SB2537

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to title 19 to be appropriately designated and to read as follows:

"Chapter

cannabis

§ -1 Definitions. As used in this chapter:

"Cannabis" shall have the same meaning as "marijuana" and "marijuana concentrate" as provided in section 712-1240.

"Cannabis accessories" means any equipment, products, or materials of any kind which are used, intended for use, or designed for use in planting, propagating, cultivating, growing, harvesting, composting, manufacturing, compounding, converting, producing, processing, preparing, testing, analyzing, packaging, repackaging, storing, containing, or vaporizing cannabis or for ingesting, inhaling, or otherwise introducing cannabis into the human body.

"Cannabis cultivation facility" means an entity licensed to cultivate, prepare, package, and sell cannabis to retail cannabis stores, to cannabis product manufacturing facilities, and to other cannabis cultivation facilities, but not to consumers.

"Cannabis establishment" means a cannabis cultivation facility, a cannabis testing facility, a cannabis product manufacturing facility, or a retail cannabis store.

"Cannabis product manufacturing facility" means an entity licensed to purchase cannabis; manufacture, prepare, and package cannabis products; and sell cannabis and cannabis products to other cannabis product manufacturing facilities and to retail cannabis stores, but not to consumers.

"Cannabis products" means concentrated cannabis products and cannabis products that are composed of cannabis and other ingredients and are intended for use or consumption, including but not limited to edible products, ointments, and tinctures.

"Cannabis testing facility" means an entity licensed to analyze and certify the safety and potency of cannabis.

"Consumer" means a person twenty-one years of age or older who purchases cannabis or cannabis products for personal use from persons twenty-one years or age or older, but not for resale to others.

"Department" means the department of health.

"Retail cannabis store" means an entity licensed to purchase cannabis from cannabis cultivation facilities, purchase cannabis and cannabis products from cannabis product manufacturing facilities, and sell cannabis and cannabis products to consumers.

"Unreasonably impracticable" means that the measures necessary to comply with regulations require such a high investment of risk, money, time, or any other resource or asset that the operation of a cannabis establishment is not worthy of being carried out in practice by a reasonably prudent businessperson.

§ -2 Personal use of cannabis. Notwithstanding any other state law to the contrary, the following acts shall neither be a criminal offense under Hawaii law nor a basis for seizure or forfeiture of assets under Hawaii law for persons twenty-one years of age or older:

(1) Possessing, using, displaying, purchasing, or transporting cannabis accessories or one ounce or less of cannabis;

(2) Possessing, growing, processing, or transporting up to five cannabis plants and possession of the cannabis produced by the plants on the premises where the plants were grown; provided that the plants are grown in a secured space, the plants are not grown openly or publicly, and are not made available for sale;

(3) Transfer of one ounce or less of cannabis without remuneration to a person who is twenty-one years of age or older;

(4) Consumption of cannabis; provided that nothing in this section shall permit consumption that is conducted openly and publicly or in a manner that endangers others; and

(5) Assisting another person who is twenty-one years of age or older in any of the acts described in paragraphs (1) through (4).

§ -3 Lawful operation of cannabis-related facilities. Notwithstanding any other state law to the contrary, the following acts shall neither be a criminal offense under Hawaii law nor a basis for seizure or forfeiture of assets under Hawaii law for persons twenty-one years of age or older:

(1) Manufacture, sale, purchase, or possession of cannabis accessories;

(2) Possessing, displaying, or transporting cannabis or cannabis products; purchase of cannabis from a cannabis cultivation facility; purchase of cannabis or cannabis products from a cannabis product manufacturing facility; or sale of cannabis or cannabis products to consumers if the person conducting the activities described in this paragraph holds a valid license to operate a retail cannabis store or is acting in the person's capacity as an owner, employee, or agent of a licensed retail cannabis store;

(3) Cultivating, harvesting, processing, packaging, transporting, displaying, or possessing cannabis; delivery or transfer of cannabis to a cannabis testing facility; selling cannabis to a cannabis cultivation facility, a cannabis product manufacturing facility, or a retail cannabis store; or the purchase of cannabis from a cannabis cultivation facility, if the person conducting the activities described in this paragraph holds a valid license to operate a cannabis cultivation facility or is acting in the person's capacity as an owner, employee, or agent of a licensed cannabis cultivation facility;

