Massachusetts Pot Advocates Want to Close the “Pay-to-Play” Tax Loopholes

According to industry advocates, most of the contracts between Massachusetts cannabis businesses and the cities and towns that host them, called Host Community Agreements, are illegal according to the letter of the law — and if the state wants cannabis businesses to succeed, that needs to change as soon as possible.

According to a report by the Boston Globe, the Massachusetts Grower Advisory Council and MassCann/NORML, the state’s affiliate NORML chapter, petitioned the Massachusetts Cannabis Control Commission on Tuesday, asking the commission to regulate the Host Community Agreements (HCAs) they believe violate on-the-book rules about how much a municipal government can demand from a cannabis business.

How HCAs Work… Against Cannabis

HCAs are required for marijuana businesses to open up shop in Massachusetts, and state law caps the community impact fees that are included in most of the HCAs at 3 percent — though communities are not specifically prohibited from adding other financial stipulations. Advocates say, however, that analysis of the 77 HCAs issued since November reveals 79 percent of them have a value exceeding the 3 percent cap.

A perfect example of this municipal rule-bending came this week, as one of the largest cities in the state continued to expand its cannabis footprint.

The city council of Lynn, the ninth largest city in the Commonwealth at just over 90,000 residents, approved a plan Tuesday that would effectively double the 3 percent cap in their forthcoming HCA negotiation with newly approved cannabis company Natural Selections. The dispensary will be located in the heart of a downtown revival project, and the company plans to put $1 million worth of renovations into a building that’s been vacant 15 years to house the shop. The Daily Item of Lynn reported that as part of negotiations, Natural Selections plans to offer an additional “$100,000 to the city in advance upon opening as part of its host agreement.”

Advocates Chime In for Small Business

While cities say it’s their right to exceed the legal HCA cap on behalf of the public good, industry advocates say it’s created a system in which small businesses are unable to flourish, and that the people who hit the hardest by these fee hikes are the ones already been hit the hardest by the War on Drugs.

Per a report by the Boston Business Journal, the CCC has declined to enforce HCA regulations for fear of potential lawsuits; the commission could face legal action after interfering, due to its lack of express authority and the law’s vague wording, which doesn’t explicitly ban additional payments or donations from cannabis companies to local host governments. The CCC has since asked the state legislature to give them the power to explicitly regulate HCAs.

Advocates have petitioned the CCC for a final response in 30 days. After that, they’re willing to head to court, where a judge could empower the commission if he feels the law already has.

“It’s a big problem for smaller or medium-sized businesses because it turns into a barrier to entry,” Peter Bernard, president of the Massachusetts Grower Advisory Council, told the Boston Globe. “It’s a pay-to-play situation… It’s really a matter of extortion and bribery in plain sight.”

The National Cannabis Industry Association echoed the concerns of local advocates about what these HCAs mean for smaller businesses.

“These attempts to extort cannabis businesses beyond the taxation allowed in the law are only going to hurt small businesses and make the localities miss out on the benefits of having a vibrant and competitive cannabis market,” NCIA Media Relations Director Morgan Fox told Cannabis Now.

“It is short-sighted and discriminatory,” he continued. “Municipal governments should be trying to attract cannabis businesses, not shut them out or only allow the ones with lots of capital at their disposal.”

TELL US, do you think host communities should be allowed more or less control over how they tax cannabis businesses?