Starting in December, the Illinois Department of Financial and Professional Regulation will begin accepting more applications for adult use cannabis licenses. Because Illinois is enacting the nation's most ambitious plan to ensure this process means opportunity for communities hit the hardest by bad drug policies, there are a lot of factors at play in granting licenses. Read IDFPR's press release below.

IDFPR Announces Next Round of Adult Use Cannabis License Applications

Applications for up to 75 Adult Use Dispensing Organization Licenses Now Available

CHICAGO – The Illinois Department of Financial and Professional Regulation announced Tuesday that applications for adult use cannabis licenses for new dispensing organizations are now available. Applications for new dispensing organizations can be found on the Department’s website.

The applications will be accepted by the department starting on December 10, 2019 and must be submitted by 12:00 p.m. on January 2, 2020. Applications will start being reviewed following the January 2nd deadline, with seventy-five conditional adult use dispensing organization licenses awarded by May 1, 2020.

“As Illinois enters the next phase of its adult use cannabis program, we are committed to a process that is efficient, timely and most critically, continues to place equity at the forefront,” said Governor JB Pritzker. “From ensuring social equity applicants receive points on their application to providing grants and technical assistance, this is a process that does more than any other state in the nation to make equity a priority.”

“We’re committed to ensuring that this process is transparent, fair and accessible to people from all communities in Illinois,” said Deborah Hagan, Secretary of the Illinois Department of Financial and Professional Regulation. “Our Department understands the important role it plays in ensuring all applicants have an opportunity to become involved in this industry and we will continue to work with our partner agencies to ensure applicants have the information they need.”

Social equity applicants will receive points on their application and are eligible to receive technical assistance, grants, low-interest loans and fee reductions and waivers. To qualify as a social equity applicant, the statute requires the applicant to be an Illinois resident and meet one of the following criteria:

• At least 51% ownership and control by one or more individuals who have resided at least 5 of the preceding 10 years in a disproportionately impacted area;
• At least 51% ownership and control by one or more individuals [or family member of an individual] who have been arrested for, convicted of, or adjudicated delinquent for an offense that is eligible for cannabis expungement; or
• Applicants with minimum of 10 full-time employees, at least 51% of employees who:
  • Currently reside in a disproportionately impacted area; or
  • Have been arrested for, convicted of, or adjudicated delinquent for an offense that is eligible for cannabis expungement, or is a member of an impacted family.

The Department of Commerce and Economic Development announced Monday which areas meet the definition of disproportionately impacted area. View the map here.

Once IDFPR awards a conditional license, the applicant has 180 days to find a location within its Bureau of Labor Statistics (BLS) Region to operate. That location cannot be within 1,500 feet of another licensed dispensing organization. A map reflecting how many licenses will be granted in each BLS region can be found here.

As the state's licensing framework for cannabis moves forward, the Illinois Department of Commerce and Economic Opportunity has released information about the areas of the state most disproportionately harmed by bad drug policy. Read their press release below and download a pdf of it here.

State of Illinois Releases Disproportionately Impacted Areas for Cannabis Program’s Social Equity Applicants

2 Million Illinoisans Throughout the State Live in Disproportionately Impacted Areas

As the most equity-centric adult use cannabis program in the nation prepares to enter its next phase, the Pritzker Administration is releasing maps that designate which parts of the state qualify as “disproportionately impacted areas” for social equity applicants. More than 2 million Illinoisans live in the 683 Census tracts that make up the disproportionately impacted areas.

(View the map here.)

The Department of Commerce and Economic Opportunity determined the disproportionately impacted areas using criteria established in the new state law. To be designated as a disproportionately impacted area, a Census tract must have high rates of arrest, conviction, and incarceration related to cannabis, among other qualifications including poverty and unemployment.

“As Illinois continues its path toward putting equity at the forefront of the state’s new adult-use  cannabis expansion, it’s important to create opportunities in communities that have been hardest hit by the war on marijuana,” said Governor JB Pritzker. “Not only will social equity applicants receive points  on their applications, but many applicants will also get grants, technical assistance, low-interest loans and fee reductions and waivers. Taken together, these efforts will do more than any other state in the nation has done to focus on equity.”

