Overview of the Marihuana Regulation & Taxation Act (MRTA)

March 29, 2021


Late Saturday evening, legislative leaders and Governor Cuomo announced and printed a final three-way deal to legalize adult-use cannabis and create a consolidated Office of Cannabis Management (OCM) within the State Liquor Authority responsible for governing and regulating medical cannabis, adult-use cannabis, and cannabinoid hemp. The bill, S854-A (Kreuger)/ A1248-A(Peoples-Stokes) will be heard and voted on by the Senate Finance Committee and Assembly Codes Committee early this week and the legislature is anticipated to hold a vote in each house by Thursday.

When the bill is signed by the Governor, the act shall take effect immediately. The legislation sets an effective date of the tax structure for retail sale of adult-use cannabis for April 1, 2022, however it is anticipated that implementation of the legislation may take 18 months to two years at which point retail sales may commence. Home grow for medical patients may begin 6 months following the bill’s enactment and home grow for adults over the age of 21 may begin 18 months following the first date of retail sale in the State.

There will be a 13% tax on adult-use retail cannabis sales, with 9% going back to the state and 4% split between cities and counties. Once mature, tax revenue from retail sales is estimated to bring in $350 million annually to New York. All cannabis taxes would be directed to the “New York State Cannabis Revenue Fund.” The revenue would cover the costs to administer the program. 40% of the remaining money would go to a community grants reinvestment fund, 40% to education, and 20% to drug treatment and public education programs.

The legislation includes a Municipality Opt-Out provision which would allow cities, towns, and villages to opt-out of allowing adult use cannabis retail dispensaries or on-site consumption licensees by passing a local law by December 31, 2021 or nine months after the effective date of this legislation.

We have provided additional detail on the provisions of the bill below. Please let us know if you have any questions.

Overview of the Marihuana Regulation and Taxation Act (MRTA):

Article 2: Establish the Office of Cannabis Management (OCM)

The OCM will be an independent office within the State Liquor Authority (SLA) responsible for implementation of the MRTA and will be charged with enforcing a comprehensive regulatory framework governing medical cannabis, adult-use cannabis, and cannabinoid hemp.

  • Cannabis Control Board: 5-member Board, 3 appointed by the Governor including the chairperson, 1 appointment each for the Senate and Assembly. The Board is charged with the authority to implement law including: market decisions (number of licenses, application periods, etc.), issuing or denying licensure, approval of social and economic equity plan, promulgating rules and regulation. A board appointment will be a three year term and should be geographically and demographically representative of the State and communities affected by the war on drugs.

  • Executive Director: Appointed by the Governor with advice and consent of the Senate for a term of three years. Will be charged with running the Office and any authorities delegated by the Board.

  • Deputies: Chief Equity Officer and Deputy Director of Public Health and Safety.

  • Cannabis Advisory Board: 13 voting members, 7 appointed by the Governor, 3 each from the Senate and Assembly. Advisory Board Members shall have statewide geographic representation that is balanced and diverse in its composition with members having expertise in public and behavioral health, substance use disorder treatment, rehabilitative treatment, homelessness and housing, economic development, environmental conservation, criminal justice, etc. Advisory Board members serve to provide recommendations to the Cannabis Control Board and administering and governing the distribution and social equity and community reinvestment grants.

  • Budget: $37 million budget appropriation with primary office in Albany and satellite offices in NYC and Buffalo.

  • Annual Report: The OCM through the Cannabis Control Board shall issue an Annual Report on the effectiveness of this chapter including an overview of licensure applications, economic and fiscal impacts of the law, programs and progress relating to the social and economic equity plan, demographic data on employees and owners within each program, impacts on public health and public safety and any other information or data deemed relevant.

Article 3: Medical Cannabis

The legislation repeals and replaces the Compassionate Care Act, enacted in 2014, from Public Health Law. The Commissioner of Health and the Cannabis Control Board shall work in conjunction to transfer the current Medical Marijuana Program within the Department of Health to the OCM, ensuring continuity of care.  

The MRTA expands the Medical Program by allowing the following:

  • Adds new medical conditions to the list of qualifying conditions including autism, Alzheimer’s, muscular dystrophy, arthritis, and any condition recommended by a patient’s practitioner

  • As is required under current law, practitioners or their designee shall consult the Prescription Monitoring Program registry prior to making a certification for medical cannabis to a medical participant and include such certification in the patient’s health care record.

  • Increases number of caregivers allowed to be designated by a patient from 2 to 5

  • Removes the prohibition on smoking by medical participants and expressly states whole cannabis flower as a form of medical cannabis

  • Mandates the office to increase the number of Registered Organizations (ROs) in underserved and underrepresented communities

  • Permits home cultivation of medical cannabis by certified patients over the age of 21 or by those caring for certified patients under the age of 21, pursuant to regulation issued by the Cannabis Control Board within 6 months of enactment.

