California Cannabis Cultivation – Qualification as Farming

California Cannabis Cultivation – Qualification as Farming

California Cannabis Cultivation
California Cannabis Cultivation

The classification of cannabis cultivation as “agricultural activity” or farming would appear to be a simple question. However, upon investigation, the treatment is far from clear, particularly due to a near century-long “War on Drugs” with a particular fixation on hemp and cannabis by the Federal government[ii]. The Congressional Research Service published a report entitled “Hemp as an Agricultural Commodity in March 2017[iii] and Section 7606 of the Farm Bill of 2014[iv].

The Federal Government has long taken a uniquely harsh position the treatment of expenditures associated with drug trafficking[v]. IRC Sec. 280E provides

“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”

The drafters of the statute could never have contemplated the current situation where cannabis is legal for medical use in the majority of states, for recreational use in an increasing number of states, and remain illegal under the Federal statute. There was a period of relative calm after the issuance of the Cole Memorandum and the IRS Chief Counsel Memorandum [“CCM”][vi]. However, Attorney General Jeffrey Sessions rescinded the Cole Memorandum[vii] with the release of Dept. of Justice Press Release 18-8   in early 2018. The release provides:

“The Department of Justice today issued a memo on federal marijuana enforcement policy announcing a return to the rule of law and the rescission of previous guidance documents. Since the passage of the Controlled Substances Act (CSA) in 1970, Congress has generally prohibited the cultivation, distribution, and possession of marijuana.

In the memorandum, Attorney General Jeff Sessions directs all U.S. Attorneys to enforce the laws enacted by Congress and to follow well-established principles when pursuing prosecutions related to marijuana activities. This return to the rule of law is also a return of trust and local control to federal prosecutors who know where and how to deploy Justice Department resources most effectively to reduce violent crime, stem the tide of the drug crisis, and dismantle criminal gangs.

“It is the mission of the Department of Justice to enforce the laws of the United States, and the previous issuance of guidance undermines the rule of law and the ability of our local, state, tribal, and federal law enforcement partners to carry out this mission,” said Attorney General Jeff Sessions. “Therefore, today’s memo on federal marijuana enforcement simply directs all U.S. Attorneys to use previously established prosecutorial principles that provide them all the necessary tools to disrupt criminal organizations, tackle the growing drug crisis, and thwart violent crime across our country.”

While there have been numerous statutes enacted which could have further targeted cannabis [ADD LINKAGE FROM EXISTING LEGISLATION TO SIC CODES.

The NAICS Division A – Agriculture, Forestry and Fishing [viii] provides for a Major Group: 01 – Agricultural Production Crops[ix] where “General Farms, Primary Crop[x]

Background on Cannabis Cultivation as Farming in California

California Cannabis Cultivation
California Cannabis Cultivation

The earliest reference to cannabis as an agricultural crop we were able to locate was in 1979, the agriculture commissioners of three north coast counties – Mendocino, Trinity, and Del Norte – decided to include the crop in their annual crop reports. “It was such an obvious part of the economy of the counties,” said Morse, elaborating that in order to underscore the crop’s importance, Trinity County officials put the outline of a cannabis leaf of the cover of the crop report.

That year, Trinity County officials included marijuana in their report under “nursery products,” which also included timber and Christmas trees. Based on “known plantings” and estimated to be 10 percent of the total crop grown, officials listed a total of 6,000 pounds at a value of $650/lb. in the county, giving a total estimate of $3.9 million as a tenth of the county’s cannabis product. This would imply the total was closer to $39 million, compared with around $50 million in all other agricultural production. Officials noted the crop was not reported separately so as to “avoid disclosure of confidential business data of individual growers.”

In Mendocino County, officials provided a “preliminary” estimate of local cannabis production, putting the figure at $90 million in value, compared with $128.5 million in timber and $9.6 million in fish for the year 1979. In a March 1980 Associated Press article, then county Ag Commissioner Ed Eriksen is quoted as saying “just because it’s illegal doesn’t mean it’s not an agricultural crop and part of the county’s economy.” Eriksen explains he was inspired by Del Norte’s report, which put that county’s marijuana valued at $700,000 with a street value of $2 million as 10% of the estimated total.

