Certain applicants in New York can apply for a social and economic equity application to help the office of cannabis management reach its goal of awarding 50 percent of the licenses to minority and women-owned business enterprises, distressed farmers or service disable veterans.
Marijuana Regulation and Taxation Act (MRTA) mandated creation of a social and economic equity plan with components such as loans, business training, incentives for large companies to incorporate social justice into their business plans, and, to varying degrees, reinvesting tax revenues from cannabis sales into communities that have suffered under marijuana criminal enforcement.
However, neither contain a specific timeline for when the program would be implemented or how quickly license applications would be accepted after the bill becomes law.
Here are key elements of New York's Marijuana Regulation and Taxation Act:
- The law states a goal to award 50% of all adult-use licenses to social and economic equity applicants. Experts predict that priority could be given for microbusiness and delivery licenses.
- 40% of the tax revenues generated by adult-use sales would be funneled into communities disadvantaged by the war on drugs.
- Existing medical marijuana operators would be required to pay a one-time “special licensing fee” to convert three of their MMJ dispensaries to dual medical-recreational stores. That fee, though not specified in the law, would help fund social equity programs.
- Financial support would be provided to social equity applicants including low- or no-interest loans, fee reductions or waivers, and assistance in preparing applications and operating a business.
- Microbusinesses would be allowed to form vertical operations, helping them achieve economies of scale. Other businesses, except for existing MMJ operators, would be prohibited from vertical integration.
- Social equity licensees would be prohibited from selling or transferring their licenses within the first three years after they are issued.
- Create an incubator program to encourage social and economic equity applicants to apply for
licensure and to provide direct support in the form of counseling services, education, small
business coaching, financial planning and compliance assistance.
Individuals from communities disproportionately impacted by the enforcement of cannabis prohibition.
- The Cannabis Control Board will issue guidelines to determine how to assess which communities have been disproportionately impacted and how to assess if someone is a member of a community disproportionately impacted.
- Communities disproportionately impacted” means, but is not limited to, a history of arrests, convictions, and other law enforcement practices in a certain geographic area, such as, but not limited to, precincts, zip codes, neighborhoods, and political subdivisions, reflecting a disparate enforcement of cannabis prohibition during a certain time period, when compared to the rest of the state
Minority-Owned Businesses
A business enterprise, including a sole proprietorship, partnership, limited liability company or corporation that is:
- At least fifty-one percent owned by one or more minority group members;
Minority group member” is a United States citizen or permanent resident alien who is and can demonstrate membership in one of the following groups:
- Black persons having origins in any of the Black African racial groups;
- Hispanic persons of Mexican, Puerto Rican, Dominican, Cuban, Central or South
American of either Indian or Hispanic origin, regardless of race; - Native American or Alaskan native persons having origins in any of the original
peoples of North America; or - Asian and Pacific Islander persons having origins in any of the far east countries, south east Asia, the Indian subcontinent or the Pacific islands. An enterprise in which such minority ownership is real, substantial and continuing;
The new law requires that such minority ownership is real, continuing:
- An enterprise in which such minority ownership has and exercises the authority to control independently the day-to-day business decisions of the enterprise
- An enterprise authorized to do business in this state and independently owned and
operated; and - An enterprise that is a small business.
Women-Owned Business
A business enterprise, including a sole proprietorship, partnership, limited liability company or
corporation that is:
- At least fifty-one percent owned by one or more United States citizens or permanent
resident aliens who are women; - An enterprise in which the ownership interest of such women is real, substantial and
continuing; - An enterprise in which such women ownership has and exercises the authority to control
independently the day-to-day business decisions of the enterprise; - An enterprise authorized to do business in this state and independently owned and
operated; and - An enterprise that is a small business.
Minority and Women-Owned Business
- A firm owned by a minority group member who is also a woman may be defined as a minority-owned business, a women-owned business, or both.
Distressed Farmers
- A New York state resident or business enterprise, including a sole proprietorship, partnership, limited liability company or corporation, that meets the small farm classification developed by the Economic Research Service of the United States Department of Agriculture, has filed a schedule F with farm receipts for the last three years, qualifies for an agriculture assessment and meets other qualifications defined in regulation by the board to demonstrate that they operate a farm operation as defined in section three hundred one of the agriculture and markets law and has been disproportionately impacted, including but not limited to incurring operating losses, by low commodity prices and faces the loss of farmland through development or suburban sprawl and meets any other qualifications as defined in regulation
by board; or - A New York state resident or business enterprise, including a sole proprietorship, partnership, limited liability company or corporation, that is a small farm operator and a member of a group that has been historically underrepresented in farm ownership and meets any other qualifications as defined in regulation by board.
Service-Disabled Veterans
- A business enterprise, including a sole proprietorship, partnership, limited liability company or
corporation that is: - At least fifty-one percent owned by one or more service-disabled veterans;
- An enterprise in which such service-disabled veteran ownership is real, substantial, and continuing;
- An enterprise in which such service-disabled veteran ownership has and exercises the authority to control independently the day-to-day business decisions of the enterprise;
- An enterprise authorized to do business in this state and is independently-owned and
operated; - An enterprise that is a small business which has a significant business presence in the state, not dominant in its field and employs, based on its industry, a certain number of persons as determined by the director, but not to exceed three hundred, taking into consideration factors which include, but are not limited to, federal small business administration standards pursuant to 13 CFR part 121 and any amendments thereto; and certified by the office of general services.
Extra priority shall be given to applications that demonstrate that an applicant:
- Is a member of a community disproportionately impacted by the enforcement of cannabis prohibition;
- Has an income lower than eighty percent of the median income of the county in which the applicant resides; and
- Was convicted of a cannabis-related offense prior to the effective date of this chapter, or had a parent, guardian, child, spouse, or dependent, or was a dependent of an individual who, prior to the effective date of this chapter, was convicted of a cannabis-related offense
MRTA Market Structure Benefits Social Equity
Social equity programs in other states have struggled due to barriers of entry for social and economic equity applicants, including having the access to capital to start a new business. To address this, the MRTA establishes a two-tier market structure which prohibits licenses from being vertically integrated and owning the majority of the market.
- This allows for multiple opportunities for social and economic equity applicants and small businesses to apply for licenses.
- The adult-use microbusiness, cooperative, on-site consumption and delivery license types are all examples of low barrier-to-entry licenses, which the MRTA prioritizes for social and economic equity applicants.
- Licenses issued under the social and economic equity plan cannot be transferred or sold within the first three years of issuance, except to another qualified social and economic equity applicant with approval from the Cannabis Control Board.
- Additionally, all non-equity licensees are required as part of the application process, to develop and implement a social responsibility framework, which is designed to contribute to communities disproportionally harmed by cannabis prohibition and to annually report this progress to the Cannabis Control Board. Adherence to this requirement, is a condition of license renewal.
If you have any questions about applying for a Social and Economic Equity Cannabis Application in New York, feel free to contact us at 212-233-0666
