SB-1262, As Passed House, December 21, 2018

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 1262

A bill to amend 2016 PA 281, entitled

"Medical marihuana facilities licensing act,"

by amending sections 102, 207, 301, 305, 401, 402, 406, 407, 409,

and 702 (MCL 333.27102, 333.27207, 333.27301, 333.27305, 333.27401,

333.27402, 333.27406, 333.27407, 333.27409, and 333.27702), section

102 as amended by 2018 PA 10 and section 402 as amended by 2017 PA

105, and by adding section 407a; and to repeal acts and parts of

acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 102. As used in this act:

(a) "Advisory panel" or "panel" means the marihuana advisory

panel created in section 801.

(b) "Affiliate" means any person that controls, is controlled

by, or is under common control with; is in a partnership or joint

venture relationship with; or is a co-shareholder of a corporation,

a co-member of a limited liability company, or a co-partner in a

limited liability partnership with a licensee or applicant.

operating license. ~~With~~ Applicant includes, with respect to

disclosures in an application, or for purposes of ineligibility for

a license under section 402, ~~the term applicant includes an~~

~~officer, director, and managerial employee of the applicant and a~~

~~person who holds any direct or indirect ownership interest in the~~

~~applicant.~~or for purposes of prior board approval of a transfer of

interest under section 406, and only for applications submitted on

or after January 1, 2019, a managerial employee of the applicant, a

person holding an indirect ownership interest of 10% or more in the

applicant, and the following for each type of applicant:

(i) For an individual or sole proprietorship: the proprietor

and spouse.

(ii) For a partnership and limited liability partnership: all

partners and their spouses. For a limited partnership and limited

liability limited partnership: all general and limited partners,

not including a limited partner holding a direct or indirect

ownership interest of less than 10% and who does not exercise

control over or participate in the management of the partnership,

and their spouses. For a limited liability company: all members and

managers, not including a member holding a direct or indirect

ownership interest of less than 10% and who does not exercise

control over or participate in the management of the company, and

their spouses.

(iii) For a privately held corporation: all corporate officers

or persons with equivalent titles and their spouses, all directors

and their spouses, and all stockholders, not including those

holding a direct or indirect ownership interest of less than 10%,

and their spouses.

(iv) For a publicly held corporation: all corporate officers

or persons with equivalent titles and their spouses, all directors

and their spouses, and all stockholders, not including those

holding a direct or indirect ownership interest of less than 10%,

and their spouses.

(v) For a multilevel ownership enterprise: any entity or

person that receives or has the right to receive 10% or more of the

gross or net profit from the enterprise during any full or partial

calendar or fiscal year.

(vi) For a nonprofit corporation: all individuals and entities

with membership or shareholder rights in accordance with the

articles of incorporation or the bylaws and their spouses.

(d) "Board" means the medical marihuana licensing board

created in section 301.

(e) "Cutting" means a section of a lead stem or root stock

that is used for vegetative asexual propagation.

(f) "Department" means the department of licensing and

regulatory affairs.

(g) "Grower" means a licensee that is a commercial entity

located in this state that cultivates, dries, trims, or cures and

packages marihuana for sale to a processor, provisioning center, or

another grower.

(h) "Industrial hemp" means that term as defined in section

7106 of the public health code, 1978 PA 368, MCL 333.7106.

(i) "Industrial hemp research and development act" means the

industrial hemp research and development act, 2014 PA 547.

(j) ~~(h)~~ "Licensee" means a person holding a state operating

license.

(k) ~~(i)~~ "Marihuana" means that term as defined in section 7106

of the public health code, 1978 PA 368, MCL 333.7106.

(l) ~~(j)~~ "Marihuana facility" means a location at which a

licensee is licensed to operate under this act.

(m) ~~(k)~~ "Marihuana plant" means any plant of the species

Cannabis sativa L. Marihuana plant does not include industrial

hemp.

(n) (l) "Marihuana-infused product" means a topical

formulation, tincture, beverage, edible substance, or similar

product containing any usable marihuana that is intended for human

consumption in a manner other than smoke inhalation. Marihuana-

infused product is not considered a food for purposes of the food

law, 2000 PA 92, MCL 289.1101 to 289.8111.

(o) ~~(m)~~ "Marihuana tracking act" means the marihuana tracking

act, 2016 PA 282, MCL 333.27901 to 333.27904.

(p) ~~(n)~~ "Michigan medical marihuana act" means the Michigan

medical marihuana act, 2008 IL 1, MCL 333.26421 to 333.26430.

(q) ~~(o)~~ "Municipality" means a city, township, or village.

(r) ~~(p)~~ "Paraphernalia" means any equipment, product, or

material of any kind that is designed for or used in growing,

cultivating, producing, manufacturing, compounding, converting,

storing, processing, preparing, transporting, injecting, smoking,

ingesting, inhaling, or otherwise introducing into the human body,

marihuana.

(s) ~~(q)~~ "Person" means an individual, corporation, limited

liability company, partnership, limited partnership, limited

liability partnership, limited liability limited partnership,

trust, or other legal entity.

(t) ~~(r)~~ "Plant" means any living organism that produces its

own food through photosynthesis and has observable root formation

or is in growth material.

(u) ~~(s)~~ "Processor" means a licensee that is a commercial

entity located in this state that purchases marihuana from a grower

and that extracts resin from the marihuana or creates a marihuana-

infused product for sale and transfer in packaged form to a

provisioning center or another processor.

(v) ~~(t)~~ "Provisioning center" means a licensee that is a

commercial entity located in this state that purchases marihuana

from a grower or processor and sells, supplies, or provides

marihuana to registered qualifying patients, directly or through

the patients' registered primary caregivers. Provisioning center

includes any commercial property where marihuana is sold at retail

to registered qualifying patients or registered primary caregivers.