When asked why the reporting only occurred one year, Morse said the three commissioners “had gone out on a limb and had their hands slapped – the message was sent out that this was not an agricultural commodity to be reported.” However, Morse said he thought it was possible that future county crop reports could ultimately include estimates of the value of local cannabis production.

The Medical Marijuana Regulation and Safety Act, which went into effect Jan. 1, includes a multitude of regulatory procedures involving many agencies, but much of the regulation of cannabis growing will now fall under the Department of Agriculture on both state and local levels. Regulations will include not only compliance with environmental requirements such as the regional water board cultivation permits, but with regulations concerning pesticide use, testing, sales, distribution, and a host of other standards akin to those faced by commercial agricultural producers around the state.

The Orange County Register published an article[xi] in 2015 which stated

California’s illegal marijuana production is worth more money than the next five leading crops combined, according to a recent report from the Orange County Register. Using data provided by California’s Department of Food and Agriculture and its own calculated estimate of in-state cannabis production, in 2015 the marijuana crop was worth an estimated $23.3 billion, nearly half of the state’s total cash farm receipts.

Based on the report’s estimations and the 2015 Crop Year Report from the state’s department of agriculture, here’s a look at the values of California’s top commodities:

  • Marijuana – $23.3 billion (estimated by the Orange County Register)
  • Milk – $6.29 billion
  • Almonds – $5.33 billion
  • Grapes – $4.95 billion
  • Cattle, calves – $3.39 billion
  • Lettuce – $2.25 billion

California is known for its agricultural bounty. Over a third of the nation’s vegetables and two-thirds of the country’s fruits and nuts are grown in the west coast state. Gilroy is considered the “Garlic Capital of the World,” grapes cover 45,000 acres of the Napa Valley, and olive and almond trees dominate the state’s Central Valley. In 2015, California’s farms and ranches received approximately $47 billion for their output. However, according to the newspaper, California’s marijuana crop is the most valuable agricultural product in the entire nation.

To calculate its estimate of cannabis crop value, the newspaper began with the number of marijuana plants that had been seized by law enforcement in 2015, which was 2.6 million. Using the assumption that the seizure of illegal drugs accounts for 10 to 20 percent of drugs produced, a figure provided by the United Nations Office on Drugs and Crime, the paper estimated that a total of 13.2 million marijuana pot plants were cultivated in California in 2015.

Prior to the passage of Proposition 64, the status of medical cannabis was that  California defined medical cannabis as an agricultural product. The identification as an agricultural crop does not extend to other areas of the law. For example, cannabis is not an agricultural crop with respect to local “right to farm” ordinances. 

Background for California CDFA Authority to Regulate Cannabis

California Cannabis Cultivation
California Cannabis Cultivation

When a state legislature passes—and the governor approves—a law (also known as a statute), this enacts a new program or changes the laws governing an existing program. After the law’s passage, one or more state agencies must adopt new regulations, amend existing regulations, and/or repeal existing regulations to ensure the program runs effectively. the California State Legislature passed the Medical Cannabis Regulation and Safety Act [“MMRSA”][xii] in 2015.

Governor Brown signed the Medical Marijuana Regulation and Safety Act into law on October 09, 2015, and it became effective on January 01, 2016. The Act, composed of 3 bills (AB 266, AB 243, and SB 643) established a licensing and regulatory framework for the cultivation, manufacture, transportation, storage, distribution, and sale of medical cannabis in the State of California.

The Medical Marijuana Regulation and Safety Act established the Medical Cannabis Cultivation Program within the California Department of Food and Agriculture to license cultivators, establish conditions under which indoor and outdoor cultivation may occur, establish a track and trace program for reporting the movement of medical cannabis items through the distribution chain, and assist other state agencies in protecting the environment and public health.

