Cannabis industry

AN ACT Relating to reducing barriers in Washington's cannabis 1
industry; amending RCW 69.50.325 and 69.50.331; adding a new section 2
to chapter 82.04 RCW; creating new sections; and providing an 3
expiration date. 4
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:5
NEW SECTION. Sec. 1. (1) The legislature finds that Washington 6
state, being one of the first two states in the nation to legalize 7
cannabis for adult use, has a mature cannabis industry that has 8
earned its position as a national leader in industry efficiencies, 9
product and brand development, and longevity of active operations.10
(2) The legislature recognizes that Washington's licensed 11
cannabis industry's tax revenues now provide over two percent of the 12
state's operating budget. 13
(3) The legislature also recognizes that when the United States 14
federal government deschedules or reschedules cannabis, interstate 15
commerce for cannabis sales will become inevitable under federal law 16
and Washington's licensed cannabis industry will be forced to compete 17
in national markets. 18
(4) The legislature finds that social equity applicants seeking 19
licensure under the cannabis social equity program have discovered 20
that it is desperately difficult or even impossible to find funding 21
H-1287.1
HOUSE BILL 1940
State of Washington 69th Legislature 2025 Regular Session
By Representatives Morgan, Wylie, Reed, Parshley, and Hill
Read first time 02/11/25. Referred to Committee on Consumer
Protection & Business.
p. 1 HB 1940
to open licensed cannabis operations. Restrictions against out-of-1
state investors has effectively blocked these applicants from 2
attracting sufficient investors and has been highlighted as a major 3
barrier to the success of the program. 4
(5) The legislature recognizes that Washington's licensed 5
cannabis industry has been restricted by a state residency 6
requirement for licensees, blocking access to investors from other 7
states, thus putting Washington cannabis licensees at a disadvantage 8
compared to licensees in other states, almost none of which have such 9
barriers to investment capital from other states. 10
(6) The legislature finds that people from many low-income and 11
minority areas do not have the same access to investment capital to 12
start businesses, thus denying certain demographics from achieving 13
generational wealth. 14
(7) The legislature acknowledges that residency requirements for 15
licensing do not exist in any other industry and is in direct 16
conflict with the dormant commerce clause of the United States 17
Constitution. 18
(8) The legislature finds that it is urgent and critical to 19
eliminate the state's residency requirement while also providing tax 20
incentives to investors to attract investments for social equity 21
applicants. 22
(9) The legislature further finds that granting a time-limited 23
tax exemption from the business and occupations tax for cannabis 24
producers, processors, and retailers licensed through the cannabis 25
social equity program, while these licensees start their businesses 26
in the established market, will reduce the unique barriers these 27
businesses are facing relative to other businesses outside and within 28
the licensed cannabis industry. 29
Sec. 2. RCW 69.50.325 and 2022 c 16 s 54 are each amended to 30
read as follows: 31
(1) There shall be a cannabis producer's license regulated by the 32
board and subject to annual renewal. The licensee is authorized to 33
produce: (a) Cannabis for sale at wholesale to cannabis processors 34
and other cannabis producers; (b) immature plants or clones and seeds 35
for sale to cooperatives as described under RCW 69.51A.250; and (c) 36
immature plants or clones and seeds for sale to qualifying patients 37
and designated providers as provided under RCW 69.51A.310. The 38
production, possession, delivery, distribution, and sale of cannabis 39
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in accordance with the provisions of this chapter and the rules 1
adopted to implement and enforce it, by a validly licensed cannabis 2
producer, shall not be a criminal or civil offense under Washington 3
state law. Every cannabis producer's license shall be issued in the 4
name of the applicant, shall specify the location at which the 5
cannabis producer intends to operate, which must be within the state 6
of Washington, and the holder thereof shall not allow any other 7
person to use the license. The application fee for a cannabis 8
producer's license shall be ((two hundred fifty dollars )) $250 plus 9
any additional application or licensing fee required under RCW 10
69.50.331(1). The annual fee for issuance and renewal of a cannabis 11
producer's license shall be ((one thousand three hundred eighty-one 12
dollars)) $1,381. A separate license shall be required for each 13
