California has been a leader in marijuana legalization. In 1996, it passed Proposition 215, the Compassionate Use Act. True to its title, the act allowed recommendations for medical marijuana to treat those suffering from AIDS, cancer and the effects of chemotherapy, chronic pain, and terminal illness. Under Prop 215, it was common to distribute medical marijuana via co-ops. In January of this year, California took another step toward legalization, but with an unintended consequence.

Proposition 64 allows for taxed, nonmedical adult use. That tax, however, has hurt those who were the first to be served—those struggling with serious illness. Under the provisions of Proposition 64, every ounce is taxed, even if intended for the very sick. Cultivators, wholesalers, and dispensaries also face significant new taxes, and there are no exceptions for charitable donations to qualified patients (for example, those too sick to work and thereby to be able to buy their medicine, which insurance does not cover). Under California’s new, for-profit tax structure, it very difficult or impossible for charities to keep operating.

Shelter Project

One such charity is Shelter Project. A video on its website explains how the project provides free cannabis for cancer treatment. Patients are given medicine to vape, eat, or otherwise use different types of cannabis products to treat their symptoms. The project’s site now has this announcement: “Due to California state cannabis laws and regulations, we are unable to enroll patients in the Shelter Project at this time. We appreciate your patience as we restructure our compassion program expected to reopen in summer 2018.” The charity’s costs per patient have drastically increased since Proposition 64’s taxation scheme came into effect.

There are many other marijuana charities in the state that give medicine to the terminally ill, to children, and to veterans. These charities are already hampered by the fact that they cannot structure themselves as charities under federal law (because they break federal law).  Because donations are not tax-deductible, the charities were operating on limited budgets before Proposition 64 took effect. Now that it has, however, many California pot charities are scaling back their operations or going out of business.

Weed for Warriors

Weed for Warriors, a veterans group, posted to its Facebook page: Proposition 64 has been “particularly harmful to ‘compassionate care’ programs, privately-funded organizations that provide free and low-cost cannabis to low-income patients with conditions such as cancer and nerve pain. The high taxes threaten to close the doors of these operations, making it difficult and expensive for the medical marijuana patients that started the legalization movement in the first place to get the medical marijuana they need.”

The law makes no allowance for a charitable supply chain. It mandates that marijuana be paid for, so before medical marijuana can be given away, retail prices, with their taxes, must be paid. The new law’s for-profit, high-tax model also spells trouble for co-ops.

Where’s the compassion?

It is ironic that while legalization started with compassionate use for the sick, including charity for poor patients, under Proposition 64, charitable giving is technically illegal. The state legislature, however, is now catching up to this unintended consequence of legalization. A new bill is in the works that would allow for a charitable supply chain from the farm to the patient.

State Senator Scott Wiener of San Francisco has sponsored a bill to make up for the gap in Proposition 64.  According to his press release, the bill would “exempt compassionate care programs from paying state cannabis taxes when they are providing free medical cannabis to financially disadvantaged people living with serious health conditions.”

“Compassionate care programs aid people who are seriously ill and suffering, and we should be helping them thrive, not squeezing them with business taxes that are forcing many of them to close,” he said. “These programs are a way for cultivators and retailers to donate free cannabis through nonprofit collectives to some of our most vulnerable residents—they are a way for Californians to take care of each other. Let’s correct this oversight in Prop 64, and help people living with serious conditions like HIV and cancer get the medical cannabis they need.”

In the interim, California’s Bureau of Cannabis Control has proposed emergency regulations to allow marijuana charities to give marijuana away to qualified patients, and charities may appeal their tax burden.

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