A noncommercial location used by a primary caregiver to assist a

qualifying patient connected to the caregiver through the

department's marihuana registration process in accordance with the

Michigan medical marihuana act is not a provisioning center for

purposes of this act.

(w) ~~(u)~~ "Registered primary caregiver" means a primary

caregiver who has been issued a current registry identification

card under the Michigan medical marihuana act.

(x) ~~(v)~~ "Registered qualifying patient" means a qualifying

patient who has been issued a current registry identification card

under the Michigan medical marihuana act or a visiting qualifying

patient as that term is defined in section 3 of the Michigan

medical marihuana act, MCL 333.26423.

(y) ~~(w)~~ "Registry identification card" means that term as

defined in section 3 of the Michigan medical marihuana act, MCL

333.26423.

(z) ~~(x)~~ "Rules" means rules promulgated under the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328, by the department in consultation with the board to

implement this act.

(aa) ~~(y)~~ "Safety compliance facility" means a licensee that is

a commercial entity that takes marihuana from a marihuana facility

or receives marihuana from a registered primary caregiver, tests

the marihuana for contaminants and for tetrahydrocannabinol and

other cannabinoids, returns the test results, and may return the

marihuana to the marihuana facility.

(bb) ~~(z)~~ "Secure transporter" means a licensee that is a

commercial entity located in this state that stores marihuana and

transports marihuana between marihuana facilities for a fee.

(cc) ~~(aa)~~ "Seed" means the fertilized, ungerminated, matured

ovule, containing an embryo or rudimentary plant, of a marihuana

plant that is flowering.

(dd) ~~(bb)~~ "Seedling" means a marihuana plant that has

germinated and has not flowered and is not harvestable.

(ee) ~~(cc)~~ "State operating license" or, unless the context

requires a different meaning, "license" means a license that is

issued under this act that allows the licensee to operate as 1 of

the following, specified in the license:

(i) A grower.

(ii) A processor.

(iii) A secure transporter.

(iv) A provisioning center.

(v) A safety compliance facility.

(ff) ~~(dd)~~ "Statewide monitoring system" or, unless the context

requires a different meaning, "system" means an internet-based,

statewide database established, implemented, and maintained by the

department under the marihuana tracking act, that is available to

licensees, law enforcement agencies, and authorized state

departments and agencies on a 24-hour basis for all of the

following:

(i) Verifying registry identification cards.

(ii) Tracking marihuana transfer and transportation by

licensees, including transferee, date, quantity, and price.

(iii) Verifying in commercially reasonable time that a

transfer will not exceed the limit that the patient or caregiver is

authorized to receive under section 4 of the Michigan medical

marihuana act, MCL 333.26424.

(gg) ~~(ee)~~ "Tissue culture" means a marihuana plant cell,

cutting, tissue, or organ, that is kept under a sterile condition

on a nutrient culture medium of known composition and that does not

have visible root formation. A tissue culture is not a marihuana

plant for purposes of a grower.

(hh) ~~(ff)~~ "Usable marihuana" means the dried leaves, flowers,

plant resin, or extract of the marihuana plant, but does not

include the seeds, stalks, and roots of the plant.

Sec. 207. (1) A Except as otherwise provided in subsection

(2), a licensee shall adopt and use a third-party inventory control

and tracking system that is capable of interfacing with the

statewide monitoring system to allow the licensee to enter or

access information in the statewide monitoring system as required

under this act and rules. The third-party inventory control and

tracking system must have all of the following capabilities

necessary for the licensee to comply with the requirements

applicable to the licensee's license type:

(a) Tracking all marihuana plants, products, packages, patient

and primary caregiver purchase totals, waste, transfers,

conversions, sales, and returns that are linked to unique

identification numbers.

(b) Tracking lot and batch information throughout the entire

chain of custody.

throughout the entire chain of custody.

(d) Tracking marihuana plant, batch, and product destruction.

(e) Tracking transportation of product.

(f) Performing complete batch recall tracking that clearly

identifies all of the following details relating to the specific

batch subject to the recall:

(i) Sold product.

(ii) Product inventory that is finished and available for

sale.

(iii) Product that is in the process of transfer.

(iv) Product being processed into another form.

(v) Postharvest raw product, such as product that is in the

drying, trimming, or curing process.

(g) Reporting and tracking loss, theft, or diversion of

product containing marihuana.

(h) Reporting and tracking all inventory discrepancies.

(i) Reporting and tracking adverse patient responses or dose-

related efficacy issues.

(j) Reporting and tracking all sales and refunds.

(k) Electronically receiving and transmitting information as

required under this act, the Michigan medical marihuana act, 2008

IL 1, MCL 333.26421 to 333.26430, and the marihuana tracking act.

(l) Receiving testing results electronically from a safety

compliance facility via a secured application program interface

into the system and directly linking the testing results to each

applicable source batch and sample.

(m) Identifying test results that may have been altered.

(n) Providing the licensee with access to information in the

tracking system that is necessary to verify that the licensee is

carrying out the marihuana transactions authorized under the

licensee's license in accordance with this act.

(o) Providing information to cross-check that product sales

are made to a registered qualifying patient or a registered primary

caregiver on behalf of a registered qualifying patient and that the

product received the required testing.

(p) Providing the department and state agencies with access to

information in the database that they are authorized to access.

(q) Providing law enforcement agencies with access to only the

information in the database that is necessary to verify that an

individual possesses a valid and current registry identification

card.

(r) Providing licensees with access only to the information in

the system that they are required to receive before a sale,

transfer, transport, or other activity authorized under a license

issued under this act.

