Michigan Office of Administrative Hearings and Rules

Administrative Rules Division (ARD)

611 W. Ottawa Street

Lansing, MI 48909

Phone: 517-335-8658 Fax: 517-335-9512

REGULATORY IMPACT STATEMENT

and COST-BENEFT ANALYSIS (RIS)

Agency Information:

Department name:

Licensing and Regulatory Affairs

Bureau name:

Marihuana Regulatory Agency

Name of person filling out RIS:

JESSICA FOX

Phone number of person filling out RIS:

517-284-9294

E-mail of person filling out RIS:

FOXJ12@michigan.gov

Rule Set Information:

ARD assigned rule set number:

2019-123 LR

Title of proposed rule set:

Medical Marihuana Facilities

Comparison of Rule(s) to Federal/State/Association Standared:

1. Compare the proposed rules to parallel federal rules or standards set by a state or national licensing agency or

accreditation association, if any exist.

There are no federal rules or standards for the regulation of marihuana. There are no other state or national licensing

agency standards or accreditation standards for marihuana.

A. Are these rules required by state law or federal mandate?

These rules are required by the Medical Marihuana Facilities Licensing Act and the Michigan Regulation and

Taxation of Marihuana Act. There is no federal mandate for these rules. These rules are being rescinded and replaced

by a new rule set.

B. If these rules exceed a federal standard, please identify the federal standard or citation, describe why it is

necessary that the proposed rules exceed the federal standard or law, and specify the costs and benefits arising out

of the deviation.

These rules do not exceed any federal standards or laws. There are no federal standards or laws in place.

2. Compare the proposed rules to standards in similarly situated states, based on geographic location, topography,

natural resources, commonalities, or economic similarities.

MCL 24.245(3)

RIS-Page 2

These rules are being rescinded and replaced by a new rule set. Michigan’s licensing and regulatory framework is

similar to programs in other Great Lakes and surrounding states. Michigan has one of the country’s largest patient

populations registered with its medical marihuana program, which will presumptively create the consumer base for

marihuana businesses. The other states have a tenth of the patient population that Michigan has. The tax in Michigan

is 3% of gross receipts of provisioning centers. The tax in Illinois is 7% at cultivators/dispensaries. Pennsylvania has a

5% excise tax on gross receipts of dispensaries. Minnesota has a $3.50 tax on each gram. Ohio does not have an

excise tax on medical marihuana. While there may be neighboring states with higher taxes, the patient population

market is far less than that of Michigan. The other programs also have similar licensing categories; however,

Michigan is unique with a transporter license available. The only other Great Lakes state that allows

recreational/adult-use marijuana is Illinois. Illinois’ Cannabis Regulation and Tax Act (ICRTA) passed on May 31,

2019, and is effective January 1, 2020. The Illinois Cannabis Regulation and Tax Act is comparable to the MRTMA

in that it creates personal possession limits and allows for individuals to cultivate a specific number of plants for

themselves. The ICRTA also creates comparable license types to MRTMA.

The proposed new rules are consistent with the rules of those states where medical and adult-use marihuana is

regulated.

A. If the rules exceed standards in those states, please explain why and specify the costs and benefits arising out of

the deviation.

The rules do not exceed the scope of licensing requirements of other states where licensure is required.

3. Identify any laws, rules, and other legal requirements that may duplicate, overlap, or conflict with the proposed

rules.

This rule set is being rescinded in its entirety in favor of the ten new topical rule sets being promulgated.

A. Explain how the rules have been coordinated, to the extent practicable, with other federal, state, and local laws

applicable to the same activity or subject matter. This section should include a discussion of the efforts undertaken

by the agency to avoid or minimize duplication.

This rule set is being rescinded in its entirety in favor of the ten new topical rule sets being promulgated. The

proposed new rules are being written in coordination with existing rules and emergency rules.

4. If MCL 24.232(8) applies and the proposed rules are more stringent than the applicable federally mandated

standard, a statement of specific facts that establish the clear and convincing need to adopt the more stringent

rules and an explanation of the exceptional circumstances that necessitate the more stringent standards is

required.

MCL 24.232(8) does not apply, there is no applicable federally mandated standard.

5. If MCL 24.232(9) applies and the proposed rules are more stringent than the applicable federal standard, either

the statute that specifically authorizes the more stringent rules or a statement of the specific facts that establish

the clear and convincing need to adopt the more stringent rules and an explanation of the exceptional

circumstances that necessitate the more stringent standards is required.