location at which a cannabis producer intends to produce cannabis.14
(2) There shall be a cannabis processor's license to process, 15
package, and label cannabis concentrates, useable cannabis, and 16
cannabis-infused products for sale at wholesale to cannabis 17
processors and cannabis retailers, regulated by the board and subject 18
to annual renewal. The processing, packaging, possession, delivery, 19
distribution, and sale of cannabis, useable cannabis, cannabis-20
infused products, and cannabis concentrates in accordance with the 21
provisions of this chapter and chapter 69.51A RCW and the rules 22
adopted to implement and enforce these chapters, by a validly 23
licensed cannabis processor, shall not be a criminal or civil offense 24
under Washington state law. Every cannabis processor's license shall 25
be issued in the name of the applicant, shall specify the location at 26
which the licensee intends to operate, which must be within the state 27
of Washington, and the holder thereof shall not allow any other 28
person to use the license. The application fee for a cannabis 29
processor's license shall be ((two hundred fifty dollars )) $250 plus 30
any additional application or licensing fee required under RCW 31
69.50.331(1). The annual fee for issuance and renewal of a cannabis 32
processor's license shall be ((one thousand three hundred eighty-one 33
dollars)) $1,381. A separate license shall be required for each 34
location at which a cannabis processor intends to process cannabis.35
(3)(a) There shall be a cannabis retailer's license to sell 36
cannabis concentrates, useable cannabis, and cannabis-infused 37
products at retail in retail outlets, regulated by the board and 38
subject to annual renewal. The possession, delivery, distribution, 39
and sale of cannabis concentrates, useable cannabis, and cannabis-40
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infused products in accordance with the provisions of this chapter 1
and the rules adopted to implement and enforce it, by a validly 2
licensed cannabis retailer, shall not be a criminal or civil offense 3
under Washington state law. Every cannabis retailer's license shall 4
be issued in the name of the applicant, shall specify the location of 5
the retail outlet the licensee intends to operate, which must be 6
within the state of Washington, and the holder thereof shall not 7
allow any other person to use the license. The application fee for a 8
cannabis retailer's license shall be ((two hundred fifty dollars )) 9
$250 plus any additional application or licensing fee required under 10
RCW 69.50.331(1). The annual fee for issuance and renewal of a 11
cannabis retailer's license shall be ((one thousand three hundred 12
eighty-one dollars)) $1,381. A separate license shall be required for 13
each location at which a cannabis retailer intends to sell cannabis 14
concentrates, useable cannabis, and cannabis-infused products.15
(b) An individual retail licensee and all other persons or 16
entities with a financial or other ownership interest in the business 17
operating under the license are limited, in the aggregate, to holding 18
a collective total of not more than five retail cannabis licenses.19
(c)(i) A cannabis retailer's license is subject to forfeiture in 20
accordance with rules adopted by the board pursuant to this section.21
(ii) The board shall adopt rules to establish a license 22
forfeiture process for a licensed cannabis retailer that is not fully 23
operational and open to the public within a specified period from the 24
date of license issuance, as established by the board, subject to the 25
following restrictions: 26
(A) No cannabis retailer's license may be subject to forfeiture 27
within the first nine months of license issuance; and28
(B) The board must require license forfeiture on or before 29
twenty-four calendar months of license issuance if a cannabis 30
retailer is not fully operational and open to the public, unless the 31
board determines that circumstances out of the licensee's control are 32
preventing the licensee from becoming fully operational and that, in 33
the board's discretion, the circumstances warrant extending the 34
forfeiture period beyond twenty-four calendar months.35
(iii) The board has discretion in adopting rules under this 36
subsection (3)(c). 37
(iv) ((This subsection (3)(c) applies to cannabis retailer's 38
licenses issued before and after July 23, 2017. However, no license 39
of a cannabis retailer that otherwise meets the conditions for 40
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license forfeiture established pursuant to this subsection (3)(c) may 1
be subject to forfeiture within the first nine calendar months of 2
July 23, 2017. 3
(v))) The board may not require license forfeiture if the 4
licensee has been incapable of opening a fully operational retail 5
cannabis business due to actions by the city, town, or county with 6