(s) Securing the confidentiality of information in the

database by preventing access by a person who is not authorized to

access the statewide monitoring system or is not authorized to

access the particular information.

(t) Providing analytics to the department regarding key

performance indicators such as the following:

(i) Total daily sales.

(ii) Total marihuana plants in production.

(iii) Total marihuana plants destroyed.

(iv) Total inventory adjustments.

(2) If the statewide monitoring system is capable of allowing

a licensee to access or enter information into the statewide

monitoring system without use of a third-party inventory control

and tracking system, a licensee may access or enter information

into the statewide monitoring system directly and the licensee is

not required to adopt and use a third-party inventory control and

tracking system.

Sec. 301. (1) The medical marihuana licensing board is created

within the department of licensing and regulatory affairs.

(2) The board consists of 5 members who are residents of this

state, not more than 3 of whom are members of the same political

party. The governor shall appoint the members. One of the members

shall be appointed from 3 nominees submitted by the senate majority

leader and 1 from 3 nominees submitted by the speaker of the house.

The governor shall designate 1 of the members as chairperson.

(3) The members shall be appointed for terms of 4 years,

except, of those who are first appointed, 1 member shall be

appointed for a term of 2 years and 2 members shall be appointed

for a term of 3 years. A member's term expires on December 31 of

the last year of the member's term. If a vacancy occurs, the

governor shall appoint a successor to fill the unexpired term in

the manner of the original appointment.

(4) Each member of the board shall be reimbursed for all

actual and necessary expenses and disbursements incurred in

carrying out official duties.

(5) A board member shall not hold any other public office for

which he or she receives compensation other than necessary travel

or other incidental expenses.

(6) A person who is not of good moral character or who has

been indicted for, charged with, or convicted of, pled guilty or

nolo contendere to, or forfeited bail concerning any felony or a

misdemeanor involving a controlled substance violation, theft,

dishonesty, or fraud under the laws of this state, any other state,

or the United States or a local ordinance in any state involving a

controlled substance violation, dishonesty, theft, or fraud that

substantially corresponds to a misdemeanor in that state is not

eligible to serve on the board.

(7) The governor may remove any member of the board for

neglect of duty, misfeasance, malfeasance, nonfeasance, or any

other just cause.

~~(8) The department in conjunction with the board shall employ~~

~~an executive director and other personnel as necessary to assist~~

~~the board in carrying out its duties. The executive director shall~~

~~devote his or her full time to the duties of the office and shall~~

~~not hold any other office or employment.~~

(8) ~~(9)~~ The board shall not appoint or employ an individual if

any of the following circumstances exist:

(a) During the 3 years immediately preceding appointment or

employment, the individual held any direct or indirect interest in,

or was employed by, a person who is licensed to operate under this

act or under a corresponding license in another jurisdiction or a

person with an application for an operating license pending before

the board or in any other jurisdiction. The board shall not employ

an individual who has a direct or indirect interest in a licensee

or a marihuana facility.

(b) The individual or his or her spouse, parent, child,

child's spouse, sibling, or spouse of a sibling has an application

for a license pending before the board or is a member of the board

of directors of, or an individual financially interested in, any

licensee or marihuana facility.

(9) ~~(10)~~ Each member of the board ~~, the executive director,~~

and each key employee as determined by the department shall file

with the governor a financial disclosure statement listing all

assets and liabilities, property and business interests, and

sources of income of the member ~~, executive director,~~ and key

employee and his or her spouse, if any, affirming that the member ,

~~executive director,~~ and key employee are in compliance with

subsection ~~(9)(a)~~ (8)(a) and (b). The financial disclosure

statement shall be made under oath and filed at the time of

employment and annually thereafter.

(10) ~~(11)~~ Each employee of the board shall file with the board

a financial disclosure statement listing all assets and

liabilities, property and business interests, and sources of income

of the employee and his or her spouse. This subsection does not

apply to ~~the executive director or~~ a key employee.

(11) ~~(12)~~ A member of the board ~~, executive director,~~ or key

employee shall not hold any direct or indirect interest in, be

employed by, or enter into a contract for services with an

applicant, a board licensee, or a marihuana facility for a period

of 4 years after the date his or her employment or membership on

the board terminates. The department in consultation with the board

shall define the term "direct or indirect interest" by rule.

(12) ~~(13)~~ For 2 years after the date his or her employment

with the board is terminated, an employee of the board shall not

acquire any direct or indirect interest in, be employed by, or

enter into a contract for services with any applicant, licensee, or

marihuana facility.

(13) ~~(14)~~ For 2 years after the termination of his or her

office or employment with the board, a board member or an

individual employed by the board shall not represent any person or

party other than this state before or against the board.

(14) ~~(15)~~ A business entity in which a former board member or

employee or agent has an interest, or any partner, officer, or

employee of the business entity, shall not make any appearance or

represent a party that the former member, employee, or agent is

prohibited from appearing for or representing. As used in this

subsection, "business entity" means a corporation, limited

liability company, partnership, limited liability partnership,

association, trust, or other form of legal entity.

Sec. 305. (1) By January 31 of each year, each member of the

board shall prepare and file with the governor's office and the

board a disclosure form in which the member does all of the

following:

(a) Affirms that the member or the member's spouse, parent,

child, or child's spouse is not a member of the board of directors

of, financially interested in, or employed by a licensee or

applicant.

(b) Affirms that the member continues to meet any other

criteria for board membership under this act or the rules

promulgated by the board.

property that is or that may be directly or indirectly involved

with operations authorized by this act.

(d) Discloses any other information as may be required to

ensure that the integrity of the board and its work is maintained.