MCL 24.232(9) does not apply, there is no applicable federal standard.

6. Identify the behavior and frequency of behavior that the proposed rules are designed to alter.

This rule set is being rescinded in its entirety in favor of the ten new topical rule sets being promulgated in order to

create greater consistency in the licensing process for marihuana businesses and to create cohesion between license

issuance for medical and adult-use marihuana businesses. These decisions are made daily by agency licensing staff.

A. Estimate the change in the frequency of the targeted behavior expected from the proposed rules.

This rule set is being rescinded in its entirety in favor of the ten new topical rule sets being promulgated.

B. Describe the difference between current behavior/practice and desired behavior/practice.

This rule set is being rescinded in its entirety in favor of the ten new topical rule sets being promulgated. Currently,

there are different requirements for medical and adult-use marihuana licensees. The goal is to create greater

consistency in the licensing process for marihuana businesses and to create cohesion between license issuance for

medical and adult-use marihuana businesses.

C. What is the desired outcome?

The desired outcome is greater consistency in the licensing process for marihuana businesses and to create cohesion

between license issuance for medical and adult-use marihuana businesses.

7. Identify the harm resulting from the behavior that the proposed rules are designed to alter and the likelihood

that the harm will occur in the absence of the rule.

MCL 24.245(3)

RIS-Page 3

The harm that will likely result if these rules are not rescinded and replaced is that licenses will not be granted in a

timely fashion. Businesses will not be able to continue to operate or begin operating. Businesses may fail. There is

also a risk that licensees will not be evaluated based upon the same criteria. Consumer safety will be affected if all

businesses are not held to the same standards.

A. What is the rationale for changing the rules instead of leaving them as currently written?

The rationale for changing these rules is to create greater consistency in licensing practices for all marihuana

businesses. This cannot be done with the rules as currently written.

8. Describe how the proposed rules protect the health, safety, and welfare of Michigan citizens while promoting a

regulatory environment in Michigan that is the least burdensome alternative for those required to comply.

The rescission of these current rules allows for new rules to be promulgated that help to ensure that only eligible

individuals obtain licenses to grow, process, test, transport, and sell marihuana products to residents of the state of

Michigan. The proposed rules contain specific criteria to ensure that individuals who are issued licenses are likely to

be compliant with all of the administrative rules regulating marihuana businesses, including safety testing standards

that protect the public health, safety, and welfare.

9. Describe any rules in the affected rule set that are obsolete or unnecessary and can be rescinded.

This rule set rescinds the administrative rules R 333.201 et. seq. in their entirety in favor of the ten new topical rule

sets being promulgated.

10. Please provide the fiscal impact on the agency (an estimate of the cost of rule imposition or potential savings

for the agency promulgating the rule).

There will be no fiscal impact on the agency. The agency already manages both medical marihuana facilities

licensing and adult-use marihuana licensing.

11. Describe whether or not an agency appropriation has been made or a funding source provided for any

expenditures associated with the proposed rules.

No appropriations have been made to any governmental units because of these rules. No additional expenditures are

anticipated or intended with the proposed rules.

12. Describe how the proposed rules are necessary and suitable to accomplish their purpose, in relationship to the

burden(s) the rules place on individuals. Burdens may include fiscal or administrative burdens, or duplicative

acts.

These rules are being rescinded in their entirety and will be replaced with new rules.

A. Despite the identified burden(s), identify how the requirements in the rules are still needed and reasonable

compared to the burdens.

These rules are being rescinded in their entirety and will be replaced with new rules.

13. Estimate any increase or decrease in revenues to other state or local governmental units (i.e. cities, counties,

school districts) as a result of the rule. Estimate the cost increases or reductions for other state or local

governmental units (i.e. cities, counties, school districts) as a result of the rule. Include the cost of equipment,

supplies, labor, and increased administrative costs in both the initial imposition of the rule and any ongoing

monitoring.

These rules are being rescinded in their entirety and will be replaced with new rules. There are no anticipated

increases or decreases in revenues or costs to other state or local governmental units as a result of the proposed rules

that will replace these rules. Any local or state change to revenue may occur via the statutory provisions as it

concerns how the funds, fees, or taxes are allocated or expended. The agency is required to set an application fee

pursuant to the MMFLA and MRTMA and has set the fee at $6,000 to offset the background investigations,

administration of the licensing application, etc. The other statutorily imposed fee is the annual regulatory

assessment/renewal fee set forth in the MMFLA and MRTMA which will be deposited in the marihuana regulatory

fund.

