North Carolina Medical Marijuana Bill Advances Through State Senate, Moves to the House of Representatives for Consideration

The cannabis industry shows no sign of slowing down as state lawmakers continue the push to legalize medical marijuana across the country. As February draws to a close, eight states are grappling with bills to create medical cannabis programs. Among those eight is North Carolina, where the proposed Senate Bill 3, titled the Compassionate Care Act (“CCA”), passed the full North Carolina Senate on March 1.

The bill, sponsored by Republican Sens. Bill Rabon and Michael Lee and Democrat Sen. Paul Lowe, proposes the legalization of medical cannabis use for patients diagnosed with one or more enumerated conditions. It would also authorize the Department of Health and Human Services and a Medical Cannabis Production Commission to evaluate applications and issue up to ten licenses.

Notably, the CCA does not differentiate between cultivators, processors, and dispensaries. Each licensee would be deemed a “supplier” and may operate both “production facilities” for the cultivation and processing of marijuana and up to eight dispensaries, or “medical cannabis centers.”

Compared to the “comprehensive” medical use programs adopted in other states, the CCA’s current text is limited. According to Senator Rabon, the legislative intent “is to only make changes to existing state law that are necessary to protect patients and their doctors from criminal and civil penalties.” The list of qualifying conditions is also limited; unlike Ohio, North Carolina would not permit patients suffering from chronic pain to obtain a marijuana certification. In fact, this version of the CCA only recognizes eleven qualified diagnoses that are not related to hospice or end-of-life care. However, unlike some states, the bill would permit smoking of medical marijuana by registered patients, with some restrictions.

While passage of the bill would be a well-earned win for medical marijuana advocates in North Carolina, cannabis business owners looking to develop a presence into the state should take care to familiarize themselves with the proposed bill. Seasoned owners and operators will recognize certain aspects, such as the creation of a seed-to-sale tracking system and a state registry of all qualified patients and caregivers. Other familiar provisions include an annual license renewal requirement, license caps, and the disqualification from licensure of individuals convicted of certain crimes.

However, license-seekers will want to pay close attention to the proposed bill’s license application requirements, which include:

• Proof the applicant has been a state resident for at least 2 years and will be the majority owner of each dispensary and production facility proposed. (Note that in Ne. Patients Grp. V. United Cannabis Patients & Caregivers of Me., 45 F.4^th 542 (2022), the First Circuit struck down a similar residency requirement in Maine on the grounds that such requirements violate the “dormant Commerce Clause,” which prohibits states from discriminating against interstate commerce)

• Documentation of the applicant’s expertise in controlled environment agriculture and the ability to engage in growing or processing of cannabis, as well as product development, quality control, and inventory management of cannabis.

• Proof that the applicant has sufficient liquid and non-liquid assets to operate for two years.

• Disclosure of the names, addresses, and dates of birth of any individual owning more than 5% of a dispensary or production facility to be operated under the license.

Under the proposed text, suppliers would be required to begin cultivation within 120 days of licensure and begin the sale of cannabis and cannabis-infused products within 270 days of initiating cultivation. Suppliers would also pay a monthly fee to the Department in an amount equal to 10% of gross revenue. This 10% fee would likely represent the largest fee imposed on medical marijuana operators in any state market, and it remains to be seen if operators could be profitable with a fee of this size while still being prohibited from taking standard business deductions due to IRC 280E.

The Compassionate Care Act now moves to the North Carolina House of Representatives. While last year’s proposed medical use legislation died in the House, Republican House Speaker Tim Moore stated that he “would not be surprised at all” if the House votes in favor of passage this time around.

This article provides a brief overview of North Carolina’s Compassionate Care Act in its current state. The bill was amended several times during the Senate committee process, including amendments designed to ensure equitable distribution and access to medical cannabis centers in underserved counties. As is often the case with legislation, the House is likely to make additional changes to the proposed bill before it heads to the Governor’s desk.

If you are interested in pursuing a North Carolina medical marijuana license, or if you have questions about North Carolina’s Compassionate Care Act, please don’t hesitate to contact a Frantz Ward cannabis attorney.