The MMRSA tasked the following California Departments with establishing regulations for the medical cannabis industry:

  • Department of Food & Agriculture – Responsible for licensing cultivators and establishing a track and trace program through the Medical Cannabis Cultivation Program.
  • Department of Public Health – Responsible for licensing laboratories and manufacturers of products, such as edibles through the Office of Medical Cannabis Safety.
  • Department of Consumer Affairs – Responsible for licensing transporters, distributors, and dispensaries through the Bureau of Medical Marijuana Regulations.

Subsequently,  California voters passed the Adult Use of Marijuana Act (Proposition 64) in 2016, both acts designated responsibilities for oversight of commercial cannabis to several state agencies.

The California Department of Food and Agriculture (CDFA) was granted the authority to

  • establish a cannabis cultivation licensing process for the state, and
  • develop a track-and-trace system to record the movement of cannabis and cannabis products through the state’s supply chain.

As a result, CDFA created a new division called CalCannabis Cultivation Licensing, which is tasked with overseeing these projects.

On June 27, 2017, California Governor Jerry Brown signed the cannabis trailer bill (also known as California Senate Bill 94). A trailer bill is a legislation that implements specific changes to the law to enact the state budget. Generally, a separate trailer bill is needed for each major area of budget appropriation, such as transportation, human services, education, revenue, or, in this case, cannabis. These bills typically are negotiated as part of the entire budget package each fiscal year.

In this instance, the cannabis trailer bill effectively merged the two existing cannabis bills—the Medical Cannabis Regulation and Safety Act and the Adult Use of Marijuana Act—into one streamlined bill: the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). Having one comprehensive state law will provide for a more unified and efficient regulatory process governing both medicinal and adult-use (recreational) cannabis. 

The State of California defines cannabis as:

“all parts of the plant Cannabis sativa Linnaeus, Cannabis indicia, or Cannabis ruderals, whether growing or not; the seeds thereof; the resin, whether crude or purified, extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. “Cannabis” also means the separated resin, whether crude or purified, obtained from cannabis. “Cannabis” does not include the mature stalks of the plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of the plant which is incapable of germination. For the purpose of this division, “cannabis” does not mean “industrial hemp” as defined by Section 11018.5 of the Health and Safety Code”[xiii

The State of California defines the term “agricultural activity”[xiv] as:

“the term “agricultural activity, operation, or facility, or appurtenances thereof” shall include, but not be limited to, the cultivation and tillage of the soil, dairying, the production, cultivation, growing, and harvesting of any agricultural commodity including timber, viticulture, apiculture, or horticulture, the raising of livestock, fur bearing animals, fish, or poultry, and any practices performed by a farmer or on a farm as incident to or in conjunction with those farming operations, including preparation for market, delivery to storage or to market, or delivery to carriers for transportation to market”.

The State of California provides direction on the definition and scope of cultivation sites in the Proposition 64 Sec. 6.1[xv].

  • The types of Cultivation Licenses are contained in BPC Division 10, Sec. 26061[xvi

 

  • The requirements for cannabis to qualifying as “organic” are contained in BPC Division 10, Sec. 26062[xvii]

 

  • The designation of County of origin is contained is provided for in BPC Division 10, Sec. 26063[xviii].

 

  • Finally, the directive which provides the overarching directive that various aspects of cannabis cultivation are to be coordinated by a broad range of State agencies is provided in BPC Division 10, Sec. 26066[xix].

[i] Cultivation is defined in BPC Division 10, Sec. 26001(l) as “means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of cannabis”

[ii] In the Comprehensive Drug Abuse Prevention and Control Act of 1970, 21 U.S.C. §801–971 (1970), (“Controlled Substances Act” or “CSA”), Congress created a regime to curtail the unlawful manufacture, distribution, and abuse of dangerous drugs (“controlled substances”). Congress assigned each controlled substance to one of five lists (Schedule I through Schedule V). See §812 of the CSA. Schedule I includes: (a) opiates; (b) opium derivatives (e.g., heroin; morphine); and (c) hallucinogenic substances (e.g., LSD; marihuana (a/k/a marijuana); mescaline; peyote).

