AR/RR and Taxes: An Update from our Executive Director

The past 60 days have been the most tumultuous that our industry has seen in years. This past week, I know many of you have been questioning the future with the Supervisors’ vote to ban commercial cultivation in AR/RR zones, and with the confusion around the newly proposed tax measure.

We are a tight community, and I’ve been feeling the general unrest and fears surface in the face of the unknown.  Which is why I wanted to write to you all personally; there are some silver linings, and there are steps that we can take moving forward.

In regards to Ag Residential and Rural Residential:

  • The guidelines establish a defense to prosecution for possession of up to 3 pounds of dried cannabis and cultivation of up to 30 plants within 100 square feet. These limits apply to collectives on a per patient basis  which will sunset on January 1st, 2018.  Resolution No 06-0846.  The transition period is for “existing cannabis cultivation cooperatives or collectives that demonstrate to the review authority that they were in operation before January 1, 2016, shall have until January 1, 2018 to come into compliance with this ordinance, provided that there has a been no increase in the size of the cultivation area and the operations are in compliance with the best management practices and the operating standards.”
  • Inclusion Zones for AR/RR cottage cultivation, were discussed at the December 13th BoS meeting and SCGA will be pursuing this option with the Districts that have the highest concentration of rural cottage farmers and happen to have the most interest in inclusion zoning: District 1 and District 5.

The ban of cultivation in AR/RR is a sharp wake-up to the many hundreds of residents that have been living and operating in compliance with state and local law, yet now need to transition in 12 months.

This is a good time to circle back to a discussion we have been having all year: If you are a small farmer that wants to participate and thrive in the regulated market, it is time to consider cooperative farming with common cause farmers to afford the costs associated with entering this new competitive market.

Looking to the silver lining, this decision by the Supervisors may very well be the fire we needed as a community to take action immediately and start developing the resources necessary to truly achieve a successful and thriving craft cannabis network of businesses that can compete as boutique and artisanal quality small batch producers. There are developers and landowners who see the reciprocal benefits associated with developing land for cooperative farming operations. The opportunity ahead is going to require each of us to bring our solutions to the table and get busy in early January. I hope you will join me at the table as we develop the policy priorities for our county and nine cities in 2017!

In regards to taxes:

What I have heard from most folks is that the 10% cap the County has allotted in the tax ordinance is more than alarming when we consider the cost of operations and the new state tax of 15%.
It’s important to understand that this is a cap, not a suggested rate for the industry today. Running a special election in order to increase taxes will cost the county nearly half a million dollars. They want to have a ceiling that can account for the unknowns in the market over the next ten years, without incurring additional tax-dollar costs for a special election.

There are two unique aspects of the tax measure that you may not be aware of, that do not exist in the majority of local taxes developing across California: (Cannabis Business Tax Ordinance, Section 6 (B), page 10)

  • The operator is charged based on their total cultivation area, not the max square foot of the license type. “The tax statement may include a request for adjustment of the tax due to square footage authorized but not utilized for cultivation”…

  • The operator may submit a crop loss to the Ag Commissioner for review, and if validated, that crop loss can be applied as a tax deduction for the operator …“and/or crop loss, along with evidence substantiating the square footage utilized and/or crop loss.”

What you need to do now:
The Board of Supervisors will meet this Tuesday, at 9am on 12/20 for a final vote on the Land Use Ordinance. This period is open for public comments and you are strongly encouraged to attend and speak.  While your comments may not swing the vote to amend the ban, it will be weighed in the future when we begin the conversation in January 2017 to develop new solutions for our AR/RR farmers.

  • Read the tax ordinance. Know that SCGA has been and will continue to work with our membership and the County of Sonoma to ensure that the rates are reasonable and allow for competitive participation across all license types.

  • Get involved in SCGA. Members, the best way to be informed and ensure that your future is being protected is by getting involved. SCGA has many committees that address the myriad of policy and community issues we face in the coming years ahead.

  • Write your Supervisor. Never doubt that they are reading the emails and letters. This is precisely how a small number of conservative and misinformed rural residents were able to achieve the ban in RR/AR zones.

As always, SCGA works to advocate for our community and you, our membership.  While at times, we wish we could write the rules, that job is up to our elected officials, and we are proud to be a part of guiding the future.  We will continue to work with them, shoulder to shoulder, and do our best to share the concerns of our members, sponsors, allies and the Sonoma County cannabis community.

Look for an event notice, coming shortly, announcing the January SCGA Membership Meeting where these topics will be discussed in more detail.

In solidarity,
Tawnie Logan – Executive Director

 

The information provided is for informational purposes only and is not intended to be legal advice.