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Michigan Rules Coming! Advisory Bulletin Round-Up

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Michigan Rules Coming! Advisory Bulletin Round-Up

Michigan’s Department of Licensing and Regulatory Affairs (LARA) has announced that the emergency rules to govern activities under the State’s Medical Marihuana Facilities Licensing Act (MMFLA) will be forthcoming this week! The agenda for the November 28 meeting of the State’s Medical Marihuana Licensing Board (Board) lists “Emergency Rules” as the first item for LARA’s report. Live streaming of the meeting, which starts at 12:30 pm, may be accessed here.

Although the State’s emergency rules are being released a very short time before the December 15 date on which the State must begin accepting license applications, we do not anticipate that the emergency rules will be all that detailed. Instead, we anticipate that Michigan’s emergency rules will focus on only the most critical issues concerning the applications, as well as issues regarding operations of the facilities. We do, however, anticipate the State continuing to issue Advisory Bulletins to provide further guidance on issues that arise. (We also sincerely hope that all of the application forms will be released next week.)

Indeed, as the State has been crafting the emergency rules, LARA has also been busy issuing Advisory Bulletins, with four out so far this month.

Last week, LARA released two Advisory Bulletins—one on license fees and another on the process for medical marihuana caregivers and patients who must relinquish that status to become licensees or employees at certain licensed facilities.

In the Advisory Bulletin on license fees, LARA explained the two state fees and one local fee put in place by the MMFLA. All three fees are nonrefundable.

Applicants will first pay the State an application fee in the amount of $6,000 at the time the application is filed. This fee is fixed for each application, so an entity seeking three grow licenses, a processing license, and a provisioning center license would need to pay $30,000. The State will accept cash.

Once an application has been approved, the applicant will have to pay a regulatory assessment before the license is issued. LARA did not announce the amount of the annual regulatory assessment, but said that, because the amount will change annually, “the new fee level will be announced by LARA prior to the start of the new fiscal year.” LARA will presumably set this fee for the first year after the State has a better sense as to how many licenses are likely to be issued. (LARA previously estimated the assessment at somewhere between $10,000 and $57,000.) Only licensees have to pay the assessment—applicants who are denied a license do not have to pay the fee.

In addition to the two state fees, a municipality may collect a local license fee of up to $5,000 from applicants who propose to open a facility in the municipality.

In the Advisory Bulletin on the transition for caregivers and patients, LARA set out who will be required to withdraw from the Michigan Medical Marihuana Program (MMMP) registry. Under the MMFLA, licensed growers and processors cannot be registered primary caregivers or employ registered caregivers—even though the MMFLA requires grower and processor licensees (or an employee) to have at least two years’ previous experience as a caregiver. LARA intends to deal with this issue by requiring all employees and “affiliates” of licensed facilities to cancel their caregiver registrations within five days of issuance of the applicable license or date of employment. The State will supply “Withdrawal Forms.”

For secure transporters, an applicant or investor cannot be either a registered caregiver or patient. To comply with the MMFLA, LARA will require that any such applicant or investor “must withdraw from the MMMP registry prior to submitting an application for a secure transporter license.” Neither provisioning centers nor safety compliance facilities are subject to rules on the registered status of their licensees, employees, or affiliates, so no withdrawal from the MMMP registry is required for those two facility types.

Finally, earlier in the month, LARA released an Advisory Bulletin on capitalization requirements. Those who have been following the issue will recall that the initial announcement of capitalization requirements at a Board meeting led to extremely spirited public comment. Activists worried that high capitalization requirements would freeze legitimate participants out of the market.

LARA’s newest announcement on capitalization requirements did not change the required amounts—but it did clarify that only 25 percent of the requirement must be met by liquid assets. Further, LARA defined liquid assets to include not just cash and financial instruments but actual marihuana inventory—so long as the inventory is compliant with the Michigan Medical Marihuana Act. As for the rest of the capital requirement, it can be satisfied by other assets, such as equipment, real estate, or even supplies. The only caveat is that the amounts and sources must be validated by an accountant’s attestation.

Apart from the above Advisory Bulletins, LARA also made a major announcement about how incumbent businesses may continue to operate while pursuing licensure, a stunning about-face from months of drama about how and when such facilities would be forced to close. That Advisory Bulletin and announcement will be the subject of a separate post, as LARA’s position has continued to evolve and questions about the transition into the regulated model continue to arise.

Remember that LARA’s Advisory Bulletins are temporary advice only. While the bulletins outline emerging policies that LARA intends to codify in its emergency rules, the policies are subject to change before the rules are finalized.

As always, check back with Dykema’s Cannabis Law Blog for further updates.