(4) Packaging, processing, transporting, manufacturing, displaying, or possessing cannabis or cannabis products; delivery or transfer of cannabis or cannabis products to a cannabis testing facility; selling cannabis or cannabis products to a retail cannabis store or a cannabis product manufacturing facility; purchase of cannabis from a cannabis cultivation facility; or purchase of cannabis or cannabis products from a cannabis product manufacturing facility, if the person conducting the activities described in this paragraph holds a valid license to operate a cannabis product manufacturing facility or is acting in the person's capacity as an owner, employee, or agent of a licensed cannabis product manufacturing facility;

(5) Possessing, cultivating, processing, repackaging, storing, transporting, displaying, transferring, or delivering cannabis or cannabis products if the person holds a valid license to operate a cannabis testing facility or is acting in the person's capacity as owner, employee, or agent of a licensed cannabis testing facility; and

(6) Leasing or otherwise allowing the use of property owned, occupied, or controlled by any person, corporation, or other entity for any of the activities described in paragraphs (1) through (5).

§ -4 Regulation of cannabis. (a) Not later than one hundred twenty days after the effective date of this Act, the department shall adopt rules pursuant to chapter 91 necessary to implement this chapter. The rules shall not prohibit the operation of cannabis establishments either expressly or by making operations unreasonably impracticable. The rules shall include:

(1) Procedures for the issuance, renewal, suspension, and revocation of a license to operate a cannabis establishment;

(2) A schedule of application, licensing, and renewal fees;

(3) Qualifications for a license that are directly and demonstrably related to the operation of a cannabis establishment;

(4) Security requirements for cannabis establishments;

(5) Requirements to prevent the sale or diversion of cannabis and cannabis products to persons under the age of twenty-one;

(6) Labeling requirements for cannabis and cannabis products sold or distributed by a cannabis establishment;

(7) Health and safety regulations and standards for the manufacture of cannabis products and the cultivation of cannabis;

(8) Restrictions on the advertising and display of cannabis and cannabis products; and

(9) Civil penalties not to exceed $100 per violation for any failure to comply with rules made pursuant to this section.

(b) To ensure that individual privacy is protected, notwithstanding subsection (a), the department shall not require a consumer to provide a retail cannabis store with personal information other than government-issued identification to determine the consumer's age. A retail cannabis store shall not be required to acquire and record personal information about consumers other than information typically acquired in a financial transaction conducted at a retail liquor store.

(c) Each application for a license to operate a cannabis establishment shall be submitted to the department. The department shall:

(1) Begin accepting and processing applications by July 1, 2019;

(2) Issue a license to the applicant within ninety days of receipt of an application unless the department finds the applicant is not in compliance with rules adopted pursuant to subsection (a); and

(3) Upon denial of an application, notify the applicant in writing of the reason or reasons for its denial.

No license issued by the department pursuant to this section shall be valid for more than one year.

§ -5 Employers; driving; minors; control of property. Nothing in this chapter shall be construed to:

(1) Require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growing of cannabis in the workplace or to affect the ability of employers to have policies restricting the use of cannabis by employees;

(2) Allow driving under the influence of cannabis or driving while impaired by cannabis or to supersede any law relating to driving under the influence of cannabis or driving while impaired by cannabis, nor shall this chapter preclude the State from enacting laws and imposing penalties for driving under the influence of or while impaired by cannabis;

(3) Permit the transfer of cannabis, with or without remuneration, to a person under the age of twenty-one or to allow a person under the age of twenty-one to purchase, possess, use, transport, grow, or consume cannabis; or

(4) Prohibit a person, employer, school, hospital, detention facility, corporation, or any other entity who occupies, owns, or controls property from prohibiting or otherwise regulating the possession, consumption, use, display, transfer, distribution, sale, transportation, or growing of cannabis on or in that property.

§ -6 Medical cannabis provisions unaffected. Nothing in this chapter shall limit any privileges or rights of a medical cannabis qualifying patient, primary caregiver, or registered entity as provided in chapter 329, part IX.

§ -7 General excise tax; drug treatment special fund. The tax imposed by chapter 237 shall apply to the gross proceeds of sale of cannabis products pursuant to this chapter. Fifty per cent of the general excise tax revenues collected shall be deposited in the drug treatment special fund established pursuant to section 321- ."

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237- Exemption of sales of cannabis and manufactured cannabis products. This chapter shall not apply to amounts received by medical cannabis dispensaries licensed under chapter 329D for sales of cannabis or manufactured cannabis products intended for medical use to qualifying patients or primary caregivers registered with the department of health under section 329-123."

