This document includes House Committee Amendments incorporated into the bill on Tue, Feb 27, 2024 at 9:03 PM by housengrossing.
Senator Evan J. Vickers proposes the following substitute bill:


1     
CANNABIS BUSINESS TAX CREDIT AMENDMENTS

2     
2024 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Evan J. Vickers

5     
House Sponsor: Jennifer Dailey-Provost

6     

7     LONG TITLE
8     General Description:
9          This bill enacts a cannabis business expenses income tax credit.
10     Highlighted Provisions:
11          This bill:
12          ▸     enacts a nonrefundable income tax credit for business expenses related to selling
13     medical cannabis within the state; and
14          ▸     requires the Department of Agriculture and Food to collect and report tax
15     identification numbers for persons that apply for a license to sell medical cannabis
16     to the State Tax Commission.
17     Money Appropriated in this Bill:
18          None
19     Other Special Clauses:
20          This bill provides retrospective operation.
21     Utah Code Sections Affected:
22     AMENDS:
23          4-41a-1001, as last amended by Laws of Utah 2023, Chapter 317 and renumbered and
24     amended by Laws of Utah 2023, Chapters 273, 307 and last amended by
25     Coordination Clause, Laws of Utah 2023, Chapter 307
26     ENACTS:
27          59-7-627, Utah Code Annotated 1953
28          59-10-1048, Utah Code Annotated 1953
29     

