All posts by Brad A. Molotsky

NJ Adult Use Bill – Two Steps Closer to a March 25th Vote – Brad A. Molotsky, Esq.

According to late night reporting from NJ Biz – Dan Munoz, who has been all over this topic, committees in both the NJ Assembly & Senate approved a measure that would legalize adult-use recreational marijuana, setting the proposals for a showdown full-floor vote in 7 days from now on March 25.

Senate Bill 2703 passed by a 6-4 vote with one abstention in the Senate Judiciary Committee Monday evening while its counterpart, Assembly Bill 4497, passed by a 6-1 vote with two abstentions at the Assembly Appropriations Committee.

Both measures would allow for anyone over 21 years of age to possess up to an ounce of marijuana.

The product would be taxed at $42 an ounce and the industry would be regulated by a five-person Cannabis Regulatory Commission, which will function similarly to how the Casino Control Commission operated following the legalization of gambling in the 1970s.

The approval of both measures followed hours of closed-door meetings as lawmakers hammered out last-minute changes to the legislation, including a dramatically increased expungement process for people with marijuana-related convictions.

Stay tuned for a detailed analysis as the final bill is published. – Brad

NJ Adult Use Cannabis Bill Fast Tracked for March 25th Vote

Gov. Phil Murphy and legislative leaders reached agreement on key provisions to legalize marijuana for adult recreational use, including how to tax and regulate it, and expunging past low-level marijuana offenses for certain users as a step toward social reform per reporting from Dan Munoz.

Per a press release issued by key Assembly Senate and the Governor’s office, we should expect to see the introduction of a cannabis bill within days.
Under the terms of the agreement:

• Adult-use marijuana would be subject to an excise tax of $42 per ounce, which will be imposed when marijuana is cultivated.

• Municipalities that are home to a cultivator or manufacturer would receive the revenue from a 2 percent tax on the product within their jurisdiction.

• Municipalities that are home to a wholesaler would receive the revenue from a 1 percent tax on the product within their jurisdiction.

• Municipalities that are home to a retailer would receive the revenue from a 3 percent tax on the product within their jurisdiction.

To start to address social equity concerns, the revised legislation will likely provide an expedited expungement process for individuals convicted of low-level marijuana offenses, and a separate expungement process that would automatically prevent certain marijuana offenses from being taken into account in particular areas such as education, housing and occupational licensing.

Additionally, there are a number of provisions that aim to ensure broad-based participation for women owned and minority owned businesses, low and middle-income individuals, and disadvantaged communities.

Under the proposed legislation, adult-use marijuana would be governed by a Cannabis Regulatory Commission, composed of 5 members—three appointed directly by the Governor to serve terms of at least 4 years, and 2 appointed by the Governor upon the recommendations of the speaker and Senate president.

The commission would be tasked with promulgating all regulations to govern the industry and overseeing applications for licensing of adult-use marijuana dispensaries.

-Brad A. Molotsky, Esq.

Is March the 4:20 for Adult Use Marijuana in NJ?

Is March the 4:20 for NJ recreational, adult use marijuana? Brad A. Molotsky

According to Senate President Stephen Sweeney, with budget hearings and discussions beginning to ramp up in Trenton, March 2019 is likely the last best time to act on a New Jersey marijuana-legalization bill.
In order for the Bill to move forward, Senator Sweeney confirmed his view that a vote needs to be held this month (i.e., March) in order to hold an election on a measure legalizing, regulating and taxing marijuana for adult-use.

Why March – According to the Senator, April would be a difficult month because of budget hearings and religious holidays. Then May is the actual budget discussion and focus on passage of the budget.

That in and of itself is problematic, according to Dan Munoz at NJBiz, given that lawmakers might view negotiations on the budget and marijuana-legalization through a tit-for-tat, transactional lens.

As for whether we could see a vote this summer or during a lame duck session of the Legislature, Senator Sweeney said he “doesn’t want to wait that long.” And whether lawmakers might put the questions before voters as a ballot referendum has essentially been a non-starter according to Munoz.

A tentative agreement between the Governor and the legislative leaders calls for a $42 an ounce tax on marijuana and for a 5-member Cannabis Regulatory Commission to oversee the new industry. Per the momentary agreement, Governor Murphy would be able to select 3 of the 5 Commission members.

Per Munoz, Governor Murphy was initially pushing for legalization within his first 100 days of office. The proposed 2020 budget, unveiled Tuesday by Governor Murphy, includes $60 million of tax revenue under the assumption that marijuana is made legal by January 2020.

The 2020 budget also anticipates spending $21 Million to create the necessary regulatory apparatus for legalized cannabis and thereafter has a placeholder for a $12 Million a year spend for cannabis operations and enforcement.

Could be an interesting March in Trenton – stay tuned!

New Jersey – One step closer to Adult Use, Recreational Marijuana Legalization

Earlier this week, Governor Murphy, Senate President Stephen Sweeney, D-3rd District, and Assembly Speaker Craig Coughlin, D-19th District, reached a tentative agreement on key pieces of adult use marijuana legislation, overcoming one of the key sticking points of how to tax the product sales, reaching a collective consensus of a $42 an ounce tax.

