The UN's Commission on Narcotic Drugs finally admits that marijuana is not as deadly as heroin.
The post In historic move, United Nations reclassifies cannabis as less-dangerous drug appeared first on Leafly.
Europeans have been celebrating the end of December since ancient times, and likely used cannabis to bring good fortune and good cheer at the winter solstice.
The post How pagans used cannabis at Christmastime appeared first on Leafly.
We have spilled a good bit of ink on this blog writing about the MORE Act (Marijuana Opportunity and Expungement Act) which is finally headed to a floor vote in the House, probably tomorrow, December 3. The MORE Act ends federal marijuana prohibition and the criminalization of cannabis by descheduling marijuana from the Controlled Substances Act (CSA). That would be great, of course. Assuming the House version (HR 3884) passes, it will be crucial for the Senate version (S 2227), sponsored by Vice-President-Elect Kamala Harris, to also see daylight in the upper chamber. My guess is it won’t, unless both Democratic candidates prevail in the Georgia runoffs this January, resulting in Mitch McConnell’s replacement as Senate Majority Leader.
But that’s a question for another day. For now, I want to highlight what would happen if the MORE Act does become law someday soon, because I’m seeing some bad information out there. The biggest point of confusion seems to be the idea that if the MORE Act passes, cannabis will become legal nationwide. It won’t. As a matter of federal law, yes, cannabis will be descheduled entirely. And not only that, but all federal marijuana convictions will be expunged— even the folks who were captured with many tons of cannabis in helicopters and submarines. But state laws will not be preempted in the least.
Does this mean someone could still be arrested for walking around with an ounce of cannabis in e.g. Boise, Idaho, the day after the MORE Act becomes federal law? Yes it does! And that’s a shame, because most cannabis arrests today are for simple possession, and most are made under state laws and by state police.
Close to four years ago, I explained on this blog that the federal government probably does not have the power to shutter state cannabis programs. Aside from the fact that the CSA contains express “anti-preemption” language, the Tenth Amendment of the U.S. Constitution provides that the federal government cannot “commandeer” states by forcing them to enact laws in the federal interest. That’s true in the cannabis prohibition context, and it will also be true once the feds give a green light to cannabis, under the MORE Act or otherwise.
If the MORE Act passes, what we will see is a flip of the current marijuana policy gap. Federal agents will no longer track or arrest cannabis traffickers, but state police sure could. We will be left with a patchwork of state legality, set against a permissive federal backdrop (with a 5% federal tax). And a million wrinkles to iron out.
It’s true that the feds will have some tools for dealing with prohibitionist locales once the CSA is amended. The best option is probably for Congress to preempt state law through Commerce Clause legislation, as it did with the 2018 Farm Bill for interstate transportation of hemp. It seems late for that in marijuana, though, with so many states so far down the road with cannabis licensing programs. The MORE Act steers clear of federal licensing altogether, perhaps for this reason.
Alternatively, Congress could use its spending power to encourage states to come around on ending prohibition. To this end, the MORE Act makes certain federal funds available only to “eligible States” that have taken steps to expunge cannabis convictions and eliminate penalties for cannabis parolees. This may move the needle in some jurisdictions; others will likely resist.
It’s also important to understand that the MORE Act doesn’t change all the federal laws around cannabis. For example, our firm deals with a lot of Food and Drug Administration (FDA) issues for cannabis businesses. That whole area will still be a cluster. The FDA has taken the position that under the Federal Food, Drug, and Cosmetic Act (FD&C Act), cannabis and cannabis-derived compounds are drugs that require FDA approval before they may be added to foods and beverages, sold as dietary supplements, or advertised for therapeutic purposes. The MORE Act as written does not alter the regulatory regime under the FD&C Act. And even if it did, we again would still have the problem of 50 states with a myriad of different, confusing laws in this area.
The MORE Act does quite a bit, but it doesn’t do everything. At state and local levels, its impact will be more penumbral than direct. I do like and support the MORE Act on balance and I hope that it passes. That said, it is not the end of the road. Not even close.
The post The MORE Act Will Not Legalize Cannabis Nationwide. Not Like You’re Thinking. appeared first on Harris Bricken.
Nearly 6,000 cases are expected to be dropped in Maricopa County alone.
The post Arizona prosecutors drop thousands of marijuana charges as legalization takes effect appeared first on Leafly.