30     Be it enacted by the Legislature of the state of Utah:
31          Section 1. Section 4-41a-1001 is amended to read:
32          4-41a-1001. Medical cannabis pharmacy -- License -- Eligibility.
33          (1) A person may not operate as a medical cannabis pharmacy without a license that
34     the department issues under this part.
35          (2) (a) (i) Subject to Subsections (4) and (5) and to Section 4-41a-1005, the department
36     shall issue a license to operate a medical cannabis pharmacy in accordance with Title 63G,
37     Chapter 6a, Utah Procurement Code.
38          (ii) The department may not issue a license to operate a medical cannabis pharmacy to
39     an applicant who is not eligible for a license under this section.
40          (b) An applicant is eligible for a license under this section if the applicant submits to
41     the department:
42          (i) subject to Subsection (2)(c), a proposed name and address where the applicant will
43     operate the medical cannabis pharmacy;
44          (ii) the applicant's federal tax identification number for the medical cannabis
45     pharmacy;
46          [(ii)] (iii) the name [and], address, and federal tax identification number of an
47     individual who:
48          (A) for a publicly traded company, has a financial or voting interest of 10% or greater
49     in the proposed medical cannabis pharmacy;
50          (B) for a privately held company, a financial or voting interest in the proposed medical
51     cannabis pharmacy; or
52          (C) has the power to direct or cause the management or control of a proposed medical
53     cannabis pharmacy;
54          [(iii)] (iv) for each application that the applicant submits to the department, a statement
55     from the applicant that the applicant will obtain and maintain:
56          (A) a performance bond in the amount of $100,000 issued by a surety authorized to
57     transact surety business in the state; or
58          (B) a liquid cash account in the amount of $100,000 with a financial institution;
59          [(iv)] (v) an operating plan that:
60          (A) complies with Section 4-41a-1004;
61          (B) includes operating procedures to comply with the operating requirements for a
62     medical cannabis pharmacy described in this part and with a relevant municipal or county law
63     that is consistent with Section 4-41a-1106; and
64          (C) the department approves;
65          [(v)] (vi) an application fee in an amount that, subject to Subsection 4-41a-104(5), the
66     department sets in accordance with Section 63J-1-504; and
67          [(vi)] (vii) a description of any investigation or adverse action taken by any licensing
68     jurisdiction, government agency, law enforcement agency, or court in any state for any
69     violation or detrimental conduct in relation to any of the applicant's cannabis-related operations
70     or businesses.
71          (c) (i) A person may not locate a medical cannabis pharmacy:
72          (A) within 200 feet of a community location; or
73          (B) in or within 600 feet of a district that the relevant municipality or county has zoned
74     as primarily residential.
75          (ii) The proximity requirements described in Subsection (2)(c)(i) shall be measured
76     from the nearest entrance to the medical cannabis pharmacy establishment by following the
77     shortest route of ordinary pedestrian travel to the property boundary of the community location
78     or residential area.
79          (iii) The department may grant a waiver to reduce the proximity requirements in
80     Subsection (2)(c)(i) by up to 20% if the department determines that it is not reasonably feasible
81     for the applicant to site the proposed medical cannabis pharmacy without the waiver.
82          (iv) An applicant for a license under this section shall provide evidence of compliance
83     with the proximity requirements described in Subsection (2)(c)(i).
84          (d) The department may not issue a license to an eligible applicant that the department
85     has selected to receive a license until the selected eligible applicant complies with the bond or
86     liquid cash requirement described in Subsection [(2)(b)(iii)] (2)(b)(iv).
87          (e) If the department receives more than one application for a medical cannabis
88     pharmacy within the same city or town, the department shall consult with the local land use
89     authority before approving any of the applications pertaining to that city or town.
90          (3) If the department selects an applicant for a medical cannabis pharmacy license
91     under this section, the department shall:
92          (a) charge the applicant an initial license fee in an amount that, subject to Subsection
93     4-41a-104(5), the department sets in accordance with Section 63J-1-504;
94          (b) notify:
95          (i) the Department of Public Safety of the license approval and the names of each
96     individual described in Subsection [(2)(b)(ii)] (2)(b)(iii); and
97          (ii) the State Tax Commission of the license approval and the name and federal tax
98     identification numbers of each person described in Subsection (2)(b)(ii) or (iii).
99          (c) charge the licensee a fee in an amount that, subject to Subsection 4-41a-104(5), the
100     department sets in accordance with Section 63J-1-504, for any change in location, ownership,
101     or company structure.
102          (4) The department may not issue a license to operate a medical cannabis pharmacy to
103     an applicant if an individual described in Subsection [(2)(b)(ii)] (2)(b)(iii):
104          (a) has been convicted under state or federal law of:
105          (i) a felony; or
106          (ii) after December 3, 2018, a misdemeanor for drug distribution;
107          (b) is younger than 21 years old; or
108          (c) after September 23, 2019, until January 1, 2023, is actively serving as a legislator.
109          (5) (a) If an applicant for a medical cannabis pharmacy license under this section holds
110     another license under this chapter, the department may not give preference to the applicant
111     based on the applicant's status as a holder of the license.
112          (b) If an applicant for a medical cannabis pharmacy license under this section holds a
113     license to operate a cannabis cultivation facility under this section, the department may give
114     consideration to the applicant's status as a holder of the license if:
115          (i) the applicant demonstrates that a decrease in costs to patients is more likely to result
116     from the applicant's vertical integration than from a more competitive marketplace; and
117          (ii) the department finds multiple other factors, in addition to the existing license, that
118     support granting the new license.
119          (6) (a) The department may revoke a license under this part:
120          (i) if the medical cannabis pharmacy does not begin operations within one year after
121     the day on which the department issues an announcement of the department's intent to award a
122     license to the medical cannabis pharmacy;
123          (ii) after the third the same violation of this chapter in any of the licensee's licensed
124     cannabis production establishments or medical cannabis pharmacies;
125          (iii) if an individual described in Subsection [(2)(b)(ii)] (2)(b)(iii) is convicted, while
126     the license is active, under state or federal law of:
127          (A) a felony; or
128          (B) after December 3, 2018, a misdemeanor for drug distribution;