SECTION 3. Chapter 321, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§321- Drug treatment special fund. (a) There is created in the treasury of the State the drug treatment special fund, into which shall be deposited tax revenues designated in section -7.

(b) Moneys in the drug treatment special fund shall be used solely for the support of drug treatment programs in the State."

SECTION 4. Chapter 712, Hawaii Revised Statutes, is amended by adding a new section to part IV to be appropriately designated and to read as follows:

"§712- Cannabis. The following acts shall be exempt from arrest, prosecution, and criminal culpability under this part:

(1) Any act permitted under section -2; and

(2) Any act permitted under section -3."

SECTION 5. Section 46-4, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

"(f) Neither this section nor any other law, county ordinance, or rule shall prohibit the use of land for medical cannabis production centers or medical cannabis dispensaries established and licensed pursuant to chapter 329D[;] or cannabis establishments established and licensed pursuant to chapter ; provided that the land is otherwise zoned for agriculture, manufacturing, or retail purposes."

SECTION 6. Section 235-2.4, Hawaii Revised Statutes, is amended by amending subsection (r) to read as follows:

"(r) Section 280E (with respect to expenditures in connection with the illegal sale of drugs) of the Internal Revenue Code shall be operative for the purposes of this chapter, except that section 280E shall not be operative with respect to the production and sale of [~~medical~~]:

(1) Medical cannabis and manufactured cannabis products by dispensaries licensed under chapter 329D and their subcontractors, as defined in section 329D-1[.]; and

(2) Cannabis and cannabis products by cannabis establishments licensed under chapter ."

SECTION 7. Section 237-24.3, Hawaii Revised Statutes, is amended to read as follows:

"§237-24.3 Additional amounts not taxable. In addition to the amounts not taxable under section 237-24, this chapter shall not apply to:

(1) Amounts received from the loading, transportation, and unloading of agricultural commodities shipped for a producer or produce dealer on one island of this State to a person, firm, or organization on another island of this State. The terms "agricultural commodity", "producer", and "produce dealer" shall be defined in the same manner as they are defined in section 147-1; provided that agricultural commodities need not have been produced in the State;

(2) Amounts received by the manager, submanager, or board of directors of:

(A) An association of owners of a condominium property regime established in accordance with chapter 514A or 514B; or

(B) A nonprofit homeowners or community association incorporated in accordance with chapter 414D or any predecessor thereto and existing pursuant to covenants running with the land,

in reimbursement of sums paid for common expenses;

(3) Amounts received or accrued from:

(A) The loading or unloading of cargo from ships, barges, vessels, or aircraft, whether or not the ships, barges, vessels, or aircraft travel between the State and other states or countries or between the islands of the State;

(B) Tugboat services including pilotage fees performed within the State, and the towage of ships, barges, or vessels in and out of state harbors, or from one pier to another; and

(C) The transportation of pilots or governmental officials to ships, barges, or vessels offshore; rigging gear; checking freight and similar services; standby charges; and use of moorings and running mooring lines;

(4) Amounts received by an employee benefit plan by way of contributions, dividends, interest, and other income; and amounts received by a nonprofit organization or office, as payments for costs and expenses incurred for the administration of an employee benefit plan; provided that this exemption shall not apply to any gross rental income or gross rental proceeds received after June 30, 1994, as income from investments in real property in this State; and provided further that gross rental income or gross rental proceeds from investments in real property received by an employee benefit plan after June 30, 1994, under written contracts executed prior to July 1, 1994, shall not be taxed until the contracts are renegotiated, renewed, or extended, or until after December 31, 1998, whichever is earlier. For the purposes of this paragraph, "employee benefit plan" means any plan as defined in section 1002(3) of title 29 of the United States Code, as amended;

(5) Amounts received for purchases made with United States Department of Agriculture food coupons under the federal food stamp program, and amounts received for purchases made with United States Department of Agriculture food vouchers under the Special Supplemental Foods Program for Women, Infants and Children;

(6) Amounts received by a hospital, infirmary, medical clinic, health care facility, pharmacy, or a practitioner licensed to administer the drug to an individual for selling prescription drugs or prosthetic devices to an individual; provided that this paragraph shall not apply to any amounts received for services provided in selling prescription drugs or prosthetic devices. As used in this paragraph:

