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HB1438: ARTICLE 35. INFUSER ORGANIZATIONS (Illinois Cannabis Regulation & Tax Act)

ARTICLE 35. INFUSER ORGANIZATIONS

Section 35-3. Definitions.

In this Article:

“Department” means the Department of Agriculture.

Section 35-5. Issuance of licenses.

(a) The Department of Agriculture shall issue up to 40 infuser licenses through a process provided for in this Article no later than July 1, 2020.

(b) The Department of Agriculture shall make the application for infuser licenses available on January 7, 2020, or if that date falls on a weekend or holiday, the business day immediately succeeding the weekend or holiday and every January 7 or succeeding business day thereafter, and shall receive such applications no later than March 15, 2020, or, if that date falls on a weekend or holiday, the business day immediately succeeding the weekend or holiday and every March 15 or succeeding business day thereafter.

(c) By December 21, 2021, the Department of Agriculture may issue up to 60 additional infuser licenses. Prior to issuing such licenses, the Department may adopt rules through emergency rulemaking in accordance with subsection (gg) of Section 5-45 of the Illinois Administrative Procedure Act, to modify or raise the number of infuser licenses and modify or change the licensing application process to reduce or eliminate barriers. The General Assembly finds that the adoption of rules to regulate cannabis use is deemed an emergency and necessary for the public interest, safety, and welfare.

In determining whether to exercise the authority granted by this subsection, the Department of Agriculture must consider the following factors:

  • (1) the percentage of cannabis sales occurring in Illinois not in the regulated market using data from the Substance Abuse and Mental Health Services Administration, National Survey on Drug Use and Health, Illinois Behavioral Risk Factor Surveillance System, and tourism data from the Illinois Office of Tourism to ascertain total cannabis consumption in Illinois compared to the amount of sales in licensed dispensing organizations;
  • (2) whether there is an adequate supply of cannabis and cannabis-infused products to serve registered medical cannabis patients;
  • (3) whether there is an adequate supply of cannabis and cannabis-infused products to sere purchasers:
  • (4) whether there is an oversupply of cannabis in Illinois leading to trafficking of cannabis to any other state;
  • (5) population increases or shifts;
  • (6) changes to federal law;
  • (7) perceived security risks of increasing the number or location of infuser organizations;
  • (8) the past security records of infuser organizations;
  • (9) the Department of Agriculture’s capacity to appropriately regulate additional licenses;
  • (10) the findings and recommendations from the disparity and availability study commissioned by the Illinois Cannabis Regulation Oversight Officer to reduce or eliminate any identified barriers to entry in the cannabis industry; and
  • (11) any other criteria the Department of Agriculture deems relevant.

(d) After January 1, 2022, the Department of Agriculture may by rule modify or raise the number of infuser licenses, and modify or change the licensing application process to reduce or eliminate barriers based on the criteria in subsection (c).

Section 35-10. Application.

(a) When applying for a license, the applicant shall electronically submit the following in such form as the Department of Agriculture may direct:

