use marijuana licenses and start selling the drug at the start of 2020. The three agencies at the helm of the medical cannabis pilot program in Illinois will also remain involved in the legalization of marijuana in Illinois: the Illinois Department of Agriculture (IDA), the Illinois Department of Public Health (IDPH) and the Illinois Department of Financial and Professional Regulation (IDFPR).
However, under the new act, several additional agencies will be created and existing agencies will have added duties. Here is a breakdown of the Illinois agencies involved in this highly regulated legalization of the cannabis industry:
- IDA: Shall administer and enforce provisions of the act related to the oversight and registration of cultivation centers, craft growers, infuser organizations and transporting organizations.
- IDFPR: Shall enforce the provisions of the act relating to the oversight and regulation of dispensing organizations.
- Illinois Department of State Police: Shall conduct a criminal history record check of prospective principal officers, board members, and agents of a cannabis business applying for a license under the act.
- IDPH: Shall make recommendations to the Department of Agriculture and the Department of Financial and Professional Regulation on appropriate health warnings for dispensaries and advertising applicable to cannabis products, including labeling and warning requirements. An Adult Use Cannabis Health Advisory Committee shall be created within the IDHP to meet at least twice annually to discuss and monitor changes in cannabis use and emerging science and medical information relevant to cannabis use. The members of the committee shall be the director of IDPH who will serve as the chairperson; the secretary of the Illinois Department of Human Services (IDHS) who will serve as co-chairperson; and various specialists, including physicians and toxicologists.
- Illinois Cannabis Regulation Oversight Officer: Shall be created within the IDFPR and shall be appointed by the governor with consent of the Senate. The oversight officer shall maintain a staff, make recommendations on policy, ensure coordination efforts between various state agencies and encourage best practices for diversity in the cannabis industry, but shall not participate in the issuance of any licenses or awards under the act. The oversight officer shall also commission studies evaluating the cannabis industry in Illinois and may direct the IDA, IDFPR, IDPH, IDHS and the Department of Commerce and Economic Opportunity to assist in the compilation, collection and gathering of data.
Cannabis Possession and Sales
Starting January 1, 2020, adults 21 and older will be able to possess cannabis and purchase cannabis products in a duly licensed Illinois dispensary. Adult possession is limited to 30 grams, or about 1 ounce of flower (as much as an adult can hold in cupped hands); 5 grams of cannabis concentrate, which is equal to 500 mg of THC in a cannabis-infused product such as gummies, other candies and lotions; and 5 grams of cannabis product in other concentrated form. Nonresidents can possess half of that amount, or 15 grams of cannabis, 250 mg of THC in a cannabis-infused product and 2.5 grams of concentrated cannabis product.
In perhaps the only major change from Governor Pritzker’s proposed legislation to legalize marijuana, only medical cannabis patients will be allowed to home grow cannabis. Medical cannabis patients can grow up to five plants each at home with a limit of five plants per household regardless of the number of residents who are 21 or over. Home-grown plants would need to be secured and out of view of the public. Home cultivators can keep what they grow, but possession limits would still apply outside of the residence, and sales are prohibited unless part of a licensed cannabis dispensary.
Social Equity/Justice Provisions
Unlike other states, the Illinois act contains concerted social equity/justice provisions. This equity program takes many forms, summarized below.
Expungement of Criminal Records
The act would foster the most sweeping criminal justice reform thus far in the cannabis legalization movement by states. According to the new law, individuals convicted for possession of under 30 grams of marijuana prior to legalization—as long as those convictions were not associated with a violent crime—would have their records automatically expunged through a prisoner review board and then be sent to the governor for pardoning. This is an automatic process through the law such that, if the governor pardons, the Illinois attorney general will then expunge those records. For individuals convicted for possession between 30 and 500 grams, those individuals would have the option of petitioning for expungement themselves in order to vacate those convictions.
Illinois legislators recognized the unfair disparity and social justice aspects attendant to past criminal convictions: “Every month that goes by, there are some who can’t get a lease, can’t get a loan, and can’t get a job” because of low-level marijuana convictions. “Every sentence is a life sentence,” according to Senator Toi Hutchinson, D-Chicago Heights, Illinois. According to Representative Kelly Cassidy, who worked with Chicago Democratic Senator Heather Steans for more than two years to craft the bill, “Prohibition hasn’t built communities. In fact, it has destroyed them. It is time to hit the reset button on the war on drugs.” According to the Illinois State Policy Advisory Council, approximately 770,000 cannabis-related cases would be eligible for expungement under this new law.
Social Equity Programs
In addition to removing low-level marijuana convictions through expungement and setting forth the process for individuals to petition for expungement, the new law provides additional support for “social equity applicants,” provides access to financial capital for startup costs and provides resources to communities “most adversely impacted by the enforcement of cannabis-related laws.”