"Prescription drugs" are those drugs defined under section 328-1 and dispensed by filling or refilling a written or oral prescription by a practitioner licensed under law to administer the drug and sold by a licensed pharmacist under section 328-16 or practitioners licensed to administer drugs; provided that "prescription drugs" shall not include cannabis, cannabis products, or manufactured cannabis products authorized pursuant to chapters 329 [~~and~~], 329D, and [[]; and[]]

"Prosthetic device" means any artificial device or appliance, instrument, apparatus, or contrivance, including their components, parts, accessories, and replacements thereof, used to replace a missing or surgically removed part of the human body, which is prescribed by a licensed practitioner of medicine, osteopathy, or podiatry and that is sold by the practitioner or that is dispensed and sold by a dealer of prosthetic devices; provided that "prosthetic device" shall not mean any auditory, ophthalmic, dental, or ocular device or appliance, instrument, apparatus, or contrivance;

(7) Taxes on transient accommodations imposed by chapter 237D and passed on and collected by operators holding certificates of registration under that chapter;

(8) Amounts received as dues by an unincorporated merchants association from its membership for advertising media, promotional, and advertising costs for the promotion of the association for the benefit of its members as a whole and not for the benefit of an individual member or group of members less than the entire membership;

(9) Amounts received by a labor organization for real property leased to:

(A) A labor organization; or

(B) A trust fund established by a labor organization for the benefit of its members, families, and dependents for medical or hospital care, pensions on retirement or death of employees, apprenticeship and training, and other membership service programs.

As used in this paragraph, "labor organization" means a labor organization exempt from federal income tax under section 501(c)(5) of the Internal Revenue Code, as amended;

(10) Amounts received from foreign diplomats and consular officials who are holding cards issued or authorized by the United States Department of State granting them an exemption from state taxes; and

(11) Amounts received as rent for the rental or leasing of aircraft or aircraft engines used by the lessees or renters for interstate air transportation of passengers and goods. For purposes of this paragraph, payments made pursuant to a lease shall be considered rent regardless of whether the lease is an operating lease or a financing lease. The definition of "interstate air transportation" is the same as in title 49 [~~U.S.C.~~] United States Code section 40102."

SECTION 8. Section 321-30.1, Hawaii Revised Statutes, is amended by amending its title and subsections (a) and (b) to read as follows:

"§321-30.1 [~~Medical cannabis~~] Cannabis registry and regulation special fund; established. (a) There is established within the state treasury the [~~medical~~] cannabis registry and regulation special fund. The fund shall be expended at the discretion of the director of health:

(1) To establish and regulate a system of medical cannabis dispensaries in the State;

(2) To offset the cost of the processing and issuance of patient registry identification certificates and primary caregiver registration certificates;

(3) To fund positions and operating costs authorized by the legislature;

(4) To establish and manage a secure and confidential database;

(5) To fund public education as required by section 329D‑26;

(6) To fund substance abuse prevention and education programs; [~~and~~]

(7) To regulate cannabis establishments in the State pursuant to chapter ; and

[~~(7)~~] (8) For any other expenditure necessary, consistent with this chapter [~~and~~], chapter 329D, and chapter , to implement medical cannabis registry and regulation programs[.] and cannabis establishment regulation programs.

(b) The fund shall consist of all moneys derived from fees collected pursuant to subsection (c) [~~and~~], section 329D-4[.], and chapter . There is established within the [~~medical~~] cannabis registry and regulation special fund:

(1) A medical cannabis registry program sub-account, into which shall be deposited all fees collected pursuant to subsection (c); [~~and~~]

(2) A medical cannabis dispensary program sub-account, into which shall be deposited all fees collected pursuant to section 329D-4[.]; and

(3) A cannabis establishment program sub-account, into which shall be deposited all fees collected pursuant to chapter ."

SECTION 9. Section 329-43.5, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) Subsections (a) and (b) shall not apply to a person who is authorized to:

(1) Acquire, possess, cultivate, use, distribute, or transport cannabis pursuant to the definition of "medical use" under section 329-121, while the person is facilitating the medical use of cannabis by a qualifying patient; [or]

(2) Dispense, manufacture, or produce cannabis or manufactured cannabis products pursuant to and in compliance with chapter 329D, while the person is facilitating the medical use of cannabis by a qualifying patient pursuant to part IX of chapter 329[.]; or

(3) Grow, process, possess, transfer, display, transport, or use cannabis or cannabis products pursuant to and in compliance with chapter ."

SECTION 10. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 11. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 12. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 13. This Act shall take effect on July 1, 2018.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2537
TWENTY-NINTH LEGISLATURE, 2018
STATE OF HAWAII