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September 2, 2021

Connecticut's Cannabis Law: What Is a Social Equity Applicant and How Do You Qualify?

Connecticut recently legalized adult-use cannabis and its law, like that of many newly legalized states, contains beneficial provisions for social equity applicants. Some of the benefits to social equity applicants include: (1) providing expedited or priority licensing, (2) 50 percent of all licenses will be awarded to social equity applicants, (3) reduced licensing fees for the first three renewal cycles, and (4) tax credits for certain investments into social equity businesses.

Under Connecticut’s Responsible and Equitable Regulation of Adult-Use Cannabis Act (RERACA), a social equity applicant is an applicant that is at least 65 percent owned and controlled by an individual or individuals who (1) had an average household income of less than 300 percent of the state median household income over the three tax years immediately preceding the date of the application and (2) was a resident of a disproportionately impacted area for at least five of the 10 years immediately preceding the date of the application or was a resident of a disproportionately impacted area for not less than nine years prior to attaining the age of 18.

For example, in 2019, the median household income in Connecticut was $78,444. Therefore, to satisfy the income requirement to be considered a social equity applicant, the individual’s income over the last three years must average less than $235,332, if  the calculation only requires the use of the 2019 median income.

RERACA created the Social Equity Council, composed of 15 members, which is charged with, among other responsibilities, promoting and encouraging full participation in the cannabis industry by persons from communities that have been disproportionately harmed by cannabis prohibition and enforcement.

When determining which areas qualify as disproportionately impacted, the Social Equity Council considered past drug convictions and current unemployment rates throughout Connecticut. Disproportionately impacted areas are those census tracts designated by the Connecticut Social Equity Council, which can be found on its website. To qualify, an individual must have lived in one of these impacted areas for five out of the last 10 years, or for at least nine years prior to turning 18 years old.

If an individual or individuals meets the criteria above and the individual or individuals own and control at least 65 percent of the applicant’s business, that business will be considered a social equity applicant.

Perhaps one of the most innovative and social equity oriented–provisions in RERACA, meant to help level the playing field for social equity applicants, is the social equity joint venture (SEJV). The SEJV is designed to encourage existing medical cannabis companies to partner with social equity applicants, and in return, the fee to convert from a solely medical cannabis company to a hybrid retailer (i.e., selling both medical and adult-use cannabis) is reduced by 50 percent.

In order to participate in this program, the medical cannabis company must establish an SEJV wherein the social equity applicant owns at least 50 percent of the business.

A medical cannabis company may also apply for approval to expand its activities (e.g., solely retail expanded to retail and cultivation) and have its fee reduced by 50 percent if, among other requirements, it engages in two SEJVs.

Barclay Damon’s Cannabis Team will continue to closely monitor developments pertaining to Connecticut’s Responsible and Equitable Regulation of Adult-Use Cannabis Act. If you or your business would like more information about how to enter into the cannabis space, please contact one of Barclay Damon’s cannabis attorneys.

If you have any questions regarding the content of this alert, please contact Jason Klimek, Cannabis Team co-leader, at jklimek@barclaydamon.com, or another member of the firm’s Cannabis Team.

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Connecticut's Cannabis Law: What Is a Social Equity Applicant and How Do You Qualify?

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