A “social equity applicant” is a business whose ownership or staff have been directly impacted by enforcement of cannabis-related laws. These can be individuals who have been arrested or convicted of cannabis-related offenses or persons with strong ties to a community that has been disproportionately and negatively impacted by poverty and cannabis drug law enforcement. These applicants must be 51 percent or more owned by those who qualify as a social equity individual, and for businesses with 10 or more staff, 51 percent of the workers must qualify as social equity individuals. Social equity applicants can obtain assistance under the act in several ways:
- Social equity applicants would receive additional points in any application scoring system to approve licenses under the law.
- A cannabis business development fund will be established to provide financial resources, including low-interest loans. The fund will start with $12 million after July 1, 2019, and any additional early approval adult-use dispensing organization licenses shall pay significant contributions of $100,000 or more to the cannabis business development fund.
- A community college cannabis vocational training pilot program will be developed in which local colleges can obtain a license from the IDA to help residents prepare for cannabis industry-related jobs. Indeed, the social equity inclusion plans include requirements for licensed cultivators and dispensaries to support, through donations or otherwise, programs that provide job training services to persons recently incarcerated or who operate in a disproportionately impacted area.
- The “3R” Program (Restore, Reinvest and Renew) would allow community groups to develop programs to benefit disadvantaged communities. Certain public officials for disadvantaged areas and community development organization representatives, in addition to the attorney general, lieutenant governor, and other agency officials shall comprise the 3R Program Board.
Permit fees would be approximately $100,000 for cultivators and $30,000 for dispensaries with lower fees for social equity applicants. There is also a separate business development fee of 5 percent of total sales or $750,000, whichever is less, for cultivators and up to $200,000 for dispensaries, again both with lower fees for social equity applicants.
The following types of cannabis business licenses will be issued under the new act:
- Dispensary license: Provides cannabis products to adult consumers in a retail location;
- Processor license: Infuses products such as edibles with cannabis extract;
- Transporter license: Transports cannabis between business licensees, but not across state lines;
- Craft grower license: Can grow between 5,000 and 14,000 square feet of canopy space and may be separately licensed as a processor and a dispensary at the same facility; and
- Cultivation license: Can grow up to 210,000 square feet of cannabis.
In a unique shift from other states, Illinois is moving away from a blanket tax for cannabis products in favor of a tax rate based on the potency of the cannabis and the type of product. The higher the THC content, the higher the tax rate.
- 10 percent tax on cannabis flower or products with less than 35 percent THC;
- 20 percent tax on products such as edible products;
- 25 percent tax on any product with a THC concentration higher than 35 percent.
In addition to these scalable tax rates, the Illinois state tax of 6.25 percent would also apply in addition to local taxes of up to 3.5 percent, depending on the area. Therefore, consumers would pay between 19.55 percent to 34.75 percent retail tax depending on the product’s potency and location.
Marijuana revenue from the law would be divided between a number of areas, demonstrating once again Illinois’ social justice aspects of its marijuana program. The largest share, 35 percent, would go into the state’s General Revenue Fund; 25 percent would go to community grants for the 3R Program; 20 percent would go to mental health services and substance abuse programs; 10 percent would go towards paying down the state’s backlog of unpaid bills; 8 percent would go to the Local Government Distributive Fund that distributes funds to local municipalities; and 2 percent would go to public education and safety campaigns around adult cannabis use.
Banning of Marijuana in Illinois
The act also allows employers to maintain a “zero tolerance” policy for cannabis use in the workplace and would create a task force through the Illinois State Police to examine ways to enforce DUI laws involving marijuana use. Furthermore, local governments would have wide-ranging control over zoning for marijuana-related businesses, including the ability to prohibit them. Colleges and universities can also continue to prohibit marijuana use. While municipalities and counties can ban cannabis businesses within their boundaries, they may not ban individual possession.
Advertising and Packaging
Advertising would be prohibited near schools, playgrounds, public transit and public property, and any advertising directed toward minors would be banned. Also, packaging would be sealed and labeled, child-resistant and will be required to state that cannabis “can impair cognition and may be habit-forming.” Packaging should also state that it should not be used by women who are pregnant or breastfeeding.
In all, legalizing marijuana is expected to generate $57 million in general revenue in the coming budget year and $30 million for a cannabis business development fund. That is far less than the initial $170 million Governor Pritzker projected in his spending plan, but it is a significant amount nonetheless. Future years are expected to reap further revenue for the state of Illinois. The act, once signed by the governor, will take effect as early as January 1, 2020.
For More Information
If you have any questions about this Alert, please contact Neville M. Bilimoria, any of the attorneys in our Cannabis Industry Group, any of the attorneys in our Health Law Practice Group or the attorney in the firm with whom you are regularly in contact.
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