Cannabis Business Blog

In two years, Oregon’s legalized recreational marijuana industry has gone from non-existent to a thriving industry, with over $60 million a year in total sales and over 400 licensed retailers. Despite the growing popularity of legalized recreational marijuana, no states have provided for the public consumption of marijuana. Oregon is considering changing that with SB 307. This measure would permit the Oregon Liquor Control Commission, the state’s regulatory body for cannabis sales, to issue permits for temporary events and for “cannabis lounges”. These permits could be issued if a county or city agrees to allow such permits in their jurisdiction.

This article was first published on GSB’s Northwest Land Law Forum blog.

On May 3, 2016, the City of Hillsboro adopted new land use regulations in preparation for recreational marijuana uses of the product.  The city’s new code allows marijuana production facilities only in the General Industrial (I-G) and Industrial Park (I-P) zones.  However, such production facilities are not allowed in the city’s recently adopted Industrial Sanctuary (I-S) or the light rail industrial zones.  As a practical matter, this limitation in the I-S zone may turn out to be smart planning as the city has envisioned high energy users at these locations, and marijuana production could have had adverse impacts to energy infrastructure and availability in the area.

Development of industrial marijuana facilities in the I-G zone will allow flexibility for the use that can either occupy existing buildings or new construction. The city’s vision is the new uses might help solve the blight caused by out?of?date buildings with the result that those structures will be repurposed and refurbished.  Further, vacant land in the southwest industrial area and in older industrial parks elsewhere in the city will allow for construction of new buildings to serve the use.  Both refurbishment and new construction for marijuana facilities will be subject to the process and standards of the Development Review process.

Similarly, the I-P zone allows industrial marijuana facilities.  However, new buildings in the I-P zone are required to have concrete or cement masonry units construction only.  The city’s intent is to ensure that new development is consistent with the city‘s plan for well?designed, highest quality development, and the construction of “use neutral” buildings which enhance property values on nearby properties and better enable conversion to other higher value uses in the future.  While the city refers to higher value uses in the future, it is hard to imagine when 2016 Oregon market projections call for $481 million in legal marijuana sales.

Although production is not allowed in the city’s Station Community Business Park (SC-BP) and Station Community Industrial (SCI) zones, complimentary uses will be allowed.  For example, wholesale facilities and testing laboratories can occupy either existing buildings or new construction.  New construction will be limited to concrete or cement masonry units construction only, and subject to the process and standards of the Development Review process.

The city also adopted time, place and manner restrictions intended to prevent nuisance impacts to surrounding properties and the general.  Here are a few highlights from these regulations:

• • In the case of production facilities, views from the exterior of the building into the production area are prohibited.

• • Security features are addressed.

• • Odor mitigation for production facilities, including installation of activated carbon filters on all exhaust outlets to the building exterior; location of exhaust outlets a minimum of 10 feet from the property line and 10 feet above finished grade; and maintenance of negative air pressure within the facility; or an alternative odor control system approved by the Building Official.

• • Marijuana waste must be rendered unusable before it is disposed.

• • A recreational marijuana production, processing, testing laboratory or wholesale sales facility shall not be located within 100 feet of any single-family residential, multi-family residential, mixed-use, urban center or institutional zone.

• • For retail sales facilities, operation may only occur between the hours of 10:00 a.m. and 8:00 p.m., Monday through Thursday; and 10:00 a.m. to 10:00 p.m., on Friday, Saturday and Sunday.

• • And be sure to check the code for distances required from schools, public plazas and other specified areas.

For those of you “do-it-yourselfers,” take heed.  The city decided that home occupations for recreational marijuana facilities are prohibited.  And don’t expect a marijuana cart on wheels to drop off your product because mobile retail businesses are prohibited.

Ready to get started with a recreational marijuana facility in Hillsboro?  We can help navigate the land use process while you get down to business.

Hal Snow shares his views with Puget Sound Business Journal’s Emily Parkhurst on the surprises, growth of the burgeoning marijuana industry, and issues faced by the industry such as putting together financing structures, non-Washington residents not being allowed to invest in companies, and the struggle in dealing with banking issues. Hal also discusses how GSB’s Cannabis practice group came to fruition with their team of experienced and dedicated attorneys with backgrounds ranging from business law, M&A, land use, real estate and regulatory, and also their experience in helping companies navigate the complexities of highly regulated industries.

Read the article here (subscription required): http://www.bizjournals.com/seattle/print-edition/2016/02/12/su

Garvey Schubert Barer will be sponsoring and attending the Cannabis Collaborative Conference at the Portland Expo Center on February 3 and 4. The conference will kick off with a keynote address from former NBA All-Star and Portland Trail Blazer Cliff Robinson, a cannabis advocate, and will feature 80 cannabis industry speakers and more than 90 exhibitors.

The numerous sessions are devoted to informing both existing businesses and new ventures about recent industry developments, including interactive workshops and hands-on demonstrations hosted by the Oregon Liquor Control Commission. This year’s conference is shaping up to be a can’t-miss event for members of the cannabis community.

You can find us at the following events on Wednesday, February 3:

• 2:15-3:00 PM - “Ask the Experts” Roundtable

Emily Harris Gant, Scott G. Warner and William K. Kabeiseman will participate in this informal round table session and will be available to answer attendees’ questions about corporate, intellectual property and real estate & land use issues, respectively, as they relate to the cannabis industry.

• 3:15-4:00 PM - The Status of Investing in the Cannabis Industry

Harold E. Snow, Jr. will review the law and regulations concerning who can invest in the cannabis industry and how, both directly and indirectly, and he will offer suggestions on maximizing investor participation in the emerging cannabis industry.

• 7:00-10:00 PM - Evening Reception

GSB is hosting the conference’s Wednesday evening party.