Congratulations for finishing the year strong, Star Gazers! Find out what else is in store for you with your December 2020 horoscope.
The post Star signs and cannabis strains: December 2020 horoscopes appeared first on Leafly.
This is the season of the year where cannabis business owners start to take a hard look at their end of year finances to decipher how profitable the company has been and whether and how their employees and other key personnel should share in that profit alongside the owners. Some marijuana and hemp employers do this with bonuses and others with equity or quasi-equity.
It is common in closely held (privately owned) companies to have some key employees who are almost irreplaceable. Often these employees started with the company shortly after its formation and have earned their implicit trust within the organization. Other times companies that are transitioning from “mom and pop” status into a larger enterprise and know they need to attract and retain key talent by including equity or quasi-equity in a competitive compensation package.
All of these potential compensation methods have pros and cons. I discuss a few of these general considerations below:
Profit. This is always the place to start your deliberations. Basic economics teaches us that all parts of the profit pie must equal 100%. If you start out with 100% economic ownership and give away 5% of the company’s profit to 10 key employees, you just cut your take-home profit in half. This is true whether you are granting actual equity, options that will convert into equity, or quasi-equity that is really a bonus structured as if the recipient owned equity.
It is significantly easier to revoke a bonus or quasi-equity than options or actual equity, and it is significantly easier to revoke options than actual equity. Once someone owns an unalloyed part of your company, they are your full-on business partner, with their rights only circumscribed by your lawyer’s careful contract drafting skills.
Decision Making Power. For owners that are considering a creative compensation plan but are hesitant to relinquish any decision making power, all of these avenues potentially allow you to retain 100% of the voting rights in your company.
Quasi-equity confers only economic rights to profits, as described in the executive’s or employee’s compensation agreement. Options do not automatically confer any economic or voting rights until they are exercised, and then the equity received (typically corporation stock or LLC transferable interests and membership rights) dictates those economic rights and whether any voting rights are included. This holds true for straight grants of equity, as well, depending on the type of equity.
If the form of business entity permits, you can easily create a second class of ownership rights that does not carry any voting power. You can do this with a limited partnership (LP), an LLC, a C corporation, and even an S corporation. But if you want to get creative with your economic rights, you cannot do that with an S corporation (or an LLC or other entity that has elected to be taxed as an S corporation).
Optics. This is sometimes a hard conversation to have with cannabis business owners because they need to know: (a) the industry standard at any given point in time regarding executive and key employee compensation; (b) what their executives and key employees reasonably expect to be offered in a compensation package; and (c) what their executives and key employees will reasonably be satisfied with.
It is expensive to replace key employees. It is also expensive to replace or deal with the fallout from an offended employee or many offended employees. But chances are that you will have a good feel for the personality and motivations of your existing employees, and you will know whether they are reasonable and will be grateful for additional specialized compensation or not. And for prospective employees and executives, they will know that your opening offer will likely differ somewhat from the final offer. They will welcome the opportunity to discuss their value to your company.
Taxes. No one likes talking about taxes except CPAs, CFOs, and the rare attorney. But both employer and employee taxes should be at the forefront of your deliberations regarding creative compensation structures. As a general rule, many employees will be happier to not have to think too hard about the future tax ramifications of their compensation.
That means that once the employee understands all of the nuances, they may prefer a straight bonus or a quasi-equity award because those would generally be taxed as ordinary income, with the taxes paid through your normal payroll process, and the employee receiving the net balance. Employers generally prefer this method, as well, because the entire amount is a deductible business expense like all employee compensation.
Options are much more nuanced and generally would not trigger tax consequences until they vest, with additional ramifications once those options are executed. An equity grant means that the employee or executive will be treated just like the other owners and will be responsible for the tax consequences of receiving the equity and also for its appreciation and periodic distributions. That can make some employees nervous, but most experienced executives will understand that the possible upside comes with tax consequences. It should not faze them, but they should understand it with the help of their tax advisers.
Be Prepared. Whether you like it or are planning for it, many key employees, including non-employee directors, will expect some type of equity-related grant. You should be prepared to discuss this topic with them and your reasons for offering it or not.
The post What is the Right Way to Compensate Key Cannabis Executives and Employees? With Stock or Options? appeared first on Harris Bricken.