jurisdiction over the licensee that include any of the following:7
(A) The adoption of a ban or moratorium that prohibits the 8
opening of a retail cannabis business; or 9
(B) The adoption of an ordinance or regulation related to zoning, 10
business licensing, land use, or other regulatory measure that has 11
the effect of preventing a licensee from receiving an occupancy 12
permit from the jurisdiction or which otherwise prevents a licensed 13
cannabis retailer from becoming operational. 14
(d) The board may issue cannabis retailer licenses pursuant to 15
this chapter and RCW 69.50.335. 16
Sec. 3. RCW 69.50.331 and 2023 c 220 s 2 are each amended to 17
read as follows: 18
(1) For the purpose of considering any application for a license 19
to produce, process, research, transport, or deliver cannabis, 20
useable cannabis, cannabis concentrates, or cannabis-infused products 21
subject to the regulations established under RCW 69.50.385, or sell 22
cannabis, or for the renewal of a license to produce, process, 23
research, transport, or deliver cannabis, useable cannabis, cannabis 24
concentrates, or cannabis-infused products subject to the regulations 25
established under RCW 69.50.385, or sell cannabis, the board must 26
conduct a comprehensive, fair, and impartial evaluation of the 27
applications timely received. 28
(a) The board may cause an inspection of the premises to be made, 29
and may inquire into all matters in connection with the construction 30
and operation of the premises. For the purpose of reviewing any 31
application for a license and for considering the denial, suspension, 32
revocation, cancellation, or renewal or denial thereof, of any 33
license, the board may consider any prior criminal arrests or 34
convictions of the applicant, any public safety administrative 35
violation history record with the board, and a criminal history 36
record information check. The board may submit the criminal history 37
record information check to the Washington state patrol and to the 38
identification division of the federal bureau of investigation in 39
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order that these agencies may search their records for prior arrests 1
and convictions of the individual or individuals who filled out the 2
forms. The board must require fingerprinting of any applicant whose 3
criminal history record information check is submitted to the federal 4
bureau of investigation. The provisions of RCW 9.95.240 and of 5
chapter 9.96A RCW do not apply to these cases. Subject to the 6
provisions of this section, the board may, in its discretion, grant 7
or deny the renewal or license applied for. Denial may be based on, 8
without limitation, the existence of chronic illegal activity 9
documented in objections submitted pursuant to subsections (7)(c) and 10
(10) of this section. Authority to approve an uncontested or 11
unopposed license may be granted by the board to any staff member the 12
board designates in writing. Conditions for granting this authority 13
must be adopted by rule. 14
(b) No license of any kind may be issued to: 15
(i) A person under the age of 21 years; 16
(ii) ((A person doing business as a sole proprietor who has not 17
lawfully resided in the state for at least six months prior to 18
applying to receive a license;19
(iii) A partnership, employee cooperative, association, nonprofit 20
corporation, or corporation )) An entity unless formed under the laws 21
of this state ((, and unless all of the members thereof are qualified 22
to obtain a license as provided in this section)); or23
(((iv))) (iii) A person whose place of business is conducted by a 24
manager or agent, unless the manager or agent possesses the same 25
qualifications required of the licensee. 26
(c) The board may impose additional licensing fees to recover 27
additional costs incurred in investigating a nonresident required to 28
be investigated under this section. If, after reasonable efforts, the 29
board is unable to investigate a nonresident required to be 30
investigated under this section, in accordance with the investigatory 31
standards applicable to the investigation of a state resident, the 32
board may deny a license or license renewal to an entity.33
(2)(a) The board may, in its discretion, subject to RCW 34
43.05.160, 69.50.563, 69.50.562, 69.50.334, and 69.50.342(3) suspend 35
or cancel any license; and all protections of the licensee from 36
criminal or civil sanctions under state law for producing, 37
processing, researching, or selling cannabis, cannabis concentrates, 38
useable cannabis, or cannabis-infused products thereunder must be 39
suspended or terminated, as the case may be. 40
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(b) The board must immediately suspend the license of a person 1
who has been certified pursuant to RCW 74.20A.320 by the department 2