129          (iv) if the licensee fails to provide the information described in Subsection [(2)(b)(vi)]
130     (2)(b)(vii) at the time of application, or fails to supplement the information described in
131     Subsection [(2)(b)(vi)] (2)(b)(vii) with any investigation or adverse action that occurs after the
132     submission of the application within 14 calendar days after the licensee receives notice of the
133     investigation or adverse action;
134          (v) if the medical cannabis pharmacy demonstrates a willful or reckless disregard for
135     the requirements of this chapter or the rules the department makes in accordance with this
136     chapter; or
137          (vi) if, after a change of ownership described in Subsection (11)(c), the department
138     determines that the medical cannabis pharmacy no longer meets the minimum standards for
139     licensure and operation of the medical cannabis pharmacy described in this chapter.
140          (b) The department shall rescind a notice of an intent to issue a license under this part
141     to an applicant or revoke a license issued under this part if the associated medical cannabis
142     pharmacy does not begin operation on or before June 1, 2021.
143          (7) (a) A person who receives a medical cannabis pharmacy license under this chapter,
144     if the municipality or county where the licensed medical cannabis pharmacy will be located
145     requires a local land use permit, shall submit to the department a copy of the licensee's
146     approved application for the land use permit within 120 days after the day on which the
147     department issues the license.
148          (b) If a licensee fails to submit to the department a copy the licensee's approved land
149     use permit application in accordance with Subsection (7)(a), the department may revoke the
150     licensee's license.
151          (8) The department shall deposit the proceeds of a fee imposed by this section into the
152     Qualified Production Enterprise Fund.
153          (9) The department shall begin accepting applications under this part on or before
154     March 1, 2020.
155          (10) (a) The department's authority to issue a license under this section is plenary and is
156     not subject to review.
157          (b) Notwithstanding Subsection (2), the decision of the department to award a license
158     to an applicant is not subject to:
159          (i) Title 63G, Chapter 6a, Part 16, Protests; or
160          (ii) Title 63G, Chapter 6a, Part 17, Procurement Appeals Board.
161          (11) (a) A medical cannabis pharmacy license is not transferrable or assignable.
162          (b) A medical cannabis pharmacy shall report in writing to the department no later than
163     10 business days before the date of any change of ownership of the medical cannabis
164     pharmacy.
165          (c) If the ownership of a medical cannabis pharmacy changes by 50% or more:
166          (i) concurrent with the report described in Subsection (11)(b), the medical cannabis
167     pharmacy shall submit a new application described in Subsection (2)(b), subject to Subsection
168     (2)(c);
169          (ii) within 30 days of the submission of the application, the department shall:
170          (A) conduct an application review; and
171          (B) award a license to the medical cannabis pharmacy for the remainder of the term of
172     the medical cannabis pharmacy's license before the ownership change if the medical cannabis
173     pharmacy meets the minimum standards for licensure and operation of the medical cannabis
174     pharmacy described in this chapter; and
175          (iii) if the department approves the license application, notwithstanding Subsection (3),
176     the medical cannabis pharmacy shall pay a license fee that the department sets in accordance
177     with Section 63J-1-504 in an amount that covers the board's cost of conducting the application
178     review.
179          Section 2. Section 59-7-627 is enacted to read:
180          59-7-627. Nonrefundable cannabis business expenses credit.
181          (1) As used in this section:
182          (a) "Medical cannabis" means the same as that term is defined in Section 26B-4-201.
183          (b) "Medical cannabis activity" means an activity related to the sale of medical
184     cannabis that is permitted under Title 4, Chapter 41a, Cannabis Production Establishments and
185     Pharmacies, by a qualifying taxpayer.
186          (c) "Qualifying taxpayer" means a corporation that holds a license issued in accordance
187     with Section 4-41a-1001 to sell medical cannabis in the state during the taxable year.
188          (2) A qualifying taxpayer may claim a nonrefundable tax credit equal to 1.8%
189     multiplied by Utah taxable income that is related to medical cannabis activity.
190          (3) (a) A qualifying taxpayer may carry forward the amount of the tax credit that
191     exceeds the qualifying taxpayer's tax liability for a period of three years.
192          (b) A qualifying taxpayer may not carry back the amount of the tax credit that exceeds
193     the qualifying taxpayer's tax liability.
194          (4) A qualifying taxpayer may not claim a credit described in Subsection (2) to the
195     extent the qualifying taxpayer claims a business expense for medical cannabis activity as a
196     deduction on the qualifying taxpayer's federal income tax return for that taxable year.
197          Section 3. Section 59-10-1048 is enacted to read:
198          59-10-1048. Nonrefundable cannabis business expenses credit.
199          (1) As used in this section:
200          (a) "Medical cannabis" means the same as that term is defined in Section 26B-4-201.
201          (b) "Medical cannabis activity" means the same as that term is defined in Section
202     59-7-627.
203          (c) "Pass-through entity income" means income that is derived from or connected with
204     Utah sources related to medical cannabis activity equal to the sum of:
205          (i) business income as defined in Section 59-10-1402; and
206          (ii) nonbusiness income as defined in Section 59-10-1402.
207          (d) "Qualifying claimant" means a pass-through entity taxpayer of a pass-through entity
208     that holds a license issued in accordance with Section 4-41a-1001 to sell medical cannabis in
209     the state during the taxable year.
210          (2) A qualifying claimant may claim a nonrefundable tax credit equal to 1.8%
211     multiplied by Ĥ→ the qualifying claimant's distributive share of ←Ĥ pass-through entity
211a     income.
212          (3) (a) A qualifying claimant may carry forward the amount of the tax credit that
213     exceeds the qualifying claimant's tax liability for a period of three years.
214          (b) A qualifying claimant may not carry back the amount of the tax credit that exceeds
215     the qualifying claimant's tax liability.
216          (4) A qualifying claimant may not claim a credit described in Subsection (2) to the
217     extent the qualifying claimant claims a business expense for medical cannabis activity as a
218     deduction on the qualifying claimant's federal income tax return for that taxable year.
219          Section 4. Effective date.
220          This bill takes effect on May 1, 2024.
221          Section 5. Retrospective operation.
222          (1) The following sections have retrospective operation for a taxable year beginning on
223     or after January 1, 2024:
224          (a) Section 59-7-627 has retrospective operation to January 1, 2024; and
225          (b) Section 59-10-1048 has retrospective operation to January 1, 2024.