To qualify as a social equity applicant, the statute requires Illinois residency and one of the following criteria:

1. At least 51% ownership and control by one or more individuals who have resided at least 5 of the preceding 10 years in a disproportionately impacted area;
2. At least 51% ownership and control by one or more individuals [or family member of an individual] who have been arrested for, convicted of, or adjudicated delinquent for an offense that is eligible for cannabis expungement; or

1. Applicants with minimum of 10 full-time employees, at least 51% of employees who:
   1. Currently reside in a disproportionately impacted area; or
   2. Have been arrested for, convicted of, or adjudicated delinquent for an offense that is eligible for cannabis expungement, or is a member of an impacted family.

Upcoming milestones in the timeline include:

Timeline for Conditional Adult Use Dispensing Organization License:

• The Illinois Department of Financial and Professional Regulation will post the application on October 1, 2019.
• IDFPR will provide two separate periods for applicants to submit questions to the agency.
• IDFPR will begin accepting applications on December 10, 2019.
• IDFPR will stop accepting applications at noon on January 2, 2020.
• IDFPR will issue up to 75 licenses by May 1, 2020.

Collectively, these efforts demonstrate the administration’s commitment to ensuring communities that have been historically impacted by the justice system due to cannabis-related offenses are able to participate in Illinois’ legal cannabis industry. Later this year, DCEO will launch a program to provide low - interest loans to qualified social equity applicants. The loans will help applicants cover the expense of starting and operating a cannabis business.

“Too many communities in Illinois have been torn apart due to failed drug policies. By providing resources to justice-impacted individuals and members of their communities, we can ensure that the legalization of cannabis benefits all Illinoisans, regardless of income or background,” said Erin Guthrie, Acting Director of the Department of Commerce and Economic Opportunity.

“We’re committed to ensuring that this process is transparent, fair and accessible to people from all communities in Illinois,” said Deborah Hagan, Secretary of the Illinois Department of Financial and Professional Regulation. “We look forward to reviewing applications and providing information to those who are interested in learning more.”

Entrepreneurs who apply for a license to operate a cannabis business will have the option to include information to verify their status as a social equity applicant. Social equity applicants will also have the opportunity to apply for a DCEO loan.

In addition to offering loans, DCEO will offer technical assistance and support for social equity applicants on everything from putting together a business plan to applying for a license. To view the map of disproportionately impacted areas, click here .

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This document is provided to summarize the law and policy but is not intended to provide legal advice. Please consult an attorney for legal advice or questions.

Disclaimer: if using a mobile device, be aware that links may not direct you to the appropriate page. Please use the section and page number references to scroll to the linked subclause

Zoning - 

1. Opting out

Local governments may opt out of having any cannabis businesses located in their jurisdictions (Section 55-25 Local Ordinances subclause 1, page 285). They can NOT opt out of residents being allowed to possess or home grow (Section 55-25 Local Ordinances subclause 1, page 283).  Municipalities should pass ordinances if they wish to opt out (Section 55-25 Local Ordinances subclause 5, page 285). Precincts in a city with a population over 500,000 may also implement ordinances by petition that intend to limit either home growing or cannabis business establishments (Section 55-28 Restricted cannabis zones subclause b-c, page 286). This political process is essentially the same for liquor moratoriums.

1. Setbacks and other restrictions

Local governments may (but do not have to) establish setbacks related to location of dispensaries, craft grow, cultivation centers, and infuser businesses. The intent of the legislation was to maximize local control over citing and zoning options since the very prescriptive language in the medical pilot program created significant challenges for licensees to find eligible properties, particularly in more densely populated areas. Zoning decisions should be based on what each jurisdiction determines are appropriate concerns for their communities (Section 55-25 Local Ordinances subclause 2, page 283).There are two instances where the law requires cannabis business setbacks. The first is that dispensaries must be at minimum 1500 feet apart so that there is not over concentration of dispensaries in a single area. The other set back is that craft grow facilities must be 1500 feet apart and 1500 feet away from a cultivation center. This is to insure that an entity cannot stack licenses and create a facility that would allow them to expand beyond the square foot limitations of a craft grow license(Section 15-20 Early Approval Adult Use Dispensing Organization License; secondary site subclause b, page 73; Section 15-25 Awarding of Conditional Adult Use Dispensing Organization Licenses prior to January 1, 2021 subclause e, page 90; Section 30-30 Craft grower requirements; prohibitions subclause o, page 219). The law also allows for craft growers, dispensaries and infusers to all be located on the same property. When local governments are working through what kind of cannabis businesses establishments and how many they are going to allow in their jurisdiction they should also be prepared for businesses that may want to utilize this ability to operate every aspect of the business in their area (Section 15-100 Security subclause e, page 143; Section 30-30 Craft Grower Requirements; Prohibitions subclause c, page 215; Section 35-25 Infuser organization requirements; prohibition subclause l, page 238)