  • (1) the nonrefundable application fee of $5,000 or, after January 1, 2021, another amount as set by rule by the Department of Agriculture, to be deposited into the Cannabis Regulation Fund;
  • (2) the legal name of the infuser;
  • (3) the proposed physical address of the infuser;
  • (4) the name, address, social security number, and date of birth of each principal officer and board member of the infuser; each principal officer and board member shall be at least 21 years of age;
  • (5) the details of any administrative or judicial proceeding in which any of the principal officers or board members of the infuser (i) pled guilty, were convicted, fined, or had a registration or license suspended or revoked, or (ii) managed or served on the board of a business or non-profit organization that pled guilty, was convicted, fined, or had a registration or license suspended or revoked;
  • (6) proposed operating bylaws that include procedures for the oversight of the infuser, including the development and implementation of a plant monitoring system, accurate recordkeeping, staffing plan, and security plan approved by the Department of State Police that are in accordance with the rules issued by the Department of Agriculture under this Act; a physical inventory of all cannabis shall be performed on a weekly basis by the infuser;
  • (7) verification from the Department of State Police that all background checks of the prospective principal officers, board members, and agents of the infuser organization have been conducted;
  • (8) a copy of the current local zoning ordinance and verification that the proposed infuser is in compliance with the local zoning rules and distance limitations established by the local jurisdiction;
  • (9) proposed employment practices, in which the applicant must demonstrate a plan of action to inform, hire, and educate minorities, women, veterans, and persons with disabilities, engage in fair labor practices, and provide worker protections;
  • (10) whether an applicant can demonstrate experience in or business practices that promote economic empowerment in Disproportionately Impacted Areas;
  • (11) experience with infusing products with cannabis concentrate;
  • (12) a description of the enclosed, locked facility where cannabis will be infused, packaged, or otherwise prepared for distribution to a dispensing organization or other infuser;
  • (13) processing, inventory, and packaging plans;
  • (14) a description of the applicant’s experience with operating a commercial kitchen or laboratory preparing products for human consumption;
  • (15) a list of any academic degrees, certifications, or relevant experience of all prospective principal officers, board members, and agents of the related business;
  • (16) the identity of every person having a financial or voting interest of 5% or greater in the infuser operation with respect to which the license is sought, whether a trust, corporation, partnership, limited liability company, or sole proprietorship, including the name and address of each person;
  • (17) a plan describing how the infuser will address each of the following:
    • (i) energy needs, including estimates of monthly electricity and gas usage, to what extent it will procure energy from a local utility or from on-site generation, and if it has or will adopt a sustainable energy use and energy conservation policy;
    • (ii) water needs, including estimated water draw, and if it has or will adopt a sustainable water use and water conservation policy; and
    • (iii) waste management, including if it has or will adopt a waste reduction policy;
  • (18) a recycling plan:
    • (A) a commitment that any recyclable waste generated by the infuser shall be recycled per applicable State and local laws, ordinances, and rules; and
    • (B) a commitment to comply with local waste provisions. An infuser commits to remain in compliance with applicable State and federal environmental requirements, including, but not limited to, storing, securing, and managing all recyclables and waste, including organic waste composed of or containing finished cannabis and cannabis products, in accordance with applicable State and local laws, ordinances, and rules; and
  • (19) any other information required by rule.

(b) Applicants must submit all required information, including the information required in Section 35-15, to the Department of Agriculture. Failure by an applicant to submit all required information may result in the application being disqualified.

(c) If the Department of Agriculture receives an application with missing information, the Department of Agriculture may issue a deficiency notice to the applicant. The applicant shall have 10 calendar days from the date of the deficiency notice to resubmit the incomplete information. Applications that are still incomplete after this opportunity to cure will not be scored and will be disqualified.

Section 35-15. Issuing licenses.

(a) The Department of Agriculture shall by rule develop a system to score infuser applications to administratively rank applications based on the clarity, organization, and quality of the applicant’s responses to required information. Applicants shall be awarded points based on the following categories:

  • (1) Suitability of the proposed facility;
  • (2) Suitability of the employee training plan;
  • (3) Security and recordkeeping plan;
  • (4) Infusing plan;
  • (5) Product safety and labeling plan;
  • (6) Business plan;
  • (7) The applicant’s status as a Social Equity Applicant, which shall constitute no less than 20% of total available points;
  • (8) Labor and employment practices, which shall constitute no less than 2% of total available points;
  • (9) Environmental plan as described in paragraphs (17) and (18) of subsection (a) of Section 35-10;
  • (10) The applicant is 51% or more owned and controlled by an individual or individuals who have been an Illinois resident for the past 5 years as proved by tax records;
  • (11) The applicant is 51% or more controlled and owned by an individual or individuals who meet the qualifications of a veteran as defined by Section 45-57 of the Illinois Procurement Code; and
  • (12) A diversity plan that includes a narrative of not more than 2,500 words that establishes a goal of diversity in ownership, management, employment, and contracting to ensure that diverse participants and groups are afforded equality of opportunity; and
  • (13) Any other criteria the Department of Agriculture may set by rule for points.

(b) The Department may also award up to 2 bonus points for the applicant’s plan to engage with the community. The applicant may demonstrate a desire to engage with its community by participating in one or more of, but not limited to, the following actions: (i) establishment of an incubator program designed to increase participation in the cannabis industry by persons who would qualify as Social Equity Applicants; (ii) providing financial assistance to substance abuse treatment centers; (iii) educating children and teens about the potential harms of cannabis use; or (iv) other measures demonstrating a commitment to the applicant’s community. Bonus points will only be awarded if the Department receives applications that receive an equal score for a particular region.

(c) Should the applicant be awarded an infuser license, the information and plans that an applicant provided in its application, including any plans submitted for the acquiring of bonus points, becomes a mandatory condition of the permit. Any variation from or failure to perform such plans may result in discipline, including the revocation or nonrenewal of a license.