We hope to see you there!

Come tax time, taxpayers in the marijuana industry in Oregon may want to proceed with caution.  Since Oregon is tied to the Internal Revenue Code—specifically IRC § 280E—for purposes of income taxation, deductions relating to the trade or business of selling medical or recreational marijuana will be disallowed, and therefore taxpayers in this industry seeking to capitalize expenses and add them to the cost of goods should keep in mind that the taxing authorities will likely be monitoring this area closely.  For more information on this issue, please read the latest post on our firm's sister blog Larry's Tax Law.

Radio talk show host Ross Reynolds, from KUOW's The Record interviews Hal Snow, member of Garvey Schubert Barer's Cannabis practice group, on the tricky landscape of the marijuana industry. Hal gives his thoughts on topical issues related to current states compliance with federal laws under the Obama administration, banking issues, rise of medicinal and recreational marijuana, and the outlook on marijuana legalization and regulation under a new president and Congress in January 2017.

Listen here: http://kuow.org/post/current-legal-landscape-marijuana-still-tricky

During our April 10 event, “Moving Forward Under Measure 91,” in Portland, Ore., we addressed a number of complex issues regarding the developing marijuana industry. This blog series will answer questions that we may not have been able to get to during the Q&A portion of our event. Make sure to keep checking back here, or subscribe to our blog for updates!

“Is the Process of Bankruptcy Different for Marijuana Businesses?”

Some marijuana businesses and their owners have actually been denied the protection of bankruptcy in several U.S. courts. A bankruptcy trustee is an officer of the federal courts, and must uphold federal law. Because marijuana is a Schedule I drug under the federal Controlled Substances Act, some courts have deemed bankruptcy trustees unable to take possession of marijuana businesses and their assets. The trustees are therefore unable to perform their duties, and those bankruptcy cases have been dismissed. See, e.g., In re Arenas, 514 B.R. 887 (Bankr. D. Colo. 2014).

While federal bankruptcy protection may be unavailable to marijuana businesses until a change is made to federal law, it is possible that some state-level remedies will be available to insolvent marijuana businesses or their creditors. For more detailed information about marijuana businesses and bankruptcy, and recommendations for how to begin considering state-level approaches, see our article in Marijuana Venture magazine: “Marijuana business denied protection by bankruptcy court.”

We’d like to thank everyone who attended our seminar, “Moving Forward Under Measure 91,” last Friday, in Portland! It was a great event, and we were even featured as part of a KGW-TV news segment.

As promised, we’ve included links to presentations by GSB attorneys, the Oregon Liquor Control Commission, League of Oregon Cities and Association of Oregon Counties. Beginning next week we will begin our blog series addressing questions that we may not have been able to get to during the Q & A. Make sure to keep checking back here, or subscribe to our blog for updates!

OVERVIEW OF MARIJUANA BUSINESS PLANNING

• Andy Aley, Garvey Schubert Barer

• Claire Hawkins, Garvey Schubert Barer

• Jared Van Kirk, Garvey Schubert Barer

• Hal Snow, Garvey Schubert Barer

CITY AND COUNTY PERSPECTIVE

• Sean O’Day, General Counsel, League of Oregon Cities

• Rob Bovett, Legal Counsel, Association of Oregon Counties

• William Kabeiseman, Garvey Schubert Barer

OREGON LIQUOR CONTROL COMMISSION

• Tom Towslee, Acting Communication Director, Marijuana Programs, Oregon Liquor Control Commission

Garvey Schubert Barer invites you to “Moving Forward Under Measure 91” a free public event, Friday, April 10, 2015 at the World Trade Center Portland.  The half-day event (8:15 a.m.–1:00 p.m.) will address the business, legal and practical implications of Measure 91 for anyone looking to do business in the marijuana industry.

Representatives from the Oregon Liquor Control Commission, Association of Oregon Counties and League of Oregon Cities, will speak about the important role city and county government plays in shaping and regulating the Oregon marijuana industry. In addition, Garvey Schubert Barer attorneys experienced in representing licensed marijuana growers, processors and retailers in Washington state will discuss general business planning needs unique to the emerging recreational marijuana industry.

Licensed marijuana and marijuana-related businesses in the U.S. face extraordinary legal challenges. Not only are these businesses burdened with challenges inherent in any new industry, but also must deal with complex and evolving state and local regulations, as well as uncertainty resulting from federal law.

Featured speakers and topics include:

• • Tom Burns, Director of Marijuana Programs, Oregon Liquor Control Commission, discussing OLCC’s anticipated and developing rules and regulations;

• • Sean O’Day, General Counsel, League of Oregon Cities, discussing cities’ perspectives and zoning issues;

• • Rob Bovett, Legal Counsel, Association of Oregon Counties, discussing counties’ perspectives and zoning issues;

• • William Kabeiseman, Garvey Schubert Barer, Discussing local perspectives and zoning issues;

• • Andy Aley, Garvey Schubert Barer, Discussing financing and operating a regulated marijuana business;

• • Claire Hawkins, Garvey Schubert Barer, Discussing intellectual property, trademarks and trade secrets;

• • Jared Van Kirk, Garvey Schubert Barer, Discussing labor and employment practices;

• • Hal Snow, Garvey Schubert Barer, Discussing asset protection planning.

Garvey Schubert Barer’s Cannabis Industry Group is part of its Regulated Industries Practice which serves businesses across a broad range of industries, including alcohol, radio and television broadcasting, government contracting, healthcare, and maritime.  The Cannabis Industry Group is comprised of attorneys experienced in finance, tax, real estate, intellectual property, employment, commercial litigation and criminal defense. This breadth of legal experience provides state-licensed marijuana businesses, and businesses serving the licensed marijuana industry, full-service representation.

The event is open to the public but space is limited.