(2) By January 31 of each year, each employee of the board

shall prepare and file with the board an employee disclosure form

in which the employee does all of the following:

(a) Affirms the absence of financial interests prohibited by

this act.

(b) Discloses any legal or beneficial interests in any real

property that is or that may be directly or indirectly involved

with operations authorized by this act.

parent, child, or child's spouse is financially interested in or

employed by a licensee or an applicant for a license under this

act.

(d) Discloses such other matters as may be required to ensure

that the integrity of the board and its work is maintained.

(3) A member, employee, or agent of the board who becomes

aware that the member, employee, or agent of the board or his or

her spouse, parent, or child is a member of the board of directors

of, financially interested in, or employed by a licensee or an

applicant shall immediately provide detailed written notice thereof

to the chairperson.

(4) A member, employee, or agent of the board who within the

previous 10 years has been indicted for, charged with, or convicted

of, pled guilty or nolo contendere to, or forfeited bail concerning

a misdemeanor involving controlled substances, dishonesty, theft,

or fraud or a local ordinance in any state involving controlled

substances, dishonesty, theft, or fraud that substantially

corresponds to a misdemeanor in that state, or a felony under

Michigan law, the laws of any other state, or the laws of the

United States or any other jurisdiction shall immediately provide

detailed written notice of the conviction or charge to the

chairperson.

(5) Any member, employee, or agent of the board who is

negotiating for, or acquires by any means, any interest in any

person who is a licensee or an applicant, or any person affiliated

with such a person, shall immediately provide written notice of the

details of the interest to the chairperson. The member, employee,

or agent of the board shall not act on behalf of the board with

respect to that person.

(6) A member, employee, or agent of the board shall not enter

into any negotiations for employment with any person or affiliate

of any person who is a licensee or an applicant and shall

immediately provide written notice of the details of any such

negotiations or discussions in progress to the chairperson. The

member, employee, or agent of the board shall not take action on

behalf of the board with respect to that person.

(7) Any member, employee, or agent of the board who receives

an invitation, written or oral, to initiate a discussion concerning

employment or the possibility of employment with a person or

affiliate of a person who is a licensee or an applicant shall

immediately report that he or she received the invitation to the

chairperson. The member, employee, or agent of the board shall not

take action on behalf of the board with respect to the person.

(8) A licensee or applicant shall not knowingly initiate a

negotiation for or discussion of employment with a member,

employee, or agent of the board. A licensee or applicant who

initiates a negotiation or discussion about employment shall

immediately provide written notice of the details of the

negotiation or discussion to the chairperson as soon as he or she

becomes aware that the negotiation or discussion has been initiated

with a member, employee, or agent of the board.

(9) A member, employee, or agent of the board, or former

member, employee, or agent of the board, shall not disseminate or

otherwise disclose any material or information in the possession of

the board that the board considers confidential unless specifically

authorized to do so by the chairperson or the board.

(10) A member, employee, or agent of the board or a parent,

spouse, sibling, spouse of a sibling, child, or spouse of a child

of a member, employee, or agent of the board shall not accept any

gift, gratuity, compensation, travel, lodging, or anything of

value, directly or indirectly, from any licensee or any applicant

or affiliate or representative of a licensee or applicant, unless

the acceptance conforms to a written policy or directive that is

issued by the chairperson or the board. Any member, employee, or

agent of the board who is offered or receives any gift, gratuity,

compensation, travel, lodging, or anything of value, directly or

indirectly, from any licensee or any applicant or affiliate or

representative of an applicant or licensee shall immediately

provide written notification of the details to the chairperson.

(11) A licensee or applicant, or an affiliate or

representative of an applicant or licensee, shall not, directly or

indirectly, give or offer to give any gift, gratuity, compensation,

travel, lodging, or anything of value to any member, employee, or

agent of the board that the member, employee, or agent of the board

is prohibited from accepting under subsection (10).

(12) A member, employee, or agent of the board shall not

engage in any conduct that constitutes a conflict of interest and

shall immediately advise the chairperson in writing of the details

of any incident or circumstances that would present the existence

of a conflict of interest with respect to performing board-related

work or duties.

(13) A member, employee, or agent of the board who is

approached and offered a bribe as described in section 118 of the

Michigan penal code, 1931 PA 328, MCL 750.118, or this act shall

immediately provide written account of the details of the incident

to the chairperson and to a law enforcement officer of a law

enforcement agency having jurisdiction.

(14) A member, employee, or agent of the board shall disclose

his or her past involvement with any marihuana enterprise in the

past 5 years and shall not engage in political activity or

politically related activity during the duration of his or her

appointment or employment.

(15) A former member, employee, or agent of the board may

appear before the board as a fact witness about matters or actions

handled by the member, employee, or agent during his or her tenure

as a member, employee, or agent of the board. The member, employee,

or agent of the board shall not receive compensation for such an

appearance other than a standard witness fee and reimbursement for

travel expenses as established by statute or court rule.

(16) A licensee or applicant or any affiliate or

representative of an applicant or licensee shall not engage in ex

parte communications with a member of the board. A member of the

board shall not engage in any ex parte communications with a

licensee or an applicant or with any affiliate or representative of

an applicant or licensee.

(17) Any board member, licensee, or applicant or affiliate or

representative of a board member, licensee, or applicant who

receives any ex parte communication in violation of subsection

(16), or who is aware of an attempted communication in violation of

subsection (16), shall immediately report details of the

communication or attempted communication in writing to the

chairperson.

