On June 25, 2019, Gov. J.B. Pritzker signed into law HB 1438, which will end cannabis prohibition and replace it with a system to tax and regulate cannabis for adults 21 and over. The new law, which was sponsored by Sen. Heather Steans and Rep. Kelly Cassidy, is comprehensive in its approach. In addition to legalizing possession and use for adults, it expands the current medical cannabis licensing system, includes automatic expungement for cannabis offenses, adds the ability for medical patients to grow cannabis at home, and offers significant benefits to communities hit hardest by inequities that were part of the war on cannabis.
Here are some key provisions of the Cannabis Regulation and Tax Act.
Cannabis possession and sales
Starting January 1, 2020, adults 21 and older may possess cannabis and purchase cannabis products in licensed stores. Possession is limited to:
Non-residents may purchase half that amount, or 15 grams of cannabis, 250 mg of THC in a cannabis-infused product, and 2.5 grams of concentrated cannabis product.
Expunging criminal records
HB 1438 will usher in one of the most sweeping criminal justice reforms so far in the cannabis movement.
In all, around 770,000 cannabis-related records will be eligible for expungement.
Equity
Social equity program: The program provides benefits directly to those who have suffered because of the war on cannabis. Not only does HB 1438 remove convictions through expungement, it specifically provides additional points for business applicants, access to financial resources for start-up costs, and resources to communities that were hardest hit from the war on cannabis.
A “social equity applicant” is a business whose ownership or staff have been directly impacted by the war on cannabis. These are people who have either been arrested or convicted of a cannabis-related offense, or a person with strong ties to a community that has been disproportionately impacted by both poverty and cannabis drug law enforcement. Such a business must be owned by 51% or more of those who qualify, or for businesses with 10 or more staff, 51% of the workers must qualify.
Social equity applicants qualify for assistance in various ways:
Training: The Department of Agriculture and Community College board will create up to eight pilot programs to train students to work in the legal cannabis industry. At least five of the eight programs must be for schools in which at least 50% of the students are low income.
Home cultivation for patients
Beginning on January 1, 2020, medical cannabis patients may purchase cannabis seeds and grow up to five plants at their residence. There are limitations on home growing, however, including a cap of five plants per household, regardless of the number of residents who are 21 or over, and plants will need to be secured and out of view by the public. Home cultivators can keep what they grow, but possession limits still apply outside the residence, and sales are prohibited unless part of a licensed cannabis business.
Business licenses
The following types of cannabis business licenses will be issued:
The transition timeline
Taxes
At the wholesale level, cannabis products will be subject to a 7% tax when they are sold by cultivation centers or craft grows.
At the retail level, Illinois is taking a unique approach. Rather than a blanket tax for all cannabis products, Illinois will charge a tax rate based on the relative potency of the cannabis and the type of product. The more concentrated THC is, the higher the tax rate:
In addition to these scalable tax rates, the state’s regular 6.25% sales tax rate also applies, along with local taxes of up to 3.5%. The range consumers will pay at the register — which does not include the 7% tax levied at wholesale — will be between 19.55% to 34.75% retail tax, depending on the product’s potency
Revenue distribution
After covering the costs of administration and expungement, the remaining funds will be distributed as follows: