Joe Airone’s voice drops when he speaks about the consequences associated with suspending the operations of the Sweetleaf Collective, a California cannabis compassion program he has run for more than half his life.
“This is literally a life or death issue,” he says. “On my project, we have a patient pass [away] every two to three months. I’m concerned that we’re going to see that mortality rate increase. I’m not comfortable with that. I’m not cool with that. Not on my watch.”
Airone, and many cooperatives like his — which supplied free cannabis though California’s previous medical marijuana system — have been forced to close as of Jan. 1 due to uncertainties around taxes, laws and licenses. This complicated web of new laws and emergency regulations, among other things, is preventing licensed retailers from “providing free cannabis goods to any person.” Today, programs that have provided marijuana at no cost for decades are at a standstill.
The Beginnings of Authentic Compassion
When medical marijuana began in California, it did so under Proposition 215, otherwise known as the Compassionate Use Act of 1996. The vote to allow state protections for possession and cultivation of cannabis by a patient or their primary caregiver was born from an authentic desire to provide cannabis to those who needed it the most. In 2004, a second law, SB 420, recognized the right of patients and caregivers to collectively or cooperatively cultivate medical marijuana together. While many dispensaries used this model to provide cannabis for cash under a non-profit dispensary arrangement, others took it as a way to supply cannabis at no cost to severely ill patients who could not otherwise afford it.
For those true compassion programs, the new regulatory model for medical marijuana in California — passed through the legislature in October 2017 as three bills now under the collective regulatory umbrella known as the Medical Cannabis and Adult Use Regulation and Safety Act (MAUCRSA) — has done what law enforcement and the federal government has been unable to do in more than 20 years: put an end to cannabis donations in California. The compassion programs have stopped providing medicine and no one, including the legislators or state agency tasked with implementing the new regulatory program, knows what comes next. In the meantime, patients in dire need have no way to obtain medical marijuana that can help them improve the quality for life in what is, for many, their final days.
Flowers Not Bombs: The Sweetleaf Collective
Until recently, Airone has never had much of a media presence, out of necessity. He founded Sweetleaf Collective in San Francisco in 1996 right after the passage of Proposition 215 and is right behind the Wo/Men’s Alliance for Medical Marijuana (WAMM) as one of the oldest medical marijuana suppliers in the state.
When I spoke with Airone, over the phone rather than in person because he has come down with a cold, his rapid and passionate speaking style is interspersed with coughs. The cold is his body’s way of slowing him down, he acknowledges, but there isn’t much time to take a break.
California cannabis is moving forward like a self-driving car and the difference between having a seat onboard or not is just about as complicated as letting technology take the wheel.
Airone calls himself a “radical activist” and tells me he has spent time in the Eureka, California jail, defending the redwood trees as a part of Earth First protests. The idea to start a service devoted to providing free medical marijuana came from his association with a program called Food Not Bombs.
“With Food Not Bombs, it’s a really interesting model,” he says. “The model is taking surplus from the grocery industry — surplus that they can’t sell, so it’s seen as waste, but it isn’t really waste — and they would redistribute it to people who needed it most.”
He then decided to apply the Food Not Bombs structure to marijuana. The structure also gave him the most legal protection he could by making a “medical necessity” argument that been defensible in court.“I knew that there was a surplus in cannabis that wasn’t being used and it was being thrown away or people were doing burn piles, and I was like, ‘Let’s take this surplus and let’s get it to the people who need it most,’” he says. “The people who would need it most would be low-income people that are terminally ill.”
At that time, the fledging medical marijuana industry was still in a very precarious place. The federal government was threatening to revoke the licenses of medical doctors who recommended their patients might try cannabis, and dispensaries and buyer’s clubs were being shutdown. In addition, Airone explains, the California state government also “wasn’t at a point where they felt they should stand with this industry.”
The program Airone started in 1996 has grown over the years though partnerships with cultivator donors, but has continued to not accept any payment for providing and delivering marijuana.
“There was no reason to exchange money, we get the product for free, we’re volunteers,” he says of the arrangement. “When we started, all I was getting was leaf. We had five patients and I was giving our patients a half ounce of leaf every month.”
When Sweetleaf stopped supplying marijuana on Jan. 1, the day legal sales of recreational marijuana began and new medical rules were put in place, it was giving each qualified person who enrolled — anywhere between 125 and 150 patients in the Bay Area — an ounce and a half of flower per month. The program was all word-of-mouth and qualification meant you were both low-income and terminally ill. Last year, they gave away 100 pounds of cannabis for free.
“We have these HIV and AIDS patients who are living in San Francisco on $1,000 a month, which is just insane,” Airone says. “Of course they have no ability to purchase cannabis. They’ve never even stepped into a dispensary because there was no reason for them to go in there, they couldn’t afford anything.”
