House Republicans Introduce the States Reform Act in Sign that Bipartisan Legalization May be Possible

A group of House Republicans, led by Representative Nancy Mace, introduced the States Reform Act on Monday, November 15, 2021.

This follows the passage the Marijuana Opportunity, Reinvestment and Expungement Act (the “MORE Act”) by the House Judiciary Committee, the passage of the Secure and Fair Enforcement Banking Act (the “SAFE Banking Act”) as part of a defense spending bill by the full House of Representatives, and the introduction of the Cannabis Administration and Opportunity Act ( the “CAOA”) and Clarifying Law Around Insurance of Marijuana Act (the “CLAIM Act”) in the Senate.

The States Reform Act, if passed, would:

• Decriminalize cannabis at the federal level (states would still be permitted to criminalize cannabis);
• Expunge federal convictions for people with non-violent cannabis convictions, which Rep. Mace expects would lead to 2,600 incarcerated people being released;
• Impose a 3% federal excise tax on cannabis;
• Empowers the US Department of Agriculture to regulate cannabis cultivation, the Alcohol and Tobacco Tax and Trade Bureau (to be renamed the Alcohol, Tobacco, and Cannabis Tax and Trade Bureau) to regulate interstate and international cannabis trade, the Bureau of Alcohol, Tobacco, Firearms and Explosives would regulate cannabis products, and the FDA to regulate medical cannabis only;
• Allows the federal government to issue packaging and labelling requirements;
• Permits the VA to recommend cannabis to veterans and prevents discrimination against veterans in federal hiring or for healthcare benefits. The States Reform Act does not protect non-veterans from discrimination based on cannabis use in federal hiring;
• The creation of federal permits necessary to operate within the market, grandfathering in those who have already been licensed by states that allow for cannabis;
• Sets the national cannabis consumption age at 21 years old, through a system similar to how the government set a national drinking age by withholding certain funds from states that utilize a lower age. People under 21 would still be eligible for prescription cannabis.

The States Reform Act does quite a bit and is much more ambitious than prior Republican proposals that would simply decriminalize cannabis. There are a number of differentiators between the States Reform Act, the MORE Act, and the CAOA.

• The States Reform Act imposes a significantly lower tax rate, with the MORE Act taxing cannabis at 5% and increasing to 8% over three years. Meanwhile, the CAOA taxes cannabis at 10% and increases to 25% over five years.  The tax revenue is also dedicated to different purposes, with the MORE Act and CAOA dedicating more tax revenue to social equity programs.  The States Reform Act lacks the dedication to social equity programs present in the MORE Act and CAOA.  However, the States Reform Act does dedicate some revenue to mental health, addiction, and second chance programs;
• The States Reform Act does not protect immigrants from deportation for cannabis-related offenses and does not prevent non-veteran recipients of federal benefits from being disqualified due to cannabis use.

While there is still a gap between the States Reform Act and the Democratic-led proposals, the States Reform Act represents a significant step towards potential federal decriminalization and/or legalization.  Should the supporters of the States Reform Act, MORE Act, and CAOA reach a compromise, a bipartisan bill may emerge that could potentially pass in both chambers of Congress.

In addition to Rep. Mace, the States Reform Act is co-sponsored by Reps. Tom McClintock, Don Young, Brian Mast, and Peter Meijer.  Rep. McClintock previously voted in favor of the MORE Act.

We will continue to monitor federal legalization efforts and provide updates regarding any developments.