People Worry About Rules Following 26 Social Equity Marijuana Licenses to be Given out in Arizona
Some Arizona citizens are worried about the unfair draft rules announced on May 6 by the Department of Health Services (DHS) for the 26 social equity marijuana licenses being given out.
The 26 social equity marijuana licenses being given out are supposed to be benefiting people who have been personally affected by marijuana laws in the past, as well as communities that have been negatively impacted by them. People are wary of how well this social equity plan will work considering it has failed in numerous other states. The last lottery winners were selected by lottery balls and this lottery will likely be done the same way.
Jeff Graves, a current barbershop owner, is trying to get into the social equity lottery after not receiving a license from the first lottery when medical marijuana was approved by voters. Graves thinks that large companies that have multiple dispensaries in different states should not be able to financially back applicants of this lottery.
“The program is set up for the average person like myself that has been affected by these tough laws,” Graves said. “They do not fit that criteria.”
There are a variety of rules and qualifications to enter the lottery, along with a $5,000 non-refundable application fee. These rules range from income, past marijuana convictions, and applying to get those expunged, and percent of the company you will have control over. Potential applicants are allowed to submit comments about these rules until May 16.
People are also worried about the funding once these social equity licenses are handed out. Bonita “Bo” Money, the founder of the National Diversity Inclusion and Cannabis Alliance, has her group working on a funding program to help social equity entrepreneurs who might have difficulty finding funding in traditional ways.
“Social equity folks, just based on the qualifications, don’t have access to capital,” Money said. “They roll these programs out and there is no funding.”
DHS might not be providing ways for financial assistance, but they do plan on offering operational and ownership training for the new business owners. Money added that it is important for new owners to have this training.
Celestia Rodriguez is one of many who are worried that the rules are not thorough enough to keep large dispensaries from using someone who fits the criteria as a way into getting one of the licenses. She questions the intention behind the rules DHS has made for the lottery.
“Are you trying to make 26 people wealthy,” Rodriguez said. “Or are you trying to rectify the damage from the war on drugs?”
Gary Smith is an attorney and president of the Arizona Cannabis Bar Association. Smith is one of many concerned with the DHS rules for the social equity draft. He thinks DHS should recognize racial disparities when giving these few licenses out.
“I would be taking way more seriously the American and Arizona experience with cannabis and racism,” Smith said. “I would be putting it up front. I wouldn’t be ignoring it the way the department seems to be ignoring it.”
There have also been some opposing views with the financial backing from large firms for applicants in the draft. Some people think it would actually be beneficial and less risky than using their own or loved ones’ money to invest.
Ronald Adkins and four friends plan on applying for a license to help minorities and people who want to get into the industry. With Adkins group having low experience in the cannabis industry, they think partnering with a large company—if allowed by the finalized rules of the draft—will help them in the areas they lack knowledge.
“We are going to have to hire people that know the industry,” Adkins said. “If we get involved in marijuana, we need to know who the players are and who can benefit us getting into the industry.”
After licenses are distributed, there are going to be challenges that the winners face with state and federal laws. They will also likely face major tax compliance issues and will likely not be able to take any tax deductions. Andrew Hunzicker, certified public accountant who specializes in assisting cannabis businesses, goes on to explain the difficulty behind these companies wanting to reduce their taxes.
“Ninety-nine percent of accountants don’t know how to do it,” Hunsicker said. “If you are trafficking a drug, as defined in schedule 1, which includes heroin or marijuana, you do not get any deductions or credit on your tax return.”
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