of social and health services as a person who is not in compliance 3
with a support order. If the person has continued to meet all other 4
requirements for reinstatement during the suspension, reissuance of 5
the license is automatic upon the board's receipt of a release issued 6
by the department of social and health services stating that the 7
licensee is in compliance with the order. 8
(c) The board may request the appointment of administrative law 9
judges under chapter 34.12 RCW who shall have power to administer 10
oaths, issue subpoenas for the attendance of witnesses and the 11
production of papers, books, accounts, documents, and testimony, 12
examine witnesses, receive testimony in any inquiry, investigation, 13
hearing, or proceeding in any part of the state, and consider 14
mitigating and aggravating circumstances in any case and deviate from 15
any prescribed penalty, under rules the board may adopt.16
(d) Witnesses must be allowed fees and mileage each way to and 17
from any inquiry, investigation, hearing, or proceeding at the rate 18
authorized by RCW 34.05.446. Fees need not be paid in advance of 19
appearance of witnesses to testify or to produce books, records, or 20
other legal evidence. 21
(e) In case of disobedience of any person to comply with the 22
order of the board or a subpoena issued by the board, or any of its 23
members, or administrative law judges, or on the refusal of a witness 24
to testify to any matter regarding which he or she may be lawfully 25
interrogated, the judge of the superior court of the county in which 26
the person resides, on application of any member of the board or 27
administrative law judge, compels obedience by contempt proceedings, 28
as in the case of disobedience of the requirements of a subpoena 29
issued from said court or a refusal to testify therein.30
(3) Upon receipt of notice of the suspension or cancellation of a 31
license, the licensee must forthwith deliver up the license to the 32
board. Where the license has been suspended only, the board must 33
return the license to the licensee at the expiration or termination 34
of the period of suspension. The board must notify all other 35
licensees in the county where the subject licensee has its premises 36
of the suspension or cancellation of the license; and no other 37
licensee or employee of another licensee may allow or cause any 38
cannabis, cannabis concentrates, useable cannabis, or cannabis-39
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infused products to be delivered to or for any person at the premises 1
of the subject licensee. 2
(4) Every license issued under this chapter is subject to all 3
conditions and restrictions imposed by this chapter or by rules 4
adopted by the board to implement and enforce this chapter. All 5
conditions and restrictions imposed by the board in the issuance of 6
an individual license must be listed on the face of the individual 7
license along with the trade name, address, and expiration date.8
(5) Every licensee must post and keep posted its license, or 9
licenses, in a conspicuous place on the premises. 10
(6) No licensee may employ any person under the age of 21 years.11
(7)(a) Before the board issues a new or renewed license to an 12
applicant it must give notice of the application to the chief 13
executive officer of the incorporated city or town, if the 14
application is for a license within an incorporated city or town, or 15
to the county legislative authority, if the application is for a 16
license outside the boundaries of incorporated cities or towns, or to 17
the tribal government if the application is for a license within 18
Indian country, or to the port authority if the application for a 19
license is located on property owned by a port authority.20
(b) The incorporated city or town through the official or 21
employee selected by it, the county legislative authority or the 22
official or employee selected by it, the tribal government, or port 23
authority has the right to file with the board within twenty days 24
after the date of transmittal of the notice for applications, or at 25
least thirty days prior to the expiration date for renewals, written 26
objections against the applicant or against the premises for which 27
the new or renewed license is asked. The board may extend the time 28
period for submitting written objections upon request from the 29
authority notified by the board. 30
(c) The written objections must include a statement of all facts 31
upon which the objections are based, and in case written objections 32
are filed, the city or town or county legislative authority may 33
request, and the board may in its discretion hold, a hearing subject 34
to the applicable provisions of Title 34 RCW. If the board makes an 35
initial decision to deny a license or renewal based on the written 36
objections of an incorporated city or town or county legislative 37