Taxes on a Free Product & The California Cannabis Coalition
In February, Khurshid Khoja, a principal at Greenbridge Corporate Capital in Sacramento, authored a letter to the Bureau of Cannabis Control’s Chief Lori Ajax on behalf of WAMM (the nation’s oldest operating medical cannabis collective that survived a federal raid in 2002, but stopped providing free marijuana in January) and the Battlefield Foundation (a non-profit devoted to serving veterans), attempting to explain the roadblock for California compassion programs.
“As you know, under existing law, California Business and Professions Code (“B&PC”) Sec. 26153 of MAUCRSA prohibits licensees from ‘giving away any amount of cannabis or cannabis products, or any cannabis accessories, as part of a business promotion or other commercial activity,’” the letter reads. “16 CCR 5411(a) prohibits licensed retailers from ‘providing free cannabis goods to any person.’”
Plus, Khoja explained in the letter that California’s new tax code imposed weight-based cultivation taxes “on all regulated cannabis harvested for the commercial market” and an excise tax “on all regulated cannabis sold at retail.” In addition, two stipulations in the tax code, 18 CCR 3700 and 3701, create “presumptions that such taxes are due even in cases where cannabis is donated for compassionate purposes and an actual sale does not occur.”
For collectives like WAMM, Battlefield Compassion and Sweetleaf, this means they would still be required to pay taxes on a product they are giving away for free. This act is something that they, as true non-profit entities, simply do not have the funds to do.
“The early result of implementing these laws and regulations and has been that licensed retailers and cultivators have had to choose between maintaining their licenses and livelihood on the one hand, and continuing to practice the principles of compassion that are the very foundation of all medical cannabis laws everywhere,” Khoja’s letter reads. “And regardless of whether these licensees choose to donate cannabis to these patients, or sell it to them for a penny, state laws still forces cultivators to pay the cultivation tax on all cannabis grown for such purposes, and requires distributors and retailers to collect and remit excise taxes on the full retail value of donated cannabis, regardless of the price paid by patients in need.”
To fight back, the non-profits have formed a California Compassion Coalition with an aim to bring back their programs. The state’s general cannabis advisory committee has voted to create emergency regulations to allow these types of programs to continue in the new marketplace. The coalition has a meeting set with the Bureau of Medical Cannabis on April 3.
“We’ve asked for a grace period for operations,” Anne Kelson, an attorney at Kelson Law Group, says, noting although the timeline for any action remains unclear, an in-person meeting with the Bureau is a huge victory. “Certainly [the meeting] signals a health of the agency itself… It’s a winning issue.”
Kelson’s understanding of what’s next seems just about as clear as the answer I received from Bureau spokesperson Alex Traverso over email.
“All we can really tell you at this point is that we’ve heard quite a bit from folks who want to see regulations change to allow for these programs to continue as they were prior to regulations going into effect,” Traverso wrote. “Our Cannabis Advisory Committee has been looking at the issue quite a bit and will likely be providing the Bureau with recommendations as we work toward implementing permanent regulations in the next couple months.”
“We’re in the wilderness right now in terms of how to help these patient bases which have been relying on these programs until January,” Kelson says.
Airone says that he doesn’t believe that the state made compassionate cannabis programs illegal under the MAUCRSA on purpose. “We believe that this is an oversight,” he says. “Most of the lobbyists and the people who have been talking to politicians, they all have money and nobody really knew that there was a whole true class of non-profits that were strictly dealing on a donation basis and giving [cannabis] away for free.”
Now, it seems both legislators and activists are on board for solving the problem, but are unsure how that will actually be done. Kelson and Khoja both agree that the excise tax probably doesn’t apply to compassion programs. In addition, a bill is moving forward in the legislature that will phase out cultivation taxes for a three-year period. One real solution, Kelson says, could be allowing these non-profit programs to pair with dispensaries that are already commercially licensed. An arrangement like this would eliminate potential barriers for these programs, such as the costs associated with tracking and tracing all of the marijuana, as well as legal security and storage requirements.
Other solutions presented by Khoja include only taxing the actual sale of cannabis and acknowledging compassion programs should not be defined under the law as commercial entities.
“We’ve got boots on the ground,” Airone says. “We’re not just how I was twenty years ago, a little radical activist. No, we’re having meetings with politicians. [The issue is] obviously really meant to get solved because it’s all just happening very rapidly.
“This coalition really has come together quickly. A lot of us, since we were just doing compassion, we hadn’t really networked,” he says. “It seems like everybody who’s making money, they know everybody else who’s making money and they all have big parties and stuff and they talk about which one of them is going to be the first weed billionaire. We never had those kind of compassion parties. We probably should [and say] like, ‘Who is going to be the most compassionate person this year?’”
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