(d) Should the applicant be awarded an infuser organization license, it shall pay a fee of $5,000 prior to receiving the license, to be deposited into the Cannabis Regulation Fund. The Department of Agriculture may by rule adjust the fee in this Section after January 1, 2021.

Section 35-20. Denial of application.

An application for an infuser license shall be denied if any of the following conditions are met:

  • (1) the applicant failed to submit the materials required by this Article;
  • (2) the applicant would not be in compliance with local zoning rules or permit requirements;
  • (3) one or more of the prospective principal officers or board members causes a violation of Section 35-25.
  • (4) one or more of the principal officers or board members is under 21 years of age;
  • (5) the person has submitted an application for a license under this Act or this Article that contains false information; or
  • (6) if the licensee; principal officer, board member, or person having a financial or voting interest of 5% or greater in the licensee; or agent is delinquent in filing any required tax returns or paying any amounts owed to the State of Illinois.

Section 35-25. Infuser organization requirements; prohibitions.

(a) The operating documents of an infuser shall include procedures for the oversight of the infuser, an inventory monitoring system including a physical inventory recorded weekly, accurate recordkeeping, and a staffing plan.

(b) An infuser shall implement a security plan reviewed by the Department of State Police that includes, but is not limited to: facility access controls, perimeter intrusion detection systems, personnel identification systems, and a 24-hour surveillance system to monitor the interior and exterior of the infuser facility and that is accessible to authorized law enforcement, the Department of Public Health, and the Department of Agriculture in real time.

(c) All processing of cannabis by an infuser must take place in an enclosed, locked facility at the physical address provided to the Department of Agriculture during the licensing process. The infuser location shall only be accessed by the agents working for the infuser, the Department of Agriculture staff performing inspections, the Department of Public Health staff performing inspections, State and local law enforcement or other emergency personnel, contractors working on jobs unrelated to cannabis, such as installing or maintaining security devices or performing electrical wiring, transporting organization agents as provided in this Act, participants in the incubator program, individuals in a mentoring or educational program approved by the State, local safety or health inspectors, or other individuals as provided by rule. However, if an infuser shares a premises with a craft grower or dispensing organization, agents from these other licensees may access the infuser portion of the premises if that is the location of common bathrooms, lunchrooms, locker rooms, or other areas of the building where processing of cannabis is not performed. At no time may a craft grower or dispensing organization agent perform work at an infuser without being a registered agent of the infuser.

(d) An infuser may not sell or distribute any cannabis to any person other than a dispensing organization, or as otherwise authorized by rule.

(e) An infuser may not either directly or indirectly discriminate in price between different cannabis business establishments that are purchasing a like grade, strain, brand, and quality of cannabis or cannabis-infused product. Nothing in this subsection (e) prevents an infuser from pricing cannabis differently based on differences in the cost of manufacturing or processing, the quantities sold, such volume discounts, or the way the products are delivered.

(f) All cannabis infused by an infuser and intended for distribution to a dispensing organization must be entered into a data collection system, packaged and labeled under Section 55-21, and, if distribution is to a dispensing organization that does not share a premises with the infuser, placed into a cannabis container for transport. All cannabis produced by an infuser and intended for distribution to a cultivation center, infuser organization, or craft grower with which it does not share a premises, must be packaged in a labeled cannabis container and entered into a data collection system before transport.

(g) Infusers are subject to random inspections by the Department of Agriculture, the Department of Public Health, the Department of State Police, and local law enforcement.

(h) An infuser agent shall notify local law enforcement, the Department of State Police, and the Department of Agriculture within 24 hours of the discovery of any loss or theft. Notification shall be made by phone, in person, or by written or electronic communication.

(i) An infuser organization may not be located in an area zoned for residential use.

(j) An infuser or infuser agent shall not transport cannabis or cannabis-infused products to any other cannabis business establishment without a transport organization license unless:

  • (i) If the infuser is located in a county with a population of 3,000,000 or more, the cannabis business establishment receiving the cannabis or cannabis-infused product is within 2,000 feet of the property line of the infuser;
  • (ii) If the infuser is located in a county with a population of more than 700,000 but fewer than 3,000,000, the cannabis business establishment receiving the cannabis or cannabis-infused product is within 2 miles of the infuser; or
  • (iii) If the infuser is located in a county with a population of fewer than 700,000, the cannabis business establishment receiving the cannabis or cannabis-infused product is within 15 miles of the infuser.

