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NY Cannabis Alert: New Law Creates Conditional Licensing Opportunity for Adult-Use Cultivators and Processors

An amendment to the NY Cannabis Law permits the Office of Cannabis Management (OCM) to award conditional licenses to certain adult-use cultivators and processors. Signed by Gov. Hochul on February 22, 2022, the new law is an encouraging step forward in the process of launching the state’s adult-use industry.

Highlights of the bill:

  • Only companies and individuals currently licensed with the state for cultivation or processing of industrial hemp can apply for the conditional licenses. Industrial hemp cultivators must have grown and harvested the crop during at least two of the past four years.
  • Licensed cultivators will be authorized to grow indoors, outdoors, or a combination of both, subject to space and lighting limitations in the law.
  • Conditional licensees will have temporary authority to conduct additional activities not included in their license. Cultivators are allowed to both minimally process and distribute flower, and processors can distribute their products.
  • The OCM is responsible for establishing and carrying out the application and licensing process, including the specific requirements to be awarded and maintain a conditional license. As listed in the bill, conditional licensees must:
    • Abide by all regulations, including those issued after receipt of the license.
    • Participate in a to-be-developed mentoring program for individuals interested in joining the industry through the social equity component of the Marijuana Regulation & Taxation Act.
    • Participate in an environmental sustainability program.
    • Begin operations within six months of receiving a license.
    • Grant OCM employees access to the premises for inspections.

Many unknowns remain about how the conditional licensing process will unfold, including timing, fees, and required documentation. While hopeful applicants wait for guidance from the OCM and Cannabis Control Board, they should gather their team of professional advisors to plan for both the application process and operating an adult-use business. From an accounting and tax standpoint, it will be critical to establish systems and controls to maintain separate accounting records for your industrial hemp and adult-use activities.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.