authority, the applicant may request a hearing subject to the 38
applicable provisions of Title 34 RCW. If a hearing is held at the 39
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request of the applicant, board representatives must present and 1
defend the board's initial decision to deny a license or renewal.2
(d) Upon the granting of a license under this title the board 3
must send written notification to the chief executive officer of the 4
incorporated city or town in which the license is granted, or to the 5
county legislative authority if the license is granted outside the 6
boundaries of incorporated cities or towns. 7
(8)(a) Except as provided in (b) through (e) of this subsection, 8
the board may not issue a license for any premises within 1,000 feet 9
of the perimeter of the grounds of any elementary or secondary 10
school, playground, recreation center or facility, child care center, 11
public park, public transit center, or library, or any game arcade 12
admission to which is not restricted to persons aged 21 years or 13
older. 14
(b) A city, county, or town may permit the licensing of premises 15
within 1,000 feet but not less than 100 feet of the facilities 16
described in (a) of this subsection, except elementary schools, 17
secondary schools, and playgrounds, by enacting an ordinance 18
authorizing such distance reduction, provided that such distance 19
reduction will not negatively impact the jurisdiction's civil 20
regulatory enforcement, criminal law enforcement interests, public 21
safety, or public health. 22
(c) A city, county, or town may permit the licensing of research 23
premises allowed under RCW 69.50.372 within 1,000 feet but not less 24
than 100 feet of the facilities described in (a) of this subsection 25
by enacting an ordinance authorizing such distance reduction, 26
provided that the ordinance will not negatively impact the 27
jurisdiction's civil regulatory enforcement, criminal law 28
enforcement, public safety, or public health. 29
(d) The board may license premises located in compliance with the 30
distance requirements set in an ordinance adopted under (b) or (c) of 31
this subsection. Before issuing or renewing a research license for 32
premises within 1,000 feet but not less than 100 feet of an 33
elementary school, secondary school, or playground in compliance with 34
an ordinance passed pursuant to (c) of this subsection, the board 35
must ensure that the facility: 36
(i) Meets a security standard exceeding that which applies to 37
cannabis producer, processor, or retailer licensees;38
(ii) Is inaccessible to the public and no part of the operation 39
of the facility is in view of the general public; and40
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(iii) Bears no advertising or signage indicating that it is a 1
cannabis research facility. 2
(e) The board must issue a certificate of compliance if the 3
premises met the requirements under (a), (b), (c), or (d) of this 4
subsection on the date of the application. The certificate allows the 5
licensee to operate the business at the proposed location 6
notwithstanding a later occurring, otherwise disqualifying factor.7
(f) The board may not issue a license for any premises within 8
Indian country, as defined in 18 U.S.C. Sec. 1151, including any fee 9
patent lands within the exterior boundaries of a reservation, without 10
the consent of the federally recognized tribe associated with the 11
reservation or Indian country. 12
(9) A city, town, or county may adopt an ordinance prohibiting a 13
cannabis producer or cannabis processor from operating or locating a 14
business within areas zoned primarily for residential use or rural 15
use with a minimum lot size of five acres or smaller.16
(10) In determining whether to grant or deny a license or renewal 17
of any license, the board must give substantial weight to objections 18
from an incorporated city or town or county legislative authority 19
based upon chronic illegal activity associated with the applicant's 20
operations of the premises proposed to be licensed or the applicant's 21
operation of any other licensed premises, or the conduct of the 22
applicant's patrons inside or outside the licensed premises. "Chronic 23
illegal activity" means (a) a pervasive pattern of activity that 24
threatens the public health, safety, and welfare of the city, town, 25
or county including, but not limited to, open container violations, 26
assaults, disturbances, disorderly conduct, or other criminal law 27
violations, or as documented in crime statistics, police reports, 28
emergency medical response data, calls for service, field data, or 29
similar records of a law enforcement agency for the city, town, 30
county, or any other municipal corporation or any state agency; or 31
(b) an unreasonably high number of citations for violations of RCW 32
