Law legalizes adult-use cannabis, expunges prior low-level cannabis convictions

Minnesota is the 23rd state to enact legislation legalizing adult-use recreational cannabis.

Beginning Aug. 1, 2023, personal possession of up to 2 pounds of marijuana is no longer a crime.

Rep. Zack Stephenson (DFL-Coon Rapids) and Sen. Lindsey Port (DFL-Burnsville) sponsor the law — HF100*/SF73/CH63 — that also establishes a regulatory framework for statewide and local structures to regulate, tax, and manage cannabis sales to adults. It takes effect July 1, 2023, unless otherwise noted

Other key provisions include:

• establishing the Office of Cannabis Management and moving the medical cannabis program under it;

• creating a 10% retail tax on cannabis products, on top of existing retail taxes;

• funding prevention and addiction recovery programs;

• creating grants to assist individuals entering the legal cannabis market;

• providing grants to law enforcement and courts; and

• providing for expungement and resentencing of low-level cannabis convictions.

The law appropriates $70.3 million in the 2024-25 biennium to establish cannabis regulatory programs. In 2026 and beyond, the cost of regulation is expected to be offset by the retail tax because ongoing regulation is expected to be supported by the retail tax and the revenue generated from license fees to cultivate, distribute, test, transport, and sell cannabis.

Regulation of Adult-Use Cannabis

The law defines a cannabis business as any licensed: cannabis microbusiness; cannabis mezzobusiness; cannabis cultivator; cannabis manufacturer; cannabis retailer; cannabis wholesaler; cannabis transporter; cannabis testing facility; cannabis event organizer; cannabis delivery service; medical cannabis cultivator; medical cannabis processor; medical cannabis retailer; and medical cannabis combination business.

Effective July 1, 2023, an Office of Cannabis Management is established; with its duties to include approving product categories of cannabis flower, cannabis products, lower-potency hemp edibles, and hemp-derived consumer products for retail sale, and prohibiting any product that is packaged in a way to be attractive to children; establishing environmental standards in the cannabis industry, in consultation with the Pollution Control Agency; and setting limits on the personal use of cannabis for individuals 21 years of age or older. Such limits include maximum possession amounts (i.e., 2 ounces in public, 2 pounds at home), and prohibitions on usage (i.e., use not allowed in a correctional facility, a public school, while operating a motor vehicle).

Other regulation aspects of the law include:

• up to eight cannabis plants will be allowed in a single residence without a license, with no more than four being mature, specifying penalties for violating any selling, possession, and usage provisions in the law;

• cities and towns can limit the number of licensed retail cannabis businesses to one per 12,500 residents;

• cannabis business licensees must undergo criminal history checks, upon request;

• license preferences are given to “social equity” applicants, including people living in areas that experienced a disproportionately large amount of criminal cannabis enforcement;

• establishment of cannabis packaging, labeling, and advertising regulations; and

• establishing substance use treatment, recovery, and prevention grants. (Art. 1, Secs 1-3, 6, 8-9, 13, 15-17, 63-65 70)

The Department of Health must from May 31, 2023, through March 1, 2025, temporarily regulate products containing hemp-derived cannabinoids, including products that contain CBD and edible products that contain up to 5 milligrams of THC per serving. (Art. 7, Sec. 4)

Taxes

Effective for gross receipts received after June 30, 2023, a 10% tax will be charged on retail cannabis sales. This is in addition to any other retail sales tax. Local governments are prohibited from imposing any additional cannabis retail taxes. That took effect May 31, 2023.

Effective July 1, 2023, 20% of retail cannabis taxes will be distributed to local governments, with the rest going into the General Fund. Half the revenue sent to local governments will be distributed equally across all 87 counties, and the remaining 50% will be distributed to counties using a formula based on the number of cannabis businesses located in a county. (Art. 2, Sec. 28)

Business Development

Establishing cannabis industry startup financing grants through the Department of Employment and Economic Development are established. CanStartup would award grants to nonprofit corporations to fund loans to new cannabis microbusinesses and to support job creation in communities where long-term residents are eligible to be social equity applicants.

