By: Carter Norfleet

Washington, D.C., Marijuana Legalization Initiative 71 was on the November 4, 2014 election ballot for voters in the District of Columbia, and it was approved. Initiative 71 fully legalizes the possession and use of up to two ounces of marijuana and the possession and cultivation of up to three marijuana plants.[1] However, D.C. election law does not allow a citizen initiative to mandate the expenditure of city funds. This means that Initiative 71 was forced to avoid addressing regulation and marijuana sales issues, since a regulatory system would require substantial city expenditure. The proposed B20-0466 bill – the “Marijuana Legalization and Regulation Act of 2013” will potentially solve the regulation and marijuana sales issues that Initiative 71 was not able to address.

The Marijuana Legalization and Regulation Act of 2013 (“B20-0466”) is a bill that the business world, especially the marijuana industry, is going to want to fully understand. Essentially, the bill will amend Title 25 of the District of Columbia Official Code to establish a licensing and regulation infrastructure for the production and sale of marijuana, useable marijuana, and marijuana-infused products in the District of Columbia.[2] B20-0466 will also establish a dedicated marijuana fund, which will consist of all marijuana excise taxes, license fees, penalties, forfeitures, and all other monies, income, or revenue received by the Alcoholic Beverage Regulation Administration from marijuana-related activities.[3] In addition, B20-0466 will establish a 6% tax of the gross receipts from the sale of or charges for marijuana or marijuana infused products produced explicitly for medicinal purposes.[4] The rate of tax will be 15% of gross receipts from the sale of or charges for marijuana or marijuana infused products produced explicitly for all other purposes.[5] Lastly, under the current proposed bill, a potential seller must be a D.C. resident for at least six months before applying to receive a retail license.[6]

Businesses thinking of entering the marijuana industry in D.C. in the coming months will need to pay special attention to the language of B20-0466. Although the residency requirement is critical to the bill and to who can actually enter the industry, the tax implications of the bill will likely be the strongest point of tension for businesses and lawmakers. If the tax is set too high, the bill might not eliminate the black market for marijuana sales. Businesses entering the market will want to make as large of a profit as possible, and if a substantial black market still exists despite this proposed legislation being enacted, it might sway businesses from investing time and money in the marijuana industry. In addition, if the regulations are too expensive to adhere to, business might also shy away from entering the industry.

It will be important for businesses seriously considering entering the industry to give adequate input regarding the language and structure of the bill so that the proposed legislation is effective. The bill will likely not be transmitted to congress until January 1, 2015, so there is still ample time to add input.

[1] The Washington Post, “D.C. Board of Elections allows marijuana legalization effort to move forward,” March 11, 2014; DCist, “Marijuana Activists Fight For Full Legalization, Home Cultivation In D.C.” October 18, 2013.

[2] Marijuana Legalization and Regulation Act of 2013.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

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