46.61.502 associated with the applicant's or licensee's operation of 33
any licensed premises as indicated by the reported statements given 34
to law enforcement upon arrest. 35
(11) The board may not issue a cannabis retail license for any 36
premises not currently licensed if: 37
(a) The board receives a written objection from the legislative 38
authority of an incorporated city or town, or county legislative 39
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authority, relating to the physical location of the proposed 1
premises; 2
(b) The objection to the location from the incorporated city or 3
town, or county legislative authority, is received by the board 4
within 20 days of the board notifying the incorporated city or town, 5
or county legislative authority, of the proposed cannabis retail 6
location; and 7
(c) The objection to the issuance of a cannabis retail license at 8
the specified location is based on a preexisting local ordinance 9
limiting outlet density in a specific geographic area. For purposes 10
of this subsection (11), a preexisting local ordinance is an 11
ordinance enacted and in effect before the date the applicant submits 12
an application for a cannabis retail license to the board identifying 13
the premises proposed to be licensed. No objection related to the 14
physical location of a proposed premises may be made by a local 15
government under this subsection (11) based on a local ordinance 16
enacted after the date the applicant submits an application for a 17
cannabis retail license to the board identifying the premises 18
proposed to be licensed. 19
(12) After January 1, 2024, all cannabis licensees are encouraged 20
but are not required to submit a social equity plan to the board. 21
Upon confirmation by the board that a cannabis licensee who is not a 22
social equity applicant, and who does not hold a social equity 23
license issued under RCW 69.50.335, has submitted a social equity 24
plan, the board must within 30 days reimburse such a licensee an 25
amount equal to the cost of the licensee's annual cannabis license 26
renewal fee. The license renewal fee reimbursement authorized under 27
this subsection is subject to the following limitations:28
(a) The board may provide reimbursement one time only to any 29
licensed entity; and 30
(b) Any licensed entity holding more than one cannabis license is 31
eligible for reimbursement of the license renewal fee on only one 32
license. 33
NEW SECTION. Sec. 4. A new section is added to chapter 82.04 34
RCW to read as follows: 35
(1) This chapter does not apply to a cannabis producer, 36
processor, or retailer, licensed by the liquor and cannabis board 37
under the cannabis social equity program under RCW 69.50.335, for the 38
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five years beginning after the licensee exceeds $5,000 in sales 1
revenues. 2
(2) This section expires July 1, 2038. 3
NEW SECTION. Sec. 5. This section is the tax preference 4
performance statement for the tax preference contained in section 4 5
of this act. This performance statement is only intended to be used 6
for subsequent evaluation of the tax preference. It is not intended 7
to create a private right of action by any party or be used to 8
determine eligibility for preferential tax treatment.9
(1) The legislature categorizes this tax preference as one 10
intended to provide tax relief for certain businesses or individuals, 11
as indicated in RCW 82.32.808(2)(e). 12
(2) It is the legislature's specific public policy objective to 13
provide this tax preference to a designated class of taxpayers who 14
are cannabis producers, processors, and retailers licensed under the 15
cannabis social equity program in RCW 69.50.335. The legislature 16
finds that this designated class of taxpayers faces unique barriers 17
in their business relative to other producers, manufacturers, 18
processors, and retailers in general, as well as relative to cannabis 19
producers, cannabis processors, and cannabis retailers licensed 20
outside of the cannabis social equity program, the majority of which 21
have years of operating experience and growth after selecting prime 22
locations within a market with a limited number of licenses and 23
locations. The legislature further finds that eligibility for 24
licensure through the cannabis social equity program is connected to 25
documented evidence of disproportionate impacts of historical 26
enforcement of criminal laws related to cannabis or other social 27
disadvantages. The legislature finds that providing a time-limited 28
business and occupations tax exemption for licensees in the cannabis 29
social equity program will reduce the unique barriers and tax and 30
financial burdens facing these businesses as they enter the 31
established market and start to grow their businesses.32
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