Four significant bills that will undoubtedly impact cannabis regulation in Nevada were recently signed into law by Nevada State Governor Joe Lombardo (R). The legislation makes a series of amendments to the state's existing cannabis laws, including minimizing penalties and fees, reforming sales tax law, doubling the legal personal possession limit, consolidating licensing rules, and enabling participation in the market by people with prior felony convictions.

1. SB 195 – Penalties and Fees

Effective upon adoption, SB 195 was advanced successfully by the Nevada Cannabis Association with solid backing from cannabis operators, citing the need to address certain burdensome and costly practices implemented by the Nevada Cannabis Compliance Board (the "Board"). These changes aim to alleviate economic burdens on operators and incentivize operator compliance and collaboration. Cannabis operators hope SB 195 and other changes during the session will provide more certainty and fairness in the disciplinary process. Highlights include:

  • The maximum civil penalty the Board may impose may not exceed $20,000 for a single violation. Previously, the most serious violations carried civil penalties of up to $90,000 for a single violation.
  • The Board must characterize certain conduct as a "single alleged violation" instead of multiple separate violations based on the facts and circumstances to prevent stacking violations.
  • The Board may bill only costs and charges expressly authorized by statute to an operator and eliminates the practice of "time and effort" invoicing for ongoing activities of the Board, such as routine inspections, audits, or non-application-based investigations.
  • Identifies "mitigating circumstances" the Board must consider concerning a disciplinary matter, including whether the operator self-reported the violation, the corrective action taken, history of prior good faith efforts to avoid the violation in question, and cooperation during the investigation.

2. AB 430 – Cannabis Sales Tax

AB 430 reforms the calculation of wholesale excise tax imposed on the sale of cannabis, applying the tax to the first wholesale sale and calculating the amount of the tax as 15% of the actual sales price in an arm's length transaction. Historically, the tax was 15% of the "fair market value" set by the Nevada Department of Taxation, with the procedure for setting the FMV criticized as flawed and resulting in an inflated value. While the "fair market value" calculated by the Nevada Department of Taxation will still be applied to affiliates' transfers, proponents believe this change will allow for a lower and more fair wholesale tax structure.

3. SB 277 – License Consolidation

SB 277 calls for medical and adult-use cannabis licenses to be merged into one license category (unless adult-use is not permitted by local jurisdiction) and aligns the fee structure for medical and adult-use licenses to the lower amount paid for a medical license. Additionally, the bill provides a mechanism for individuals with "excluded felony offenses" who have, up until this point, been excluded from owning, controlling, or working in a cannabis establishment to petition the Board to allow an exemption to participate in the industry. The Board may only grant such an exemption if doing so would not pose a threat to public health or safety or negatively impact the cannabis industry. Other highlights include:

  • SB 277 increases the possession limit and daily purchase limit of cannabis from 1 ounce to 2.5 ounces and doubles the limit for cannabis concentrates.
  • The fees for initial licensing and renewal of an adult-use cannabis license were reduced, except for the initial issuance of an adult-use retail license, which remains unchanged at $20,000.
  • The initial and renewal fees for other categories of adult-use licenses were reduced to mirror the medical fees. For example, the initial application fee for an adult-use cultivation establishment was reduced from $30,000 to $3,000, and the renewal fee was reduced from $10,000 to $1,000.

4. SB 328 – Unlicensed Cannabis Activities

SB 328 requires the Board to adopt regulations providing for investigating unlicensed cannabis activities and imposing penalties against persons who engage in such activities.

Historically, Nevada's regulated cannabis scheme has not provided the Board (or its predecessors) with any enforcement authority to address unlicensed cannabis operations, with the scope of authority extending only to licensed operators. Proponents believe this is a small but crucial first step in reducing the number of illicit operators in the Nevada marketplace and preserving market share for licensed operators.

  • SB 328 eliminates the Board's exemption from NRS 233B, known as the Nevada Administrative Procedure Act (the "Act").
  • The Board will now be required to submit regulations to the Legislative Counsel Bureau for formal review and revision before adopting any new regulations.
  • In contested matters, the Board will be subject to the adjudication procedures outlined in the Act, including judicial review afforded by the Act.
  • Staggers terms of Board members, limits the term of Board Chair to two years, and eliminates the Board's authority to appoint and remove an Executive Director, with that authority now in the hands of the Governor.

Proponents of SB 328 believe these changes will improve the Board's accountability and provide guardrails on its authority.

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