This article allows for current Registered Organizations within the Medical Program to participate in the Adult-Use program, subject to conditions set by the Cannabis Control Board.

Article 4: Adult-Use Cannabis

  • The MRTA creates a two-tier licensing structure which would prohibit licensed growers and producers from also owning a retail license to protect the market from monopolistic competition.

  • License Types: cultivator, processor, distributor, nursery, cooperative, microbusiness, retail dispensary, on-site consumption, and delivery.

  • Selection Criteria for Licensure: Applicants must demonstrate labor peace agreement, ability to contribute to communities harmed by the war on drugs, environmental impact, history of compliance, priority for licensees who use union labor on facilities.

  • All license types will be subject to quality control, public health and consumer protections including lab testing, packaging, labeling, marketing and advertising restrictions and requirements.

  • Social and Economic Equity Program: Would facilitate individuals disproportionally impacted by cannabis enforcement, including creating a goal of 50% of licenses to go to a minority or woman owned business enterprise, or distressed farmers or service-disabled veterans to encourage participation in the industry. All non-equity licensees are required as part of the application process to develop and implement a social responsibility framework to contribute to equity goals.

Article 5: Cannabinoid Hemp

The legislation would repeal the Cannabinoid Hemp Program from the Public Health Law which was chaptered in 2020, and replace it within the Consolidated Cannabis Law with very few changes. The changes to existing law are detailed below:

  • Would permit the sale of hemp flower in the cannabinoid hemp program (was previously banned in proposed regulations issued Fall 2020 and will be subject to revised regulations).

  • Smokable forms of cannabinoid hemp are only to be sold by adult-use retail stores.

  • Growing of cannabinoid hemp will continue to be regulated by the Department of Agriculture & Markets.


Taxation and Tax Revenue

The bill sets a 9% sales tax on cannabis, plus an additional 4% tax split between the county and local government with 1% going to counties and 3% going to cities, towns and villages. An additional tax would also be imposed based on the level of THC, the active ingredient in marijuana, ranging from 0.5 cents per milligram for flower to 3 cents per milligram for edibles.

All cannabis taxes would be directed to the “New York State Cannabis Revenue Fund.” The revenue would cover the costs to administer the program. 40% of the remaining money would go to a community grants reinvestment fund, 40% to education, and 20% to drug treatment and public education programs.

NYS Drug Treatment and Public Education Fund

A new fund is created for expenditures from the 20% of tax revenues after program administration that are dedicated for treatment/education.  The monies will be expended to the Commissioner of OASAS and disbursed, in consultation with the Commissioners of NYSDOH, OMH, the Office of Cannabis Management and NYSED for the following purposes:

  • OASAS Administration of the Fund;

  • Development and Implementation of a Youth-Focused Public Health Education and Prevention Campaign, including school-based prevention, early intervention, and health care services and programs to reduce the risk of cannabis and other substance use by school-aged children;

  • Development and implementation of a Statewide Public Health Campaign, focused on the health effect of cannabis and legal use, including education of the general public on legal use of cannabis and importance of preventing youth access, preventing secondhand cannabis smoke exposure, information for pregnant or breastfeeding women, and the overconsumption of edible cannabis products; and

  • For Substance Use Disorder Treatment Programs for Youth and Adults, with an emphasis on programs that are culturally and gender competent, trauma-informed, evidence-based and provide a continuum of care for behavioral health needs.

OASAS is required under the bill to issue a written annual report by February of each year related to the dispersal of monies from this new Fund.

Municipal Opt-Out

Cities, towns, and villages may opt-out of allowing adult use cannabis retail dispensaries or on-site consumption licensees by passing a local law by December 31, 2021 or nine months after the effective date of this legislation. If a municipality does not opt-out by December 31, 2021 a municipality will be unable to opt-out at a future date. A municipality that opts-out may opt back in at anytime.

  • Municipalities cannot opt-out of adult use legalization including cannabis use and possession by adults 21 year of age and older in accordance with the law.

  • Municipalities may choose to opt-out of both retail and on-site consumption adult-use licensees or just one of these licenses but cannot opt-out of the other adult-use license types.

Local Control

  • Except for opt-out provisions, detailed above, all municipalities including counties, are preempted from adopting any law, rule, ordinance, regulation, or prohibition pertaining to the operation or licensure of adult-use, medical, or cannabinoid hemp licenses.

  • Towns, cities, and villages are permitted to pass local laws and regulations governing the time (hours of operation), place (local zoning and location of licenses), and manner (adherence to local building codes) of adult-use retail dispensaries and on-site consumption licenses provided that the local law and regulations do not make the operation of the license unreasonably impracticable.

  • Municipalities may not issue local licenses to cannabis licensees.

Traffic Safety

The State Department of Health would launch a research study, partnering with different universities, evaluating methodologies and technologies that could detect cannabis-impaired driving. Once a test is discovered, the state health department would be able to approve and certify the use of this test. Additional funding for drug recognition experts would also be made available.