Though a medical marijuana business is illegal under federal law, it remains obligated to pay federal income tax on its taxable income because §61(a) does not differentiate between income derived from legal sources and income derived from illegal sources. See, e.g., James v. United States, 366 U.S. 213, 218 (1961). Under the Sixteenth Amendment to the United States Constitution (“Sixteenth Amendment”), Congress is authorized to lay and collect taxes on income. In a series of cases, the United States Supreme Court has held that income in the context of a reseller or producer means gross income, not gross receipts. In other words, Congress may not tax the return of capital. See, e.g., Doyle v Mitchell Bros. Co., 247 U.S. 179, 185 (“As was said in Stratton’s Independence v. Howbert, [citation omitted], ‘Income may be defined as the gain derived from capital, from labor, or from both combined.’”); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934) (“The power to tax income like that of the new corporation is plain and extends to the gross income. Whether and to what extent deductions shall be allowed depends upon legislative grace; and only as there is clear provision therefor can any particular deduction be allowed.”).

[iii] Hemp as an Agricultural Commodity – RL32725 See also Vote Hemp Website

[iv] On February 7, 2014, President Obama signed the Farm Bill of 2013 into law. Section 7606 of the act, Legitimacy of Industrial Hemp Research, defines industrial hemp as distinct from marijuana and authorizes institutions of higher education or state department’s of agriculture in states that legalized hemp cultivation to regulate and conduct research and pilot programs. The text of the House Report on Sec. 7606 is here.

[v] In 1981, the Tax Court allowed an illegal business to recover the cost of the controlled substances (i.e., amphetamines; cocaine; marijuana) obtained on consignment and also to claim certain business deductions (a portion of the rent he paid on his apartment which was his sole place of business, the cost of a small scale, packaging expenses, telephone expenses, and automobile expenses). See Jeffrey Edmondson v. Commissioner, T.C. Memo. 1981-623.

In 1982, Congress enacted §280E, which reverses the holding in Edmondson as it relates to deductions other than the cost of the controlled substances.

Under Explanation of Provision, the Senate Report reads as follows: All deductions and credits for amounts paid or incurred in the illegal trafficking in drugs listed in the Controlled Substances Act are disallowed. To preclude possible challenges on constitutional grounds, the adjustment to gross receipts with respect to effective costs of goods sold is not affected by this provision of the bill. S. REP. NO. 97-494 (Vol. I), at 309 (1982). The Senate bill was adopted in conference. CONF. REP. NO. 97-760, at 598 (1982), 1982-2 C.B. 661.

[vi] 201504011

[vii] Deputy Attorney General Jim Cole in 2013, set forth new priorities for federal prosecutors operating in states where the drug had been legalized for medical or other adult use. It represented a major shift from strict enforcement to a more hands-off approach, so long as they didn’t threaten other federal priorities, such as preventing the distribution of the drug to minors and cartels.

[viii] Division: A — Agriculture, Forestry, And Fishing

This division includes establishments primarily engaged in agricultural production, forestry, commercial fishing, hunting and trapping, and related services.

The classification of agricultural production covers establishments (e.g., farms, ranches, dairies, greenhouses, nurseries, orchards, hatcheries) primarily engaged in the production of crops, plants, vines, or trees (excluding forestry operations); and the keeping, grazing, or feeding of livestock for the sale of livestock or livestock products (including serum), for livestock increase, or for value increase. Livestock, as used here, includes cattle, sheep, goats, hogs, and poultry. Also included are animal specialties, such as horses, rabbits, bees, pets, fur-bearing animals in captivity, and fish in captivity. Agricultural production also includes establishments primarily engaged in the operation of sod farms, cranberry bogs, and poultry hatcheries; in the production of mushrooms, bulbs, flower seeds, and vegetable seeds; and in the growing of hydroponic crops.

Farms are the establishment units generally utilized for the purpose of industrial classification of agricultural production. A farm may consist of a single tract of land or a number of separate tracts which may be held under different tenures.