14. Discuss any program, service, duty, or responsibility imposed upon any city, county, town, village, or school

district by the rules.

These rules are being rescinded in their entirety and will be replaced with new rules.

A. Describe any actions that governmental units must take to be in compliance with the rules. This section should

include items such as record keeping and reporting requirements or changing operational practices.

These rules are being rescinded in their entirety and will be replaced with new rules.

15. Describe whether or not an appropriation to state or local governmental units has been made or a funding

source provided for any additional expenditures associated with the proposed rules.

MCL 24.245(3)

RIS-Page 4

No appropriations have been made to any governmental units because of these rules. No additional expenditures are

anticipated or intended with the proposed rules.

16. In general, what impact will the rules have on rural areas?

These rules are being rescinded in their entirety and will be replaced with new rules. The proposed rules are not

expected to impact rural areas in as much as the rules apply to all marihuana businesses regardless of location.

A. Describe the types of public or private interests in rural areas that will be affected by the rules.

These rules are being rescinded in their entirety and will be replaced with new rules. The proposed rules are not

expected to affect public or private interests in rural areas.

17. Do the proposed rules have any impact on the environment? If yes, please explain.

These rules are being rescinded in their entirety and will be replaced with new rules. The proposed rules do not have

any impact on the environment. The rules contain standards that are in line with requirements of the Department of

Environment, Great Lakes, and Energy.

18. Describe whether and how the agency considered exempting small businesses from the proposed rules.

These rules are being rescinded in their entirety and will be replaced with new rules. The proposed new rules were

designed to regulate all commercial marihuana businesses, regardless of their size. They are intended to allow any

business, including a small business, to obtain a license in the industry.

19. If small businesses are not exempt, describe (a) the manner in which the agency reduced the economic impact

of the proposed rules on small businesses, including a detailed recitation of the efforts of the agency to comply

with the mandate to reduce the disproportionate impact of the rules upon small businesses as described below (in

accordance with MCL 24.240(1)(a-d)), or (b) the reasons such a reduction was not lawful or feasible.

These rules are being rescinded in their entirety and will be replaced with new rules. In the proposed new rules, the

application fees are set in a tiered fashion as to make licenses more available for small businesses. The license types

available are available to small businesses. These rules, however, are intended to broadly lay out the criteria for a

marihuana business to obtain a license. They do not target small businesses, nor do they negatively impact them

exclusively.

A. Identify and estimate the number of small businesses affected by the proposed rules and the probable effect on

small businesses.

These rules are being rescinded in their entirety and will be replaced with new rules. It is uncertain how many small

businesses may be affected by the proposed rules. However, the belief is that these proposed rules will make it easier

for small businesses to enter into the regulated marihuana market.

B. Describe how the agency established differing compliance or reporting requirements or timetables for small

businesses under the rules after projecting the required reporting, record-keeping, and other administrative costs.

These rules are being rescinded in their entirety and will be replaced with new rules. The agency did not establish

separate compliance or reporting requirements for small businesses.

The proposed rules will apply to all applicants and licensees across the license categories, as applicable. The rules

were drafted to be the least burdensome on all applicants and licensees.

C. Describe how the agency consolidated or simplified the compliance and reporting requirements for small

businesses and identify the skills necessary to comply with the reporting requirements.

These rules are being rescinded in their entirety and will be replaced with new rules. The agency did not consolidate

or simplify compliance and reporting requirements for small businesses with the proposed rules.

D. Describe how the agency established performance standards to replace design or operation standards required

by the proposed rules.

These rules are being rescinded in their entirety and will be replaced with new rules. The agency did not establish

performance standards to replace design or operation standards required by these rules.

20. Identify any disproportionate impact the proposed rules may have on small businesses because of their size or

geographic location.

These rules are being rescinded in their entirety and will be replaced with new rules. The proposed rules affect

applicants and/or licensees rather than specifically small businesses. Therefore, there is no disproportionate effect on

a small business because of its size or geographic location.

21. Identify the nature of any report and the estimated cost of its preparation by small businesses required to

comply with the proposed rules.