(k) An infuser may enter into a contract with a transporting organization to transport cannabis to a dispensing organization or a laboratory.

(l) An infuser organization may share premises with a craft grower or a dispensing organization, or both, provided each licensee stores currency and cannabis or cannabis-infused products in a separate secured vault to which the other licensee does not have access or all licensees sharing a vault share more than 50% of the same ownership.

(m) It is unlawful for any person or entity having an infuser organization license or any officer, associate, member, representative or agent of such licensee to offer or deliver money, or anything else of value, directly or indirectly to any person having an Early Approval Adult Use Dispensing Organization License, a Conditional Adult Use Dispensing Organization License, an Adult Use Dispensing Organization License, or a medical cannabis dispensing organization license issued under the Compassionate Use of Medical Cannabis Pilot Program Act, or to any person connected with or in any way representing, or to any member of the family of, such person holding an Early Approval Adult Use Dispensing Organization License, a Conditional Adult Use Dispensing Organization License, an Adult Use Dispensing Organization License, or a medical cannabis dispensing organization license issued under the Compassionate Use of Medical Cannabis Pilot Program Act, or to any stockholders in any corporation engaged the retail sales of cannabis, or to any officer, manager, agent, or representative of the Early Approval Adult Use Dispensing Organization License, a Conditional Adult Use Dispensing Organization License, an Adult Use Dispensing Organization License, or a medical cannabis dispensing organization license issued under the Compassionate Use of Medical Cannabis Pilot Program Act to obtain preferential placement within the dispensing organization, including, without limitation, on shelves and in display cases where purchasers can view products, or on the dispensing organization’s website.

(n) At no time shall an infuser organization or an infuser agent perform the extraction of cannabis concentrate from cannabis flower.

Section 35-30. Infuser agent identification card.

(a) The Department of Agriculture shall:

  • (1) establish by rule the information required in an initial application or renewal application for an agent identification card submitted under this Act and the nonrefundable fee to accompany the initial application or renewal application;
  • (2) verify the information contained in an initial application or renewal application for an agent identification card submitted under this Act, and approve or deny an application within 30 days of receiving a completed initial application or renewal application and all supporting documentation required by rule;
  • (3) issue an agent identification card to a qualifying agent within 15 business days of approving the initial application or renewal application;
  • (4) enter the license number of the infuser where the agent works; and
  • (5) allow for an electronic initial application and renewal application process, and provide a confirmation by electronic or other methods that an application has been submitted. The Department of Agriculture may by rule require prospective agents to file their applications by electronic means and provide notices to the agents by electronic means.

(b) An agent must keep his or her identification card visible at all times when on the property of a cannabis business establishment including the cannabis business establishment for which he or she is an agent.

(c) The agent identification cards shall contain the following:

  • (1) the name of the cardholder;
  • (2) the date of issuance and expiration date of the identification card;
  • (3) a random 10-digit alphanumeric identification number containing at least 4 numbers and at least 4 letters that is unique to the holder;
  • (4) a photograph of the cardholder; and
  • (5) the legal name of the infuser organization employing the agent.

(d) An agent identification card shall be immediately returned to the infuser organization of the agent upon termination of his or her employment.

(e) Any agent identification card lost by a transporting agent shall be reported to the Department of State Police and the Department of Agriculture immediately upon discovery of the loss.

Section 35-31. Ensuring an adequate supply of raw materials to serve infusers.

(a) As used in this Section, “raw materials” includes, but is not limited to, CO2 hash oil, “crude”, “distillate”, or any other cannabis concentrate extracted from cannabis flower by use of a solvent or a mechanical process.

(b) The Department of Agriculture may by rule design a method for assessing whether licensed infusers have access to an adequate supply of reasonably affordable raw materials, which may include but not be limited to: (i) a survey of infusers; (ii) a market study on the sales trends of cannabis-infused products manufactured by infusers; and (iii) the costs cultivation centers and craft growers assume for the raw materials they use in any cannabis-infused products they manufacture.

(c) The Department of Agriculture shall perform an assessment of whether infusers have access to an adequate supply of reasonably affordable raw materials that shall start no sooner than January 1, 2022 and shall conclude no later than April 1, 2022. The Department of Agriculture may rely on data from the Illinois Cannabis Regulation Oversight Officer as part of this assessment.