The classification of agricultural services includes establishments primarily engaged in supplying soil preparation services, crop services, landscape and horticultural services, veterinary and other animal services, and farm labor and management services.

The classification of forestry covers establishments primarily engaged in the operation of timber tracts, tree farms, or forest nurseries; in the gathering of forest products; or in performing forestry services. Logging establishments are classified in Manufacturing, Industry 2411.

The classification of fishing and hunting and trapping covers establishments primarily engaged in commercial fishing (including shellfish and marine products); in operating fish hatcheries and fish and game preserves; and in commercial hunting and trapping.

Establishments which produce agricultural commodities and sell them directly to the general public for personal or household consumption are classified in Major Groups 01 and 02.

[ix] Major Group: 01—Agricultural Production Crops

This major group includes establishments (e.g., farms, orchards, greenhouses, nurseries) primarily engaged in the production of crops, plants, vines, and trees (excluding forestry operations). This major group also includes establishments primarily engaged in the operation of sod farms, and cranberry bogs; in the production of mushrooms, bulbs, flower seeds, and vegetable seeds; and in the growing of hydroponic crops. Seeds of field crops are classified in the same industry as crops grown for other purposes.

An establishment primarily engaged in crop production (Major Group 01) is classified in the industry (four-digit) and industry group (three-digit) which accounts for 50 percent or more of the total value of sales for its agricultural production. If the total value of sales for agricultural products of an establishment is less than 50 percent from a single four-digit industry, but 50 percent or more of the value of sales for its agricultural products derives from the products of two or more four-digit industries within the same three-digit industry group, the establishment is classified in the miscellaneous industry of that industry group; otherwise, it is classified as a general crop farm in Industry 0191. Establishments that derive 50 percent or more of the value of sales from horticultural specialties of Industry Group 018 are classified in Industry 0181 or Industry 0182 according to their primary activity.

[x] Industry: 0191—General Farms, Primarily Crop

Establishments deriving 50 percent or more of their total value of sales of agricultural products from crops, including horticultural specialties, but less than 50 percent from products of any single three-digit industry group.

[xi] https://news.medicalmarijuanainc.com/marijuana-far-valuable-agricultural-crop-california-report-finds/

[xii] Senate Bill 643 passed as part of MMRSA contained language which required through the Medical Marijuana Regulation and Safety Act, that the Department of Food and Agriculture administer the provisions of the act related to and associated with the cultivation and transportation of medical cannabis.

[xiii] BPC Division 10, Sec. 26001(f)

[xiv] Cal. Civ. Code § 3482.5(e) (2013)

[xv] (a) Regulations issued by the Department of Food and Agriculture governing the licensing of indoor, outdoor, nursery, special cottage, and mixed-light cultivation sites shall apply to licensed cultivators under this division. The Department of Food and Agriculture shall have the authority necessary for the implementation of the regulations it adopts pursuant to this division, including regulations governing the licensing of indoor, outdoor, mixed-light cultivation site, nursery, and special cottage cultivation.

(b) The regulations shall do all of the following:

(1) Provide that weighing or measuring devices used in connection with the sale or distribution of cannabis are required to meet standards equivalent to Division 5 (commencing with Section 12001).

(2) Require that cannabis cultivation by licensees is conducted in accordance with state and local laws.

(3) Establish procedures for the issuance and revocation of unique identifiers for activities associated with a cannabis cultivation license, pursuant to Chapter 6.5 (commencing with Section 26067). All cannabis shall be labeled with the unique identifier issued by the Department of Food and Agriculture.

(4) Prescribe standards, in consultation with the bureau, for the reporting of information as necessary related to unique identifiers pursuant to Chapter 6.5 (commencing with Section 26067).

(c) The Department of Food and Agriculture shall serve as the lead agency for purposes of the California Environmental Quality Act (Division 13 (commencing with Section 21000) of the Public Resources Code) related to the licensing of cannabis cultivation.

(d) The Department of Pesticide Regulation shall develop guidelines for the use of pesticides in the cultivation of cannabis and residue in harvested cannabis.