These rules are being rescinded in their entirety and will be replaced with new rules.

MCL 24.245(3)

RIS-Page 5

22. Analyze the costs of compliance for all small businesses affected by the proposed rules, including costs of

equipment, supplies, labor, and increased administrative costs.

These rules are being rescinded in their entirety and will be replaced with new rules.

23. Identify the nature and estimated cost of any legal, consulting, or accounting services that small businesses

would incur in complying with the proposed rules.

These rules are being rescinded in their entirety and will be replaced with new rules.

24. Estimate the ability of small businesses to absorb the costs without suffering economic harm and without

adversely affecting competition in the marketplace.

These rules are being rescinded in their entirety and will be replaced with new rules.

25. Estimate the cost, if any, to the agency of administering or enforcing a rule that exempts or sets lesser

standards for compliance by small businesses.

These rules are being rescinded in their entirety and will be replaced with new rules.

26. Identify the impact on the public interest of exempting or setting lesser standards of compliance for small

businesses.

These rules are being rescinded in their entirety and will be replaced with new rules. The proposed new rules apply to

all applicants and licensees, regardless of size or geographic location. Therefore, exempting or setting lesser

compliance standards for small businesses could create a potential threat to health and safety of the state of

Michigan.

27. Describe whether and how the agency has involved small businesses in the development of the proposed rules.

The agency worked with the Medical Marihuana Licensing Board (Board) in the development of the proposed rules.

Workgroups were also conducted that were comprised with varying levels of business owners, from small or large

businesses and members of the public and they made recommendations to the Board. Small businesses were not

exclusively included or excluded by the very nature of being a small business.

A. If small businesses were involved in the development of the rules, please identify the business(es).

Small business was involved in the development of rules only in as much as making recommendations during the

workgroups to the Board and not specifically to the agency on specifics concerning the proposed rules.

28. Estimate the actual statewide compliance costs of the rule amendments on businesses or groups.

These rules are being rescinded in their entirety and will be replaced with new rules. The MMFLA and MRTMA

require the agency to promulgate rules that ensure the safety, security, and integrity of the operation of marihuana

businesses. The statutes also require licensees to comply with standards and requirements for marihuana businesses.

There are costs associated with the statutory requirements implemented through the proposed rules. This is an

existing program, so the actual costs are already in place. The rules will not increase or decrease the compliance

costs.

A. Identify the businesses or groups who will be directly affected by, bear the cost of, or directly benefit from the

proposed rules.

The rules apply to applicants and licensees. These rules are being rescinded and replaced by new rules. There could

be additional businesses or groups affected by, bear the cost of, or directly benefit from the proposed rules.

Examples may be CPAs, lab equipment companies, surveillance equipment companies, third-party integrators, and

point of sale companies.

B. What additional costs will be imposed on businesses and other groups as a result of these proposed rules (i.e.

new equipment, supplies, labor, accounting, or recordkeeping)? Please identify the types and number of businesses

and groups. Be sure to quantify how each entity will be affected.

These rules are being rescinded and replaced by new rules.

29. Estimate the actual statewide compliance costs of the proposed rules on individuals (regulated individuals or

the public). Include the costs of education, training, application fees, examination fees, license fees, new

equipment, supplies, labor, accounting, or recordkeeping.

These rules are being rescinded in their entirety and will be replaced with new rules. The rules that will replace these

rules will include license fees and annual regulatory assessment/renewal fees set at application for all marihuana

business types.

A. How many and what category of individuals will be affected by the rules?

All applicants for marihuana licenses will be affected.

B. What qualitative and quantitative impact do the proposed changes in rules have on these individuals?

MCL 24.245(3)

RIS-Page 6

This licensed and regulated industry could have an impact on the cost and sale of medical marihuana, and whether

someone chooses to become a medical marihuana patient with adult-use marihuana available.

30. Quantify any cost reductions to businesses, individuals, groups of individuals, or governmental units as a result

of the proposed rules.

These rules are being rescinded in their entirety and will be replaced with new rules. The rules that will replace these

rules impact applicants and licensees. A cost reduction that could apply is that the application fee could be reduced if

the applicant is applying for numerous licenses. (The regulatory assessment will not be reduced however.)

31. Estimate the primary and direct benefits and any secondary or indirect benefits of the proposed rules. Please

provide both quantitative and qualitative information, as well as your assumptions.