(d) The Department of Agriculture shall perform an assessment of whether infusers have access to an adequate supply of reasonably affordable raw materials that shall start no sooner than January 1, 2023 and shall conclude no later than April 1, 2023. The Department of Agriculture may rely on data from the Cannabis Regulation Oversight Officer as part of this assessment.

(e) The Department of Agriculture may by rule adopt measures to ensure infusers have access to an adequate supply of reasonably affordable raw materials necessary for the manufacture of cannabis-infused products. Such measures may include, but not be limited to (i) requiring cultivation centers and craft growers to set aside a minimum amount of raw materials for the wholesale market or (ii) enabling infusers to apply for a processor license to extract raw materials from cannabis flower.

(f) If the Department of Agriculture determines processor licenses may be available to infusing organizations based upon findings made pursuant to subsection (e), infuser organizations may submit to the Department of Agriculture on forms provided by the Department of Agriculture the following information as part of an application to receive a processor license:

  • (1) experience with the extraction, processing, or infusing of oils similar to those derived from cannabis, or other business practices to be performed by the infuser;
  • (2) a description of the applicant’s experience with manufacturing equipment and chemicals to be used in processing;
  • (3) expertise in relevant scientific fields;
  • (4) a commitment that any cannabis waste, liquid waste, or hazardous waste shall be disposed of in accordance with 8 Ill. Adm. Code 1000.460, except, to the greatest extent feasible, all cannabis plant waste will be rendered unusable by grinding and incorporating the cannabis plant waste with compostable mixed waste to be disposed of in accordance with Ill. Adm. Code 1000.460(g)(1); and
  • (5) any other information the Department of Agriculture deems relevant.

(g) The Department of Agriculture may only issue an infusing organization a processor license if, based on the information pursuant to subsection (f) and any other criteria set by the Department of Agriculture, which may include but not be limited an inspection of the site where processing would occur, the Department of Agriculture is reasonably certain the infusing organization will process cannabis in a safe and compliant manner.

Section 35-35. Infuser organization background checks.

(a) Through the Department of State Police, the Department of Agriculture shall conduct a background check of the prospective principal officers, board members, and agents of an infuser applying for a license or identification card under this Act. The Department of State Police shall charge a fee set by rule for conducting the criminal history record check, which shall be deposited into the State Police Services Fund and shall not exceed the actual cost of the record check. In order to carry out this provision, each infuser organization’s prospective principal officer, board member, or agent shall submit a full set of fingerprints to the Department of State Police for the purpose of obtaining a State and federal criminal records check. These fingerprints shall be checked against the fingerprint records now and hereafter, to the extent allowed by law, filed in the Department of State Police and Federal Bureau of Investigation criminal history records databases. The Department of State Police shall furnish, following positive identification, all conviction information to the Department of Agriculture.

(b) When applying for the initial license or identification card, the background checks for all prospective principal officers, board members, and agents shall be completed before submitting the application to the licensing or issuing agency.

Section 35-40. Renewal of infuser organization licenses and agent identification cards.

(a) Licenses and identification cards issued under this Act shall be renewed annually. An infuser organization shall receive written or electronic notice 90 days before the expiration of its current license that the license will expire. The Department of Agriculture shall grant a renewal within 45 days of submission of a renewal application if:

  • (1) the infuser organization submits a renewal application and the required nonrefundable renewal fee of $20,000, or, after January 1, 2021, another amount set by rule by the Department of Agriculture, to be deposited into the Cannabis Regulation Fund;
  • (2) the Department of Agriculture has not suspended or revoked the license of the infuser organization for violating this Act or rules adopted under this Act;
  • (3) the infuser organization has continued to operate in accordance with all plans submitted as part of its application and approved by the Department of Agriculture or any amendments thereto that have been approved by the Department of Agriculture;
  • (4) The infuser has submitted an agent, employee, contracting, and subcontracting diversity report as required by the Department; and
  • (5) The infuser has submitted an environmental impact report.

(b) If an infuser organization fails to renew its license before expiration, it shall cease operations until its license is renewed.

(c) If an infuser organization agent fails to renew his or her identification card before its expiration, he or she shall cease to work as an agent of the infuser organization until his or her identification card is renewed.

(d) Any infuser organization that continues to operate, or any infuser organization agent who continues to work as an agent, after the applicable license or identification card has expired without renewal is subject to the penalties provided under Section 35-25.

(e) The Department shall not renew a license or an agent identification card if the applicant is delinquent in filing any required tax returns or paying any amounts owed to the State of Illinois.