Also established at the department will be CanNavigate, to award grants to eligible organizations to help individuals navigate the regulatory structure of the legal cannabis industry, and CanTrain, that will award grants to eligible organizations to train people for work in the legal cannabis industry, and eligible individuals to acquire such training. (Art. 3, Secs. 1-3)

Criminal Penalties

Effective Aug. 1, 2023, adults at least age 21 can possess or publicly transport 2 ounces of cannabis flower, and up to 8 grams of cannabis concentrates. Adults can also possess up to 2 pounds of marijuana in their home. Limits on edible cannabis product possession are 800 milligrams of THC, the active ingredient in cannabis.

Penalties for violating possession limits, making illegal cannabis sales, such as selling to a minor, and exceeding personal cultivation limits can be up to five years in prison and a $10,000 fine.

The law also deals with cannabis and motor vehicles by creating an “Open package” law prohibiting possession of opened cannabis products in a vehicle similar the existing “Open bottle” law; specifying that a person operating a motor vehicle gives implied consent to be tested for impairment; requiring driver education courses to include information on the effects of cannabis consumption on the ability of a person to operate a motor vehicle; and, effective May 31, 2023, the Department of Public Safety must design, plan, and implement a pilot project to study oral fluid roadside testing instruments to determine the presence of cannabis in individuals stopped or arrested for driving while impaired. (Art. 4, Secs. 19-20, 30-33)

Expungement

Effective Aug. 1, 2023, the law will automatically expunge the criminal records of Minnesotans with petty misdemeanor and misdemeanor cannabis convictions. Expunged records aren’t destroyed, but they’re removed from the public view and won’t appear in criminal background checks.

The Bureau of Criminal Apprehension is charged with identifying low-level cannabis offenders whose records are in the BCA’s system, sealing those records, notifying law enforcement and other agencies of the grant of expungement, and directing the judicial branch to expunge records.

For felony or other cannabis convictions not eligible for automatic expungement, records will not be cleared automatically, but examined on a case-by-case basis by the Cannabis Expungement Board.

The new law gives the board the power to determine whether a person’s felony cannabis conviction should be vacated, charges should be dismissed, and records should be expunged, or whether the person should be resentenced to a lesser offense. (Art. 5, Secs. 2-3)

Other provisions

The law also calls for:

• the governor, effective May 31, 2023, to negotiate compacts with American Indian tribes regarding medical cannabis and adult-use cannabis;

• requiring education programs on the physical and mental effects of cannabis use;

• requiring the Department of Health to collect data on cannabis use in the state;

• setting conditions governing workplace testing for cannabis; and

• repealing several existing statutes and rules governing the medical cannabis registry program. (Art. 6, Secs. 1-2, 7-8; Art. 7, Sec. 4; Art. 8, Sec. 1)

Appropriations

To pay for establishing the regulatory structure for adult-use cannabis and other costs that will be incurred before the legal sale of adult-use cannabis begins to generate retail tax and license fee revenue, the law appropriates, effective July 1, 2023:

• $39.6 million for the Office of Cannabis Management;

• $23.6 million to the Department of Health for grants to local and tribal health departments, youth education, and education grants for pregnant or breastfeeding individuals;

• $15 million to the Office of Traffic Safety in the Department of Public Safety for drug recognition evaluator training;

• $12 million to the Department of Employment and Economic Development for the CanStartup, CanNavigate, and CanTrain programs;

• $11.2 million for the Cannabis Expungement Board;

• $11 million transferred from the General Fund to the substance use treatment, recovery, and prevention grant account;

• $8.5 million to the Department of Revenue;

• $5 million to the University of Minnesota to establish a Center for Cannabis Research within the School of Public Health;

• $3 million to district courts to support treatment courts;

• $2.6 million to the Office of Traffic Safety for a roadside testing pilot project; and

• $2.2 million to the Department of Health for the temporary regulation of edible products extracted from hemp.

Effective May 31, 2023, the Bureau of Criminal Apprehension will get $6.66 million in fiscal year 2023 and $3.6 million in fiscal year 2025 to identify and provide records of convictions for offenses involving the possession of cannabis that may be eligible for expungement and resentencing.

HF0100* / SF0073 / CH63