(e) A cannabis cultivator shall not use any pesticide that has been banned for use in the state.

(f) The regulations promulgated by the Department of Food and Agriculture under this division shall implement the requirements of subdivision(b) of Section 26060.1.

(g) The Department of Pesticide Regulation shall require that the application of pesticides or other pest control in connection with the indoor, outdoor, nursery, specialty cottage, or mixed-light cultivation of cannabis complies with Division 6 (commencing with Section 11401) of the Food and Agricultural Code and its implementing regulations.

(Amended by Stats. 2017, Ch. 27, Sec. 47. (SB 94) Effective June 27, 2017. Note: This section was added on Nov. 8, 2016, by initiative Prop. 64.)

[xvi] (a) The state cultivator license types to be issued by the Department of Food and Agriculture under this division shall include all of the following:

(1) Type 1, or “specialty outdoor,” for outdoor cultivation using no artificial lighting of less than or equal to 5,000 square feet of total canopy size on one premise, or up to 50 mature plants on non-contiguous plots.

(2) Type 1A, or “specialty indoor,” for indoor cultivation using exclusively artificial lighting of between 501 and 5,000 square feet of total canopy size on one premises.

(3) Type 1B, or “specialty mixed-light,” for cultivation using a combination of natural and supplemental artificial lighting at a maximum threshold to be determined by the licensing authority, of between 2,501 and 5,000 square feet of total canopy size on one premises.

(4) Type 1C, or “specialty cottage,” for cultivation using a combination of natural and supplemental artificial lighting at a maximum threshold to be determined by the licensing authority, of 2,500 square feet or less of total canopy size for mixed-light cultivation, up to 25 mature plants for outdoor cultivation, or 500 square feet or less of total canopy size for indoor cultivation, on one premises.

(5) Type 2, or “small outdoor,” for outdoor cultivation using no artificial lighting between 5,001 and 10,000 square feet, inclusive, of total canopy size on one premises.

(6) Type 2A, or “small indoor,” for indoor cultivation using exclusively artificial lighting between 5,001 and 10,000 square feet, inclusive, of total canopy size on one premises.

(7) Type 2B, or “small mixed-light,” for cultivation using a combination of natural and supplemental artificial lighting at a maximum threshold to be determined by the licensing authority, between 5,001 and 10,000 square feet, inclusive, of total canopy size on one premises.

(8) Type 3, or “outdoor,” for outdoor cultivation using no artificial lighting from 10,001 square feet to one acre, inclusive, of total canopy size on one premises. The Department of Food and Agriculture shall limit the number of licenses allowed of this type.

(9) Type 3A, or “indoor,” for indoor cultivation using exclusively artificial lighting between 10,001 and 22,000 square feet, inclusive, of total canopy size on one premises. The Department of Food and Agriculture shall limit the number of licenses allowed of this type.

(10) Type 3B, or “mixed-light,” for cultivation using a combination of natural and supplemental artificial lighting at a maximum threshold to be determined by the licensing authority, between 10,001 and 22,000 square feet, inclusive, of total canopy size on one premises. The Department of Food and Agriculture shall limit the number of licenses allowed of this type.

(11) Type 4, or “nursery” for cultivation of cannabis solely as a nursery.

(b) Except as otherwise provided by law:

(1) Type 5, or “outdoor,” means for outdoor cultivation using no artificial lighting greater than one acre, inclusive, of total canopy size on one premises.

(2) Type 5A, or “indoor,” means for indoor cultivation using exclusively artificial lighting greater than 22,000 square feet, inclusive, of total canopy size on one premises.

(3) Type 5B, or “mixed-light,” means for cultivation using a combination of natural and supplemental artificial lighting at a maximum threshold to be determined by the licensing authority, greater than 22,000 square feet, inclusive, of total canopy size on one premises.

(c) No Type 5, Type 5A, or Type 5B cultivation licenses may be issued before January 1, 2023.

