The Maine Office of Marijuana Policy Re-formats/Changes (?) Residency Requirements in Response to Rulemaking Comments

The OMP released provisional adult use marijuana rules late yesterday. These rules are majorly substantive, so they are now headed to the legislature. It seems likely that the Veterans and Legal Affairs Committee will hold its public hearing on these rules as early as Monday next week.

While there’s a lot to unpack in this newest iteration of the OMP rules, I’ll focus briefly on the residency requirements today. The provisional rules eliminated two notable subsections from Section 2.3.1(B) that were present in earlier iterations. These are the two subsections which OMP eliminated:

(b)(i) No person or entity shall attempt to subvert this paragraph by way of multi-layered corporate structures or other methods for creating a corporate veil, nor through other equity conveyance tools, including without limitation, purchase options and purchase warrants. The Department may deny an application at its discretion for violation of this provision.

(b)(ii) No person or entity shall create a party of control to a marijuana establishment License consisting of less than a majority of residents.

Before you read too much into the deletion of these paragraphs, the OMP justified removing these paragraphs in its response to specific comments:

“The Department has removed the language of sub-parts (B)(i) and (ii) with the understanding that the powers contained therein were inherent in the powers granted by the Legislature to the Department in statute. These provisions were determined to be duplicative by the Office of Marijuana Policy. Action taken by OMP to remove these provisions should not be construed as a limit on the power of the Department to pierce any corporate veil intended to obfuscate the residency requirements intended by the Legislature in Title 28-B. The Department has clarified in rule that the applicant shall bear the burden of proving majority ownership by residents.”

Lastly, the OMP also added additional language to the residency requirements in Section 2.3.1(B)(b), so now that subsection reads (with the new portion underlined):

“A majority of the shares, membership interests, partnership interests or other equity ownership interests as applicable to the business entity must be held or owned by natural persons who are residents or business entities whose owners are all natural persons who are residents of the State of Maine. The applicant shall demonstrate to the Department that a majority of the shares, membership interests, partnership interests and other equity ownership interests are held by residents of the State of Maine.”

Next, the legislature will have the opportunity to make changes to these provisional rules, and will certainly be considering how these residency provisions jive with the Department’s claim to “inherent powers” derived from Title 28-B.