Personal Possession and Home Cultivation

  • Would allow individuals over twenty-one years of age to possess, display, purchase, obtain, or transport up to 3 ounces of cannabis and up to 24 grams of concentrated cannabis. Would also allow individuals over twenty-one home possession of 5 pounds of cannabis that must be kept in a secure location away from anyone under the age of 21.

  • No finding or determination of reasonable cause to believe a crime has been committed shall be based solely on evidence of the odor of cannabis, the odor of burnt cannabis, the possession or suspicion of possession of cannabis in legal amounts, or the presence of cash or currency in proximity to cannabis, etc. However, law enforcement may find reasonable cause as to the odor of burnt cannabis when the individual is operating a motor vehicle.

  • Home grow shall be allowed in the following amounts 18 months from the first sale of adult-use cannabis, subject to rules and regulations:

    • §  3 mature plants and 3 immature plants are permitted for adults over the age of 21.

    • §  6 mature plants and 6 immature plants are the maximum permitted per household.

  • A county, town, city or village may enact and enforce regulations to reasonably regulate the actions and conduct in this section but any violation may be punishable by no more than an infraction and punishable by no more than a civil penalty of 200 dollars or less. Local regulation may not completely or essentially prohibit a person from engaging in the conduct authorized in this section.

  • Medical home grow: 6 months from the effective date of this article the cannabis management board shall issue regulations governing home grow.

  • Not allowed to process or use volatile solvents to process cannabis at home

Restrictions on Where Cannabis Can Be Used

While the legislation allows public use of cannabis in the form of smoking or vaping, smoking or vaping of cannabis is prohibited anywhere smoking tobacco is prohibited, pursuant to the Clean Indoor Air Act. Municipalities and local governments are permitted to make laws that are more restrictive than the Clean Indoor Air Act. Cannabis consumption in the form of smoking or vaping will be allowed at licensed adult-use on-site consumption premises, pursuant to Article 4 of this chapter. Property owners, landlords, and rental companies can ban the use of cannabis on their premises. Cannabis cannot be consumed when operating a motor vehicle.

Criminal Justice and Record Expungement

Possession penalties:

  • Unlawful possession of cannabis = more than 3 ounces to 1 pound: violation, $125 fine

  • Criminal possession of cannabis in the third degree = 1 pound or more: misdemeanor

  • Criminal possession of cannabis in the second degree = over 5 pounds: Class E felony

Sale penalties:

  • Unlawful sale of cannabis = any amount: violation, $250 fine

  • Criminal sale of cannabis in the third degree = sells over 3 ounces or knowingly sells or gives to a person less than 21 years of age: misdemeanor

  • Criminal sale of cannabis in the second degree = over 5 pounds: Class E felony

The legislation creates automatic expungement or resentencing for anyone with a previous marijuana conviction that would now be legal under the law.

Protections for the Use of Cannabis and Workplace Safety

The legislation prohibits unlawful discrimination for the use of cannabis and provides the following protections:

  • No school or landlord may refuse to enroll or lease to a person for conduct allowed under this chapter. Lays out several exceptions including smoke-free policies related to federal requirements (provided that such restriction may not be construed to limit the certified medical use of cannabis), and/or schools/colleges/universities that have adopted a code of conduct prohibiting cannabis use on the basis of a sincere religious belief of the institution.

  • Protections for certified medical patients and for the purpose of medical care including organ transplants. A certified medical patient’s use of medical cannabis must be considered the equivalent of the use of any other medication under the direction of a practitioner and does not constitute the use of an illicit substance or otherwise disqualify a registered qualifying patient from medical care.

  • No person may be denied custody of or visitation or parenting time with a minor under the family court act, domestic relations law, or social services law, solely for conduct permitted under this chapter.  

  • A person currently under parole, probation or other state supervision, or released on recognizance, non-monetary conditions, or bail prior to being convicted, shall not be punished or otherwise penalized for conduct allowed under this chapter unless the terms and conditions of said parole, probation, or state supervision explicitly prohibit a person’s cannabis use or any other conduct otherwise allowed under this chapter. A person’s use of cannabis or conduct under this chapter shall not be prohibited unless it has been shown by clear and convincing evidence that the prohibition is reasonably related to the underlying crime.

Workplace Safety Provisions

  • Prohibits employers from discriminating against employees for the use of cannabis outside of work (the law does not permit impairment during work hours).

  • Employers may still implement policies prohibiting cannabis use for select exemptions, including if it would cause an employer to commit any act that would cause the employer to be in violation of federal law or that would result in the loss of a federal contract or federal funding.

Public Health and Education Campaign

The Office is directed to establish a Public Health and Education campaign including evaluation of evidence-based prevention and education programs that de-formalize cannabis use among youth, develop standards for regulating characteristics of legal cannabis that may appeal to youth (i.e. flavors, shapes, forms, names), restrict advertising and promotion of commercial cannabis products, safeguard pregnant and breastfeeding women through education about the potential harms related to cannabis use.