(18) Any member of the board who receives an ex parte

communication in an attempt to influence that member's official

action shall disclose the source and content of the communication

to the chairperson. The chairperson may investigate or initiate an

investigation of the matter with the assistance of the attorney

general and state police to determine if the communication violates

subsection (16) or subsection (17) or other state law. The

disclosure under this section and the investigation are

confidential. Following an investigation, the chairperson shall

advise the governor or the board, or both, of the results of the

investigation and may recommend action as the chairperson considers

appropriate. If the chairperson receives such an ex parte

communication, he or she shall report the communication to the

governor's office for appropriate action.

(19) A new or current employee or agent of the board shall

obtain written permission from the ~~executive~~ director of the

department or his or her designee before continuing outside

employment held at the time the employee begins to work for the

board. Permission shall be denied, or permission previously granted

shall be revoked, if the ~~executive~~ director of the department or

his or her designee considers the nature of the work to create a

possible conflict of interest or if it would otherwise interfere

with the duties of the employee or agent for the board.

(20) An employee or agent of the board granted permission for

outside employment shall not conduct any business or perform any

activities, including solicitation, related to outside employment

on premises used by the board or during the employee's working

hours for the board.

(21) The chairperson shall report any action he or she has

taken or proposes to take under this section with respect to an

employee or agent or former employee or former agent to the board

at the next meeting of the board. ~~The board may direct the~~

~~executive director to take additional or different action.~~

(22) Except as allowed under the Michigan medical marihuana

act, a member, employee, or agent of the board shall not enter into

any personal transaction involving marihuana with a licensee or

applicant.

(23) If a licensee or applicant, or an affiliate or

representative of a licensee or applicant, violates this section,

the board may deny a license application, revoke or suspend a

license, or take other disciplinary action as provided in section

407.

(24) Violation of this section by a member of the board may

result in disqualification or constitute cause for removal under

section 301(7) or other disciplinary action as recommended by the

board to the governor.

(25) A violation of this section by an employee or agent of

the board need not result in termination of employment if the board

determines that the conduct involved does not violate the purpose

of this act. However, all of the following apply:

(a) If, after being offered employment or beginning employment

with the board, the employee or agent intentionally acquires a

financial interest in a licensee or an applicant, or an affiliate

or representative of a licensee or applicant, the offer or

employment with the board shall be terminated.

(b) If a financial interest in a licensee or an applicant, or

an affiliate or representative of a licensee or applicant, is

acquired by an employee or agent that has been offered employment

with the board, an employee of the board, or the employee's or

agent's spouse, parent, or child, through no intentional action of

the employee or agent, the individual shall have up to 30 days to

divest or terminate the financial interest. Employment may be

terminated if the interest has not been divested after 30 days.

a spouse, parent, child, or spouse of a child of a board member.

(26) Violation of this section does not create a civil cause

of action.

(27) As used in this section:

(a) "Outside employment", in addition to employment by a third

party, includes, but is not limited to, the following:

(i) Operation of a proprietorship.

(ii) Participation in a partnership or group business

enterprise.

(iii) Performance as a director or corporate officer of any

for-profit or nonprofit corporation or banking or credit

institution.

(iv) Performance as a manager of a limited liability company.

(b) "Political activity" or "politically related activity"

includes all of the following:

(i) Using his or her official authority or influence for the

purpose of interfering with or affecting the result of an election.

(ii) Knowingly soliciting, accepting, or receiving a political

contribution from any person.

(iii) Running for the nomination or as a candidate for

election to a partisan political office.

(iv) Knowingly soliciting or discouraging the participation in

any political activity of any person who is either of the

following:

(A) Applying for any compensation, grant, contract, ruling,

license, permit, or certificate pending before the board.

(B) The subject of or a participant in an ongoing audit,

investigation, or enforcement action being carried out by the

board.

Sec. 401. (1) Beginning ~~360 days after the effective date of~~

~~this act,~~ December 15, 2017, a person may apply to the board for

state operating licenses in the categories of class A, B, or C

grower; processor; provisioning center; secure transporter; and

safety compliance facility as provided in this act. The application

shall be made under oath on a form provided by the board and shall

contain information as prescribed by the board, including, but not

limited to, all of the following:

(a) The name, business address, business telephone number,

~~social security~~ Social Security number, and, if applicable, federal

tax identification number of the applicant.

(b) The identity of every person having any ownership interest

in the applicant with respect to which the license is sought. If

the disclosed entity is a trust, the application shall disclose the

names and addresses of the beneficiaries; if a privately held

corporation, the names and addresses of all shareholders, officers,

and directors; if a publicly held corporation, the names and

addresses of all shareholders holding a direct or indirect interest

of greater than 5%, officers, and directors; if a partnership or

limited liability partnership, the names and addresses of all

partners; if a limited partnership or limited liability limited

partnership, the names of all partners, both general and limited;

or if a limited liability company, the names and addresses of all

members and managers.

indirectly involved in the growing, processing, testing,

transporting, or sale of marihuana, including, if applicable, the

state of incorporation or registration, in which an applicant or,

if the applicant is an individual, the applicant's spouse, parent,

or child has any equity interest. If an applicant is a corporation,

partnership, or other business entity, the applicant shall identify

any other corporation, partnership, or other business entity that

is directly or indirectly involved in the growing, processing,

testing, transporting, or sale of marihuana in which it has any

equity interest, including, if applicable, the state of

incorporation or registration. An applicant may comply with this

subdivision by filing a copy of the applicant's registration with

the Securities and Exchange Commission if the registration contains

the information required by this subdivision.

(d) Whether an applicant has been indicted for, charged with,

arrested for, or convicted of, pled guilty or nolo contendere to,

forfeited bail concerning any criminal offense under the laws of

any jurisdiction, either felony or controlled-substance-related

misdemeanor, not including traffic violations, regardless of

whether the offense has been reversed on appeal or otherwise,

including the date, the name and location of the court, arresting

agency, and prosecuting agency, the case caption, the docket

number, the offense, the disposition, and the location and length

of incarceration.

