As described in an earlier post, part of the motivation for monitoring ownership of these licenses may have to do with the trailblazing social equity program built into Illinois’ adult use cannabis regulations. In addition to offering a 50% waiver for nonrefundable license application fees — which typically cost $30,000 for an Early Approval Adult Use Dispensing Organization License and $60,000 for Conditional Adult Use Dispensing Organization License — these provisions provide access to grant and loan programs for Qualified Social Equity Applicants who obtain a license. As outlined in the definition of Social Equity Applicant in section 410 ILCS 705/1-10, these applicants must either:
- Apply with a holding of at least 51% ownership and control by one or more individuals who have resided for at least 5 of the preceding 10 years in a Disproportionately Impacted Area, or have been arrested for, convicted of, or adjudicated delinquent for any offense that is eligible for expungement under HB 1438; or
- Have at least 10 full-time employees, at least 51% of whom currently reside in a Disproportionately Impacted Area or have been arrested for, convicted of, or adjudicated delinquent for any offense that is eligible for expungement.
Given that the Department has created these kinds of incentives and benefits for social equity applicants, it follows that the state would want such license holders to remain Social Equity Qualified Organizations after the license is granted. To that end, as outlined in 410 ILCS 705/7-25 and its subsections, if any of these applicants seek to transfer, sell, or grant a cannabis business establishment license within 5 years after it was issued to a person or entity that does not qualify as a Social Equity Applicant, the transfer agreement requires that any benefits received as a Social Equity Applicant are paid back. Specifically, the new license holder would need to pay the CBDF an amount equal to any any fees that were waived based on the applicant’s status as a Social Equity Applicant, any outstanding amount owed by the Qualified Social Equity Applicant for a loan through the CBDF, and the full amount of any grants that the original applicant received through the social equity program.
Questions Remain for how License Transferability will Play Out
While some parts of the license transfer process are spelled out in HB 1438, a number of questions remain:
- What are the factors the Department will use to determine whether a change in principal officers is a transfer of license? Where, specifically, is that line drawn? What is the test? This is a key question that was not addressed in the bill.
- Owners and principal officers are not allowed to own more than 10 licenses for cannabis dispensing organizations. Is that only within the state of Illinois? What about someone who owns licenses or is a principal officer for an organization in another state?
- The regulations are specific to dispensing organizations. What are or will be the rules regarding ownership for cultivation centers?
Answers to questions like these will likely reveal themselves in the coming months, as license holders begin the process of getting their businesses up and running and the Department shifts the focus of their Q+A sessions away from the application process and towards broader business inquiries.