1. Clarity, efficiency, and equity

As local governments consider zoning plans, it might be helpful to contemplate prioritizing what issues need to be resolved most quickly. In order for existing dispensaries to convert to dual use establishments, there may need to be a change to permit those businesses to continue to operate. The second most pressing issue relates to the second location being allowed for existing dispensary license holders and the need to create specific zoning requirements that will apply to new dispensaries. In both cases, these need to be in place very soon in order to allow these businesses to begin operation on 1/1/2020. The next round of dispensary applications, which will represent the first new entrants into the industry and hopefully a significant number of social equity applicants, will become available on 10/1/19 with applications due 1/1/20 for issuance in May of 2020. In addition, there will be a need to contemplate zoning requirements related to craft grow and infusing businesses. These applications become available January 7 with a due date of March 15 and issuance no later than July 1, 2020. These priorities should also take into account that local governments want to avoid any unnecessary litigation; have an interest in ensuring that existing cannabis businesses are able to operate under the new law on January 1; and can creatively use some of their own zoning tools to ensure that the equity applicants have access to their markets.

Local ordinances may create civil penalties for businesses that violate their locally determined conditions for placement (concerning time, place, on premises administration, and manner of operation) if they are not unreasonably restrictive. The enforcement of these is primarily left up to the discretion of the local government (Section 55-25 Local Ordinances subclause 1-5, page 283) - although the municipality may not regulate in a manner more restrictive than the State under this Act.

Enforcement and prosecutorial discretion -

Municipalities should contemplate immediate policy concerning whether there should by any enforcement of simple possession. Technically any possession of cannabis remains illegal until the legalization date of January 1, 2020, at which point any possession over 30 grams remains illegal. However, local governments should immediately contemplate and update their policies concerning cannabis possession prior to and in anticipation of the legalization date. One provision of the law’s attempt to rectify the War on Drugs’ impact on minority and underprivileged communities is the automatic expungement of criminal records for possession of 30 grams or less (Section 5.2 Expungement, sealing, and immediate sealing subclause 2.5, page 370). The following questions should be contemplated on how to proceed prior to legalization: Should local law enforcement continue to enforce/arrest for amounts between 10-30 grams? Should local law enforcement continue to arrest for possession for any amounts under 30 grams? What will the local jurisdiction do with folks in custody at the time of implementation? For example, DuPage State’s Attorney Berlin recently announced that he will no longer prosecute these cases since they’ll be eligible for resentencing Jan 1. See this Tribune article. These conversations should be had in conjunction with each county’s States Attorney.

Taxation -

Municipalities will have the ability to impose up to an additional 3% in local taxes beginning in September of 2020. (Section 8-11-22 Municipal Cannabis Retailers' Occupation Tax Law subclause a, page 540). Counties have the ability to impose 3% in local taxes in addition to any municipalities tax, or 3.75% in unincorporated areas (Section 5-1006.8 County Cannabis Retailers’ Occupation Tax Law subclasue a, page 533)[1] The municipality or county must pass a resolution or ordinance imposing the tax before the first day in June in order to begin collecting the taxes by September of 2020. A municipality or county may impose or discontinue a tax on cannabis in any year but must pass a result ion or ordinance before the first day of June in order for it to go into effect by September of that year. (Section 8-11-22 Municipal Cannabis Retailers’ Occupation Tax Law subclause f, page 543; Section 5-1006.8 County Cannabis Retailers’ Occupation Tax Law subclasue f, page 536).