This rule set is being rescinded in its entirety in favor of the ten new topical rule sets being promulgated. Currently,

there are different requirements for medical and adult-use marihuana licensees. The goal is to create greater

consistency in the licensing process for marihuana businesses and to create cohesion between license issuance for

medical and adult-use marihuana businesses.

32. Explain how the proposed rules will impact business growth and job creation (or elimination) in Michigan.

This rule set is being rescinded in its entirety in favor of the ten new topical rule sets being promulgated. The

licensing and regulatory framework that will be created with new rules will establish a commercial supply and

distribution mechanism for marihuana. The license categories create new businesses in the industry that otherwise

were not licensed or regulated – and will impact business growth and job creation specifically for those interacting

with the licensed marihuana business.

33. Identify any individuals or businesses who will be disproportionately affected by the rules as a result of their

industrial sector, segment of the public, business size, or geographic location.

These rules are being rescinded and replaced by new rules. The new rules will specifically focus on the marihuana

industrial sector as they implement aspects of the regulatory framework as required by the MMFLA and MRTMA.

The operation of these businesses impacts the marihuana customer segment of the public through increased access to

marihuana that has been tracked, tested, and labeled to ensure safety for customers. There is no expected

disproportionate effect due to business size or geographic location.

34. Identify the sources the agency relied upon in compiling the regulatory impact statement, including the

methodology utilized in determining the existence and extent of the impact of the proposed rules and a cost-

benefit analysis of the proposed rules.

Sources from other states are the following:

Illinois:

http://www.revenue.state.il.us/QuestionsAndAnswers/139.htm

http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=3503&ChapterID=35

Minnesota:

https://www.revisor.mn.gov/statutes/cite/297D.08

https://www.revisor.mn.gov/laws/?id=311&year=2014&type=0

Ohio:

https://mjbizdaily.com/ohio-mmj-market-could-generate-200m-400m-in-sales/

https://www.medicalmarijuana.ohio.gov/Documents/advisory-committee/April%202017/Program%20Budget%20-%

20Presentation.pdf

https://www.medicalmarijuana.ohio.gov/rules

Pennsylvania:

http://www.revenue.pa.gov/GeneralTaxInformation/Tax%20Types%20and%20Information/Pages/Medical-Marijuana

-Tax.aspx#.WUqeBeurrb0

https://www.pa.gov/guides/pennsylvania-medical-marijuana-program/

OTHER:

https://www.leafly.com/news/industry/state-by-state-guide-to-cannabis-advertising-regulations

"House Fiscal Agency and Senate/Department Reports/LAB coalition"

MCL 24.245(3)

RIS-Page 7

A. How were estimates made, and what were your assumptions? Include internal and external sources, published

reports, information provided by associations or organizations, etc., which demonstrate a need for the proposed

rules.

These rules are being rescinded in their entirety and will be replaced with new rules. There were no estimates made

because the rules impact an individual licensee or registrant as well as applicant for licensure or registration. No

estimate could consider the setting where an individual may use his or her license or registration. Because the rules

only impact an individual, and impact all in the same way, the assumptions made was that no additional cost or

benefit would result from the proposed rules.

35. Identify any reasonable alternatives to the proposed rules that would achieve the same or similar goals.

The rules are required by the MMFLA and MRTMA; there is no reasonable alternative to the proposed rules.

A. Please include any statutory amendments that may be necessary to achieve such alternatives.

The rulemaking provisions of the MMFLA and MRTMA would have to be removed for any such alternative to occur.

36. Discuss the feasibility of establishing a regulatory program similar to that proposed in the rules that would

operate through private market-based mechanisms. Please include a discussion of private market-based systems

utilized by other states.

The rules are required by the MMFLA and MRTMA; private market-based systems cannot serve as an alternative.

36. Discuss the feasibility of establishing a regulatory program similar to that proposed in the rules that would

operate through private market-based mechanisms. Please include a discussion of private market-based systems

utilized by other states.

Since the rules are specifically required by the MMFLA and MRTMA, there are no alternatives to the proposed rules

that the agency could consider. They are necessary to ensure the safety, security, and integrity of the operation of

marihuana facilities.

38. As required by MCL 24.245b(1)(c), please describe any instructions regarding the method of complying with

the rules, if applicable.

There are no additional instructions for complying with the proposed rules.

MCL 24.245(3)