(d) Commencing on January 1, 2023, a Type 5, Type 5A, or Type 5B licensee may apply for and hold a Type 6 or Type 7 license and apply for and hold a Type 10 license. A Type 5, Type 5A, or Type 5B licensee shall not be eligible to apply for or hold a Type 8, Type 11, or Type 12 license.

(Amended by Stats. 2017, Ch. 27, Sec. 49. (SB 94) Effective June 27, 2017. Note: This section was added on Nov. 8, 2016, by initiative Prop. 64.)

[xvii] (a) No later than January 1, 2021, the Department of Food and Agriculture shall establish a program for cannabis that is comparable to the National Organic Program (Section 6517 of the federal Organic Foods Production Act of 1990 (7 U.S.C. Sec. 6501 et seq.)), and the California Organic Food and Farming Act (Chapter 10 (commencing with Section 46000) of Division 17 of the Food and Agricultural Code) and Article 7 (commencing with Section 110810) of Chapter 5 of Part 5 of Division 104 of the Health and Safety Code. The Department of Food and Agriculture shall be the sole determiner of designation and certification.

(b) If at any time preceding or following the establishment of a program by the Department of Food and Agriculture pursuant to subdivision (a), the National Organic Program (Section 6517 of the federal Organic Foods Production Act of 1990 (7 U.S.C. Sec. 6501 et seq.)) authorizes organic designation and certification for cannabis, this section shall become inoperative and, as of January 1, of the following year, is repealed.

(Repealed and added by Stats. 2017, Ch. 27, Sec. 51. (SB 94) Effective June 27, 2017. Conditionally inoperative as prescribed by its own provisions. Repealed, by its own provisions, on January 1 following inoperative date.)

26062.5.

A person shall not represent, sell, or offer for sale any cannabis or cannabis product as organic except in accordance with the National Organic Program (Section 6517 of the federal Organic Foods Production Act of 1990 (7 U.S.C. Sec. 6501 et seq.)), if applicable. A person shall not represent, sell, or offer for sale any cannabis or cannabis product with the designation or certification established by the Department of Food and Agriculture pursuant to subdivision (a) of Section 26062 except in accordance with that subdivision.

(Added by Stats. 2017, Ch. 27, Sec. 52. (SB 94) Effective June 27, 2017.)

[xviii] (a) No later than January 1, 2018, the Department of Food and Agriculture shall establish standards by which a licensed cultivator may designate a county of origin for cannabis. To be eligible for the designation, 100 percent of the cannabis shall be produced within the designated county, as defined by finite political boundaries.

(1) Cannabis shall not be advertised, marketed, labeled, or sold as grown in a California county when the cannabis was not grown in that county.

(2) The name of a California county, including any similar name that is likely to mislead consumers as to the origin of the product, shall not be used in the advertising, labeling, marketing, or packaging of cannabis products unless the cannabis contained in the product was grown in that county. 

(b) No later than January 1, 2021, the Department of Food and Agriculture shall establish a process by which licensed cultivators may establish appellations of standards, practices, and varietals applicable to cannabis grown in a certain geographical area in California, not otherwise specified in subdivision (a)

(Amended by Stats. 2017, Ch. 27, Sec. 53. (SB 94) Effective June 27, 2017. Note: This section was added on Nov. 8, 2016, by initiative Prop. 64.)

[xix] Indoor and outdoor cannabis cultivation by persons and entities licensed under this division shall be conducted in accordance with state and local laws related to land conversion, current building and fire standards, grading, electricity usage, water usage, water quality, woodland and riparian habitat protection, agricultural discharges, and similar matters. State agencies, including, but not limited to, the State Board of Forestry and Fire Protection, the Department of Fish and Wildlife, the State Water Resources Control Board, the California regional water quality control boards, and traditional state law enforcement agencies, shall address environmental impacts of cannabis cultivation and shall coordinate when appropriate with cities and counties and their law enforcement agencies in enforcement efforts. 

(Amended by Stats. 2017, Ch. 27, Sec. 56. (SB 94) Effective June 27, 2017. Note: This section was added on Nov. 8, 2016, by initiative Prop. 64.)

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