According to a recent Monmouth University Poll, 6 in 10 New Jersey adults support legalizing recreational marijuana. The February poll interviewed 604 New Jersey adults between Feb. 8 and 10, found that 62% of respondents favored legalizing small amounts of marijuana for personal use, compared to 32% of adults who said no to the prospect of legal marijuana in New Jersey.

68% of respondents said it would support the state economy, while 40% of respondents who support legal cannabis said it would boost tax revenue for New Jersey.
From an age perspective, 81% of millennials (i.e., ages 18 to 34), support legalizing marijuana, compared to 74% of adults ages 35 to 54, and 67% of adults 55 and older.

One of the other bones of contention that was overcome involved who will control the oversight commission. The current agreement would create a 5-member Cannabis Regulatory Commission to oversee the state’s marijuana industry, and Governor Murphy would be able to appoint 3 of the members without requiring Senate approval.

A earlier New Jersey marijuana legalization bill that was advanced by Assembly and Senate commitees in the fall of 2018 included a 12% sales tax. Under the Monday compromise, adult use marijuana purchasers will pay the same tax rate no matter what amount they purchased – meaning, $42 for an ounce, $21 for a half-ounce, $10.50 for a quarter-ounce or $5.25 for an eighth-ounce.

The Senate Budget and Appropriations Committee vote was 7-4 in favor, while the Assembly Appropriations Committee voted 7-3 to advance the bill. If legislation is moved, the “Marijuana Legalization Act” would allow users 21 years old and up to possess up to an ounce of marijuana.

Bill 420 – It’s “That” Time Again!

On 1-9-19, Rep. Earl Blumenauer (D-OR) introduced H.R. 420, the “Regulate Marijuana Like Alcohol Act.” Blumenauer, the co-sponsor of the Rohrabacher–Blumenauer amendment, better known as the on-going appropriations provision that prohibits the Justice Department from spending federal funds to enforce federal law that is in conflict with state medical cannabis laws.

Proposed Bill 420 is a total overhaul of the federal government’s treatment of marijuana. Among other things, the bill:

1. Decriminalizes marijuana by removing it from the Controlled Substances Act;
2. Amends the Federal Alcohol Administration Act to enable the Secretary of the Treasury to issue permits to those who want to to manufacture, distribute, or sell marijuana;
3. Transfers jurisdiction from the DEA to the Bureau of Alcohol, Tobacco, Firearms and Explosives;
4. Prohibits widespread advertising for marijuana; and
5. Grants to the FDA the same authority for marijuana as it has for alcohol.

Rep. Blumenauer noted: “Congress cannot continue to be out of touch with a movement that a growing majority of Americans support. It’s time to end this senseless prohibition.” In this vein, per a Pew Research Center study released last fall, nearly 66% of Americans support legalization at the federal level.

The new co-chairs of the 2019 bipartisan Congressional Cannabis Conference are Rep. Barbara Lee (D-CA) and Dave Joyce (R-OH), Rep. Earl Blumenauer (D-OR) and Don Young (R-AK).

Opportunity Zones – Government Shut Down Stalls Treasury Responses and requested clarifications

Putting aside partisan points of view on the wall and whether a government shut down to get a wall paid for is a good idea, the shut down is already impacting US Treasury’s ability to finalize new regulations to clarify certain aspects of the Opportunity Zone program.

Comment letters have been sent in by various trade association and OZ groups my team and I are involved with to the IRS and Treasury but, unfortunately, the clarity we are looking for will need to wait until the shutdown has been resolved plus two weeks thereafter (at least) per a notice posted in the Federal Register.  Open issues that the Real Estate Roundtable, Novogradac’s OZ team and others are seeking include the following:

  • Defining original use and substantial improvements
  • Two tiered structures and the “working capital” impact – 31 months
  • How vacant land might qualify as “original use” property
  • Clarifying how and when the 180 day rule applies to certain pass through entities
  • Clarifying how Section 1231 gains of pass through entities are eligible for deferral
  • Seeking a removal of the fixed end of 2047 for sale purposes to qualify for a stepped up basis
  • Clarification regarding the methodology for applying the 90% and 70% asset tests
  • Requesting limitations on non compliance penalties to the portion of the aggregate assets of a QOF that are funded with gains for which a deferral election has been made
  • Definition of “substantially all” –  keeping the definition at 70% and generally requiring real property businesses to hold 90% of tangible property inside a QOZ
  • Clarifying if property that straddles a QOZ can treat the improvements as being all within the QOZ
  • Clarifying the requirement that a substantial portion of the intangible property of a QOZB be used in the “active conduct of a trade or business” in the QOZ
  • Clarifying the timing of capital gains and dividend treatment for REITs

While our clients are still closing deals and effectively using the OZ program to defer, reduce and ultimately, hopefully, create a capital gain free sale after 10-years at the federal level, additional clarity would, in fact, be nice.

Border security for sure, but let’s get these rules clarified now so we can spur investment where its needed without the histrionics and the child like tantrums.

See attached Novogradac letter to US Treasury for more details – https://www.novoco.com/system/files/group/Opportunity%20Zones%20Working%20Group/novogradac_wg_comment_letter_proposed_regs_122818.pdf