NM cannabis producer challenges new DOH rules

A high-profile medical cannabis producer filed a petition in a state district court last week, asking a judge to invalidate rules recently put in place by the New Mexico Department of Health. 

In the petition, lawyers for cannabis producer Ultra Health argued that many of the recently adopted rules regarding plant and product testing, product labels and facility safety standards are “arbitrary and capricious.”

Last year, the state’s Medical Cannabis Program, which is part of the DOH, started the rule change process with a series of public meetings, which carried over to early this year. The rules, which range from pesticide and chemical testing to reciprocity for already approved cannabis patients from other states, went into effect earlier this month. But Ultra Health’s petition focuses on the new standards for producers, some of which the petition says would increase the financial burdens for patients. 

“Producers, who already pay well over $100,000 per year for their license and are precluded by federal law from taking any income tax deductions, will have to pay for the increased testing burden and will pass along the costs to patients,” the petition reads. 

A DOH spokesman wouldn’t say if or when the department would respond to the request to annul the new rules. 

“The Department of Health does not comment on pending litigation,” DOH spokesman David Morgan said. 

Arguably a perennial thorn in the side of the department, Ultra Health and its CEO Duke Rodriguez have filed numerous legal actions against the state over issues like the legality of displaying a cannabis plant at the state fair and increasing the number of plants producers can grow. Brian Egolf, who also serves as the state’s speaker of the House, is one of two lawyers who filed the petition.  

Testing and labels 

The new rules from the DOH spell out specific standards for testing plants for fungus, pesticides and heavy metals. But in the petition, Ultra Health’s lawyers argued that the department failed to show evidence that the safe level of contaminants is based on studies or science.  

“While Petitioner Ultra Health agrees that some testing is necessary to protect the safety of cannabis patients, DOH’s rules do not draw the necessary connection between the arbitrarily chosen testing parameters and specific measurements of patient safety,” the petition states. 

The petition also asserts that the DOH simply copied regulations from other states like Colorado and Oregon, where both medical and recreational-use cannabis are legal.

State judge denies petition for medical cannabis use while on house arrest

A state district judge denied a petition asking the court to force Bernalillo County and its Metropolitan Detention Center to allow those on house arrest to use medical cannabis if they have a medical cannabis card.  

Second Judicial District Judge Erin O’Connell ruled from the bench during a telephone hearing on Tuesday. She said she denied the petition on the basis that it was out of her jurisdiction and that if she granted the petition it would conflict with the judges decision in a tangential criminal case. 

“The criminal court took the plea in this case and sentenced the petitioner and issued conditions of release based on that plea,” O’Connell said. “The court therefore has concern that granting relief would potentially result in conflicting orders with the criminal court. The criminal case O’Connell referred to was that of Joe Montaño. In 2019, Montaño was convicted of drunk driving and, due to a plea agreement, was sentenced to drug court and Bernalillo County’s Community Custody Program, also known as house arrest. 

Montaño previously spoke to NM Political Report about his past criminal convictions which ultimately resulted in him spending more than two decades in and out of prison. 

Montaño didn’t hide the fact from county CCP officers that he used medical cannabis and during a home visit they found cannabis and paraphernalia.

Cannabis consumption area future cloudy amid COVID-19

Amid a gradual relaxing of public health orders designed to slow the spread of COVID-19, consumers and business owners alike are navigating how to have a socially distanced meal, shopping trip and gym session. But after July, there will be a new type of business facing still unknown restrictions while at the same time allowing patrons to smoke inside. Pending a signature from the Department of Health Secretary, the state will allow medical cannabis consumption areas after July 