(e) Whether an applicant has ever applied for or has been

granted any commercial license or certificate issued by a licensing

authority in Michigan or any other jurisdiction that has been

denied, restricted, suspended, revoked, or not renewed and a

statement describing the facts and circumstances concerning the

application, denial, restriction, suspension, revocation, or

nonrenewal, including the licensing authority, the date each action

was taken, and the reason for each action.

(f) Whether an applicant has filed, or been served with, a

complaint or other notice filed with any public body, regarding the

delinquency in the payment of, or a dispute over the filings

concerning the payment of, any tax required under federal, state,

or local law, including the amount, type of tax, taxing agency, and

time periods involved.

(g) A statement listing the names and titles of all public

officials or officers of any unit of government, and the spouses,

parents, and children of those public officials or officers, who,

directly or indirectly, own any financial interest in, have any

beneficial interest in, are the creditors of or hold any debt

instrument issued by, or hold or have any interest in any

contractual or service relationship with an applicant. As used in

this subdivision, public official or officer does not include a

person who would have to be listed solely because of his or her

state or federal military service.

(h) A description of the type of marihuana facility;

anticipated or actual number of employees; and projected or actual

gross receipts.

(i) Financial information in the manner and form prescribed by

the board.

(j) A paper copy or electronic posting website reference for

the ordinance or zoning restriction that the municipality adopted

to authorize or restrict operation of 1 or more marihuana

facilities in the municipality.

(k) A copy of the notice informing the municipality by

registered mail that the applicant has applied for a license under

this act. The applicant shall also certify that it has delivered

the notice to the municipality or will do so by 10 days after the

date the applicant submits the application for a license to the

board.

(l) Any other information the department requires by rule.

(2) The board shall use information provided on the

application as a basis to conduct a thorough background

investigation on the applicant. A false application is cause for

the board to deny a license. The board shall not consider an

incomplete application but shall, within a reasonable time, return

the application to the applicant with notification of the

deficiency and instructions for submitting a corrected application.

Information the board obtains from the background investigation is

exempt from disclosure under the freedom of information act, 1976

PA 442, MCL 15.231 to 15.246.

(3) An applicant must provide written consent to the

inspections, examinations, searches, and seizures provided for in

section 303(1)(c)(i) to (iv) and to disclosure to the board and its

agents of otherwise confidential records, including tax records

held by any federal, state, or local agency, or credit bureau or

financial institution, while applying for or holding a license.

Information the board receives under this subsection is exempt from

disclosure under the freedom of information act, 1976 PA 442, MCL

15.231 to 15.246.

(4) An applicant must certify that the applicant does not have

an interest in any other state operating license that is prohibited

under this act.

(5) A nonrefundable application fee must be paid at the time

of filing to defray the costs associated with the background

investigation conducted by the board. The department in

consultation with the board shall set the amount of the application

fee for each category and class of license by rule. If the costs of

the investigation and processing the application exceed the

application fee, the applicant shall pay the additional amount to

the board. All information, records, interviews, reports,

statements, memoranda, or other data supplied to or used by the

board in the course of its review or investigation of an

application for a license under this act shall be disclosed only in

accordance with this act. The information, records, interviews,

reports, statements, memoranda, or other data are not admissible as

evidence or discoverable in any action of any kind in any court or

before any tribunal, board, agency, or person, except for any

action considered necessary by the board.

(6) By 10 days after the date the applicant submits an

application to the board, the applicant shall notify the

municipality by registered mail that it has applied for a license

under this act.

Sec. 402. (1) The board shall issue a license to an applicant

who submits a complete application and pays both the nonrefundable

application fee required under section 401(5) and the regulatory

assessment established by the board for the first year of

operation, if the board determines that the applicant is qualified

to receive a license under this act.

(2) An applicant is ineligible to receive a license if any of

the following circumstances exist:

(a) The applicant has been convicted of or released from

incarceration for a felony under the laws of this state, any other

state, or the United States within the past 10 years or has been

convicted of a controlled substance-related felony within the past

10 years.

(b) Within the past 5 years the applicant has been convicted

of a misdemeanor involving a controlled substance, theft,

dishonesty, or fraud in any state or been found responsible for

violating a local ordinance in any state involving a controlled

substance, dishonesty, theft, or fraud that substantially

corresponds to a misdemeanor in that state.

license under this act that contains false information.

(d) The applicant is a member of the board.

(e) The applicant fails to demonstrate the applicant's ability

to maintain adequate premises liability and casualty insurance for

its proposed marihuana facility.

(f) The applicant holds an elective office of a governmental

unit of this state, another state, or the federal government; is a

member of or employed by a regulatory body of a governmental unit

in this state, another state, or the federal government; or is

employed by a governmental unit of this state. This subdivision

does not apply to an elected officer of or employee of a federally

recognized Indian tribe or to an elected precinct delegate.

~~(g) The applicant, if an individual, has been a resident of~~

~~this state for less than a continuous 2-year period immediately~~

~~preceding the date of filing the application. The requirements in~~

~~this subdivision do not apply after June 30, 2018.~~

(g) ~~(h)~~ The board determines that the applicant is not in

compliance with section 205(1).

(h) ~~(i)~~ The applicant fails to meet other criteria established

by rule.

(3) In determining whether to grant a license to an applicant,

the board may also consider all of the following:

(a) The integrity, moral character, and reputation; personal

and business probity; financial ability and experience; and

responsibility or means to operate or maintain a marihuana facility

of the applicant and of any other person that meets either of the

following:

(i) Controls, directly or indirectly, the applicant.

