Nevada’s Cannabis Industry Takes Another Step Forward –

Four significant bills that will undoubtedly impact cannabis
regulation in Nevada were recently signed into law by Nevada State
Governor Joe Lombardo (R). The legislation makes a series of
amendments to the state’s existing cannabis laws, including
minimizing penalties and fees, reforming sales tax law, doubling
the legal personal possession limit, consolidating licensing rules,
and enabling participation in the market by people with prior
felony convictions.

1. SB 195 – Penalties and Fees

Effective upon adoption, SB 195 was advanced successfully by the
Nevada Cannabis Association with solid backing from cannabis
operators, citing the need to address certain burdensome and costly
practices implemented by the Nevada Cannabis Compliance Board (the
“Board”). These changes aim to alleviate economic burdens
on operators and incentivize operator compliance and collaboration.
Cannabis operators hope SB 195 and other changes during the session
will provide more certainty and fairness in the disciplinary
process. Highlights include:

• The maximum civil penalty the Board may impose may not exceed
  $20,000 for a single violation. Previously, the most serious
  violations carried civil penalties of up to $90,000 for a single
  violation.




• The Board must characterize certain conduct as a “single
  alleged violation” instead of multiple separate violations
  based on the facts and circumstances to prevent stacking
  violations.




• The Board may bill only costs and charges expressly authorized
  by statute to an operator and eliminates the practice of “time
  and effort” invoicing for ongoing activities of the Board,
  such as routine inspections, audits, or non-application-based
  investigations.




• Identifies “mitigating circumstances” the Board
  must consider concerning a disciplinary matter, including
  whether the operator self-reported the violation, the corrective
  action taken, history of prior good faith efforts to avoid the
  violation in question, and cooperation during the
  investigation.

2. AB 430 – Cannabis Sales Tax

AB 430 reforms the calculation of wholesale excise tax imposed
on the sale of cannabis, applying the tax to the first wholesale
sale and calculating the amount of the tax as 15% of the actual
sales price in an arm’s length transaction. Historically, the
tax was 15% of the “fair market value” set by the Nevada
Department of Taxation, with the procedure for setting the FMV
criticized as flawed and resulting in an inflated value. While the
“fair market value” calculated by the Nevada Department
of Taxation will still be applied to affiliates’ transfers,
proponents believe this change will allow for a lower and more fair
wholesale tax structure.

3. SB 277 – License Consolidation

SB 277 calls for medical and adult-use cannabis licenses to be
merged into one license category (unless adult-use is not permitted
by local jurisdiction) and aligns the fee structure for medical and
adult-use licenses to the lower amount paid for a medical license.
Additionally, the bill provides a mechanism for individuals with
“excluded felony offenses” who have, up until this point,
been excluded from owning, controlling, or working in a cannabis
establishment to petition the Board to allow an exemption to
participate in the industry. The Board may only grant such an
exemption if doing so would not pose a threat to public health or
safety or negatively impact the cannabis industry. Other highlights
include:

• SB 277 increases the possession limit and daily purchase limit
  of cannabis from 1 ounce to 2.5 ounces and doubles the limit for
  cannabis concentrates.




• The fees for initial licensing and renewal of an adult-use
  cannabis license were reduced, except for the initial issuance of
  an adult-use retail license, which remains unchanged at
  $20,000.




• The initial and renewal fees for other categories of adult-use
  licenses were reduced to mirror the medical fees. For example, the
  initial application fee for an adult-use cultivation establishment
  was reduced from $30,000 to $3,000, and the renewal fee was reduced
  from $10,000 to $1,000.

4. SB 328 – Unlicensed Cannabis Activities

SB 328 requires the Board to adopt regulations providing for
investigating unlicensed cannabis activities and imposing penalties
against persons who engage in such activities.

Historically, Nevada’s regulated cannabis scheme has not
provided the Board (or its predecessors) with any enforcement
authority to address unlicensed cannabis operations, with the scope
of authority extending only to licensed operators. Proponents
believe this is a small but crucial first step in reducing the
number of illicit operators in the Nevada marketplace and
preserving market share for licensed operators.

• SB 328 eliminates the Board’s exemption from NRS 233B,
  known as the Nevada Administrative Procedure Act (the
  “Act”).




• The Board will now be required to submit regulations to the
  Legislative Counsel Bureau for formal review and revision before
  adopting any new regulations.




• In contested matters, the Board will be subject to the
  adjudication procedures outlined in the Act, including judicial
  review afforded by the Act.




• Staggers terms of Board members, limits the term of Board Chair
  to two years, and eliminates the Board’s authority to appoint
  and remove an Executive Director, with that authority now in the
  hands of the Governor.

Proponents of SB 328 believe these changes will improve the
Board’s accountability and provide guardrails on its
authority.

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