Proceed with extreme caution and avoid immediately taxing to the cap. We are already near the high middle end of tax rates around the country, and it’s vital to allow the marketplace to mature before

increasing tax rates. This has been a huge issue around the country as states and locals have often found that street markets lower prices to compete and maintain market share, so it’s critical to allow the new market to gain traction before increasing consumer costs through taxation. It is anticipated that it will take up to 5 years before the market is fully mature, so a taxation strategy should take this into account to avoid negatively impacting consumer movement into the legal marketplace and counterproductive taxation strategies.

Equity - 

As an equity-centered law, there are numerous provisions included. Provisions of the social equity program offer benefits (including financial assistance and license application benefits) to individuals that have been most impacted by cannabis-related law enforcement. The Cannabis Business Development Fund is a special fund created in the State Treasury to be used to pay for low-interest rate loans, grants, compensation for loans and grants, outreach, research, and job training for Social Equity Applicants interested in beginning and operating cannabis-related businesses (Section 7-10. Cannabis Business Development Fund subclause 1-4, page 31). The Department of Commerce and Economic Opportunity will also establish grant and loan programs for Social Equity Applicants (Section 7-15 Loans and grants to Social Equity Applicants subclause a, page 32). If a Social Equity Applicant meets specific qualifications, license benefits for Social Equity Applicants include a 50% fee waiver for applications (Section 7-20 Fee waivers subclause a, page 35; Section 15-30. Selection criteria for conditional licenses awarded under Section 15-25 subclause c5, page 95).

Keep in mind that everything in the new law is a floor, not a ceiling. There are important ways a local government can impact the equity provisions in the law. While the programs incorporated into the law creating resources for social equity applicants are significant, there’s nothing stopping local governments from adding onto these ideas via fee waivers, technical assistance or other access to capital programs that build on the loan funds incorporated into the state program. In addition, issues such as zoning decisions can have a significant impact on the equity space. Avoiding undue concentration and assuring access in underserved communities are other important considerations.

Community College Pilot Program - 

A rather late addition to the bill, but a significant opportunity to drive employment and training is the four-year pilot program that allows eight community colleges within the state to apply to participate in a pilot that will provide the opportunity to incorporate plant handling in a community college curriculum.

This will create a pool of qualified potential employees for the growing industry. The program will be administered jointly by the IL Community College Board and the Department of Agriculture. While the program will allow hands-on learning of cultivation and processing, all harvested product resulting from the program must be destroyed. The department has until September 1, 2020 to issue up to eight program licenses. The Department of Agriculture, in conjunction with the Illinois Community College Board, is responsible for developing the various aspects of selecting license recipients (Section 25-10 Issuance of Community College Cannabis Vocational Pilot Program licenses subclauses a-d, page 194).

The joint departments must make applications for program participation available by February 1, 2020, and the application will be due from applicants by July 1st of 2020, with the programs eligible to begin instructing students in the 2021-2022 academic year. In the process of applicant selection, the Departments must consider various factors, including the geographic diversity of the schools so as to make sure students throughout the entire state may take advantage of the program, and the proposed curriculum plans of the community colleges. Additionally, at least five of the eight selected Program license awardees must have a student population composed of more than 50% low-income in each of the past four years (Section 25-10 Issuance of Community College Cannabis Vocational Pilot Program licenses subclauses b3, page 194). Licensees, while held under specific restrictions to guarantee the safety of students and faculty, have the freedom to, once selected, determine their curriculum and career advising processes. It’s also important to note that there are community colleges already providing a cannabis curriculum that is theory based as opposed to hands-on, so there is also the option of not participating in the plant handling pilot program and merely implementing a classroom-based curriculum such as the one at Oakton. The idea is to authorize community colleges to develop a program that works best for its students and faculty, instead of a one-size-fits-all program.

More information on the application and licensing process for Community College Pilot Programs will be available through the Department of Agriculture and the Illinois Community College board once the application has been developed.

Public Consumption - 

The law allows units of local government to create opportunities within their communities to open what are commonly known as social use spaces (Section 55-25 Local Ordinances subclause 3, page 284). The law is relatively broad in the definition of these spaces in terms of what the local government can allow within the spaces. They are intended to be businesses that permit the use (but not sale) of cannabis products within their facilities. These could be existing establishments that can offer this opportunity to their patrons within the bounds of their current operation or stand-alone intentional spaces dedicated to social use. That said, while the language required an exception to the state’s smoke-free law protecting against second-hand smoke, we’ve made clear that it is not the intent of the state or the sponsors to allow smoking of cannabis products in venues where tobacco smoking is prohibited but instead want to create an opportunity not unlike that created by hookah lounges or cigar clubs. There are a couple of reasons why this is important. First, in other states that have created legal marketplaces but not created social consumption spaces, we still see a disproportionate impact on communities of color concerning enforcement of public use prohibitions. There are several reasons for this, but it is important to note that building and property owners can still prohibit smoking by tenants and residents of public housing facilities are federally prohibited from consumption on site, so there is a significant swath of the population who might not have a legal space to consume. In addition, areas with substantial tourism have also found concerns from the hospitality industry, particularly hotels, around the issue of use in their spaces. Each unit of local government has the option of deciding how and when to allow the creation of these spaces, including what other business activity can occur on-site, location of facilities, proximity to cannabis business facilities, licensing of facilities, etc..

In 2019, Colorado’s Governor signed a bill that authorizes and regulates social use spaces throughout the state (article on the new law). Before this was passed, individual municipalities determined exactly how they would approach the topic. Denver, Colorado passed a ballot initiative in 2016 on social use before state legislation titled Initiative 300. The ordinance, which originally had a four-year expiration date, created a pilot program to permit approved businesses to allow consumption of cannabis in designated consumption areas (see the full Cannabis Consumption Pilot Program here). A permit for a social-use space did not require any association to a dispensary organization (Sec. 6-302 Cannabis consumption permit subclause i-iii, page 2). The space must be approved by eligible neighborhood organizations, which are organizations that are either defined in the Revised Municipal Code as being in existence for two or more years, business improvement districts, or any association of residents or owners of real property designated as such by the Director of Excise and Licenses (Sec. 6-301 Defined terms subclause 6 i-iii, page 3). The evidence of community support “may include any additional operational requirements that the eligible neighborhood organization deems necessary to protect the health. safety, and welfare of the surrounding community” (Sec. 6-304 Evidence of community support subclause a-b, page 3). The program document contains specific regulations for Cannabis Consumption Areas, as well as the proposed format for applications to become a licensed area. Denver’s system is comprehensive and allows for community involvement in the placement and type of businesses wishing to provide Designated Consumption Areas, and could serve as a model for Illinois municipalities.

Las Vegas, Nevada, also passed regulations on social use. Nevada’s state law on cannabis use does not explicitly allow social use spaces; however, it is implied that municipalities have the opportunity to permit and regulate them if they wish. In May of 2019, the city council approved an ordinance authorizing customers 21 and older to bring their own cannabis to newly licensed social use venues. Social use venue licenses can only be issued to a licensed dispensary. On-site consumption facilities must obtain annual city licenses and, initially, only licensed dispensaries could apply for on-site consumption, not private businesses (refer to this policy analysis by a local Las Vegas newspaper). The ordinance established business licenses and land use regulations for social spaces, as well as safety requirements (see the ordinance here). As the only businesses that could receive social use licenses were businesses that were already licensed dispensaries, the city was able to avoid outlining specific rules for placement and potential backlash from surrounding communities. The intention being, beyond avoiding zoning complications, that dispensaries would have use lounges associated with but not inside of their regular place of business.

San Francisco, California, was one of the first cities to allow widespread cannabis-use lounges. According to the state’s current law on adult-use cannabis, local municipalities may act in their own authority on social-use as long as they stay within state regulations (Chapter 20 Local Control 26200 subclause a-g). San Francisco took the initiative and began passing city ordinances to create their own regulations. Individual zones had the opportunity to opt in, opt out, or conditionally opt in to social use permitting. All cannabis-related storefronts must receive neighborhood confirmation before a license can be obtained, and there are ventilation, safety, and employee regulations to limit the inhalation of second-hand smoke. Consumption lounges in San Francisco must be attached in some way to a dispensary that has already obtained that prior license (article on San Francisco’s practices). To even further discourage illegal cannabis, consumption lounge users cannot bring their own cannabis; they must first purchase it at the dispensary.

[1] This applies to non-home rule counties as amended by PA 101-0363 page 66

Breakdown of municipality ordinances on social-use spaces