(ii) Is controlled, directly or indirectly, by the applicant

or by a person who controls, directly or indirectly, the applicant.

(b) The financial ability of the applicant to purchase and

maintain adequate liability and casualty insurance.

capitalization to operate and maintain the proposed marihuana

facility.

(d) Whether the applicant has been indicted for, charged with,

arrested for, or convicted of, pled guilty or nolo contendere to,

forfeited bail concerning, or had expunged any relevant criminal

offense under the laws of any jurisdiction, either felony or

misdemeanor, not including traffic violations, regardless of

whether the offense has been expunged, pardoned, or reversed on

appeal or otherwise.

(e) Whether the applicant has filed, or had filed against it,

a proceeding for bankruptcy within the past 7 years.

(f) Whether the applicant has been served with a complaint or

other notice filed with any public body regarding payment of any

tax required under federal, state, or local law that has been

delinquent for 1 or more years.

(g) Whether the applicant has a history of noncompliance with

any regulatory requirements in this state or any other

jurisdiction.

(h) Whether at the time of application the applicant is a

defendant in litigation involving its business practices.

(i) Whether the applicant meets other standards in rules

applicable to the license category.

(4) Each applicant ~~shall submit with its application, on forms~~

~~provided by the board, a passport quality photograph and~~ shall

ensure that 1 set of fingerprints is submitted to the department of

state police. ~~for each person having any ownership interest in the~~

~~marihuana facility and each person who is an officer, director, or~~

~~managerial employee of the applicant, in order for the department~~

~~of state police to conduct a criminal history check on each person~~

~~and to forward each person's fingerprints to the Federal Bureau of~~

~~Investigation for a national criminal history check.~~ The applicant

shall submit with its application ~~each person's~~ the applicant's

written consent to the criminal history check described in this

section and the submission of ~~each person's~~ the applicant's

fingerprints to, and the inclusion of ~~each person's~~ the applicant's

fingerprints in, the state and federal database systems described

in subsection (7).

(5) The fingerprints required under subsection (4) may be

taken by a law enforcement agency or any other person determined by

the department of state police to be qualified to take

fingerprints. The applicant shall submit a fingerprint processing

fee to the department in an amount required under section 3 of 1935

PA 120, MCL 28.273, and any costs imposed by the Federal Bureau of

Investigation.

(6) The department of state police shall ~~conduct~~ do all of the

following:

(a) Conduct a criminal history check on each ~~person described~~

~~in subsection (4)~~ applicant and ~~shall~~ request the Federal Bureau of

Investigation to make a determination of the existence of any

national criminal history pertaining to each ~~person. The department~~

~~of state police shall provide~~ applicant.

(b) Provide the board with a written report containing the

criminal history record information of each ~~person who was the~~

~~subject of the criminal history check conducted under this~~

~~section.~~applicant.

(7) All of the following apply concerning fingerprints

submitted to the department of state police under this section:

(a) The department of state police shall store and retain all

fingerprints submitted under this section in an automated

fingerprint identification system database that searches against

latent fingerprints, and provides for an automatic notification if

and when a subsequent fingerprint is submitted into the system that

matches a set of fingerprints previously submitted under this

section or if and when the criminal history of an individual whose

fingerprints are retained in the system is updated. Upon receiving

a notification, the department of state police shall immediately

notify the board. Information in the database maintained under this

subsection is confidential, is not subject to disclosure under the

freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, and

shall not be disclosed to any person except for purposes of this

act or for law enforcement purposes.

(b) The department of state police shall forward all

fingerprints submitted to it under this section to the Federal

Bureau of Investigation for submission of those fingerprints into

the FBI automatic notification system. This subdivision does not

apply until the department of state police is a participant in the

FBI automatic notification system. As used in this subdivision:

(i) "Automatic notification system" means a system that stores

and retains fingerprints, and that provides for an automatic

notification to a participant if and when a fingerprint is

submitted into the system that matches an individual whose

fingerprints are retained in the system or if and when the criminal

history of an individual whose fingerprints are retained in the

system is updated.

(ii) "FBI automatic notification system" means the automatic

notification system that is maintained by the Federal Bureau of

Investigation.

(8) The board shall review all applications for licenses and

shall inform each applicant of the board's decision.

(9) A license shall be issued for a 1-year period and is

renewable annually. Except as otherwise provided in this act, the

board shall renew a license if all of the following requirements

are met:

(a) The licensee applies to the board on a renewal form

provided by the board that requires information prescribed in

rules.

(b) The application is received by the board on or before the

expiration date of the current license.

603.

(d) The licensee meets the requirements of this act and any

other renewal requirements set forth in rules.

(10) The department shall notify the licensee by mail or

electronic mail at the last known address on file with the board

advising of the time, procedure, and regulatory assessment under

section 603. The failure of the licensee to receive notice under

this subsection does not relieve the licensee of the responsibility

for renewing the license.

(11) If a license renewal application is not submitted by the

license expiration date, the license may be renewed within 60 days

after its expiration date upon application, payment of the

regulatory assessment under section 603, and satisfaction of any

renewal requirement and late fee set forth in rules. The licensee

may continue to operate during the 60 days after the license

expiration date if the license is renewed by the end of the 60-day

period.

(12) License expiration does not terminate the board's

authority to impose sanctions on a licensee whose license has

expired.

(13) In its decision on an application for renewal, the board

shall consider any specific written input it receives from an

individual or entity within the local unit of government in which

the applicant for renewal is located.

(14) A licensee must consent in writing to inspections,

examinations, searches, and seizures that are permitted under this

act and must provide a handwriting exemplar, fingerprints,

photographs, and information as authorized in this act or by rules.

(15) An applicant or licensee has a continuing duty to provide

information requested by the board and to cooperate in any

investigation, inquiry, or hearing conducted by the board.

Sec. 406. Each license is exclusive to the licensee, and a

licensee or any other person must apply for and receive the board's

approval before a license is transferred, sold, or purchased. The

attempted transfer, sale, or other conveyance of an interest of

~~more than 1%~~ in a license without prior board approval is grounds

for suspension or revocation of the license or for other sanction

considered appropriate by the board, but only if the transfer,

sale, or other conveyance would result in the transferee meeting

the definition of applicant.

Sec. 407. (1) If an applicant or licensee fails to comply with

this act or rules, if a licensee fails to comply with the marihuana

tracking act, if a licensee no longer meets the eligibility

requirements for a license under this act, or if an applicant or

licensee fails to provide information the board requests to assist

in any investigation, inquiry, or board hearing, the board may

deny, suspend, revoke, or restrict a license. The board may

suspend, revoke, or restrict a license and require the removal of a

licensee or an employee of a licensee for a violation of this act,

rules, the marihuana tracking act, or any ordinance adopted under

section 205. The board may impose civil fines of up to $5,000.00

against an individual and up to $10,000.00 or an amount equal to

the daily gross receipts, whichever is greater, against a licensee

for each violation of this act, rules, or an order of the board.

Assessment of a civil fine under this subsection is not a bar to

the investigation, arrest, charging, or prosecution of an

individual for any other violation of this act and is not grounds

to suppress evidence in any criminal prosecution that arises under

this act or any other law of this state.

(2) The board shall comply with the administrative procedures

act of 1969, 1969 PA 306, MCL 24.201 to 24.328, when denying,

revoking, suspending, or restricting a license or imposing a fine.

The board may suspend a license without notice or hearing upon a

determination that the safety or health of patrons or employees is

jeopardized by continuing a marihuana facility's operation. If the

board suspends a license under this subsection without notice or

hearing, a prompt postsuspension hearing must be held to determine

if the suspension should remain in effect. The suspension may

remain in effect until the board determines that the cause for

suspension has been abated. The board may revoke the license or

approve a transfer or sale of the license upon a determination that

the licensee has not made satisfactory progress toward abating the

hazard.

(3) After denying an application for a license, the board

shall, upon request, provide a public investigative hearing at

which the applicant is given the opportunity to present testimony

and evidence to establish its suitability for a license. Other

testimony and evidence may be presented at the hearing, but the

board's decision must be based on the whole record before the board

and is not limited to testimony and evidence submitted at the

public investigative hearing.

(4) Except for license applicants who may be granted a hearing

at the discretion of the board under subsection (3), any party

aggrieved by an action of the board suspending, revoking,

restricting, or refusing to renew a license, or imposing a fine,

shall be given a hearing before the board upon request. A request

for a hearing must be made to the board in writing within 21 days

after service of notice of the action of the board. Notice of the

action of the board must be served either by personal delivery or

by certified mail, postage prepaid, to the aggrieved party. Notice

served by certified mail is considered complete on the business day

following the date of the mailing.

(5) The board may conduct investigative and contested case

hearings; issue subpoenas for the attendance of witnesses; issue

subpoenas duces tecum for the production of books, ledgers,

records, memoranda, electronically retrievable data, and other

pertinent documents; and administer oaths and affirmations to

witnesses as appropriate to exercise and discharge the powers and

duties of the board under this act. The ~~executive~~ director of the

department or his or her designee may issue subpoenas and

administer oaths and affirmations to witnesses.

Sec. 407a. Beginning June 1, 2019, a person shall not hold

itself out as operating a marihuana facility if the person does not

hold a license to operate that marihuana facility or if the

person's license to operate that marihuana facility is suspended,

revoked, lapsed, or void, or was fraudulently obtained or

transferred to the person other than pursuant to section 406. A

person that violates this section is guilty as follows:

(a) In the case of a first violation, a misdemeanor punishable

by a fine of not less than $10,000.00 or more than $25,000.00 or

imprisonment of not more than 93 days, or both.

(b) In the case of a second or subsequent violation, a

misdemeanor punishable by a fine of not less than $10,000.00 or

more than $25,000.00 or imprisonment of not more than 1 year, or

both.

punishable by a fine of not less than $10,000.00 or more than

$25,000.00 or imprisonment for not more than 4 years, or both.

Sec. 409. A state operating license is a revocable privilege

granted by this state and is not a property right. Granting a

license does not create or vest any right, title, franchise, or

other property interest. ~~Each license is exclusive to the licensee,~~

~~and a licensee or any other person must apply for and receive the~~

~~board's and municipality's approval before a license is~~

~~transferred, sold, or purchased.~~ A licensee or any other person

shall not lease, pledge, or borrow or loan money against a license.

~~The attempted transfer, sale, or other conveyance of an interest in~~

~~a license without prior board approval is grounds for suspension or~~

~~revocation of the license or for other sanction considered~~

~~appropriate by the board.~~

Sec. 702. The board shall submit with the annual report to the

governor under section ~~302(k)~~ 302(l) and to the chairs of the

legislative committees that govern issues related to marihuana

facilities a report covering the previous year. The report shall

include an account of the board actions, its financial position,

results of operation under this act, and any recommendations for

legislation that the board considers advisable.

Enacting section 1. Section 404 of the medical marihuana

facilities licensing act, 2016 PA 281, MCL 333.27404, is repealed.

Enacting section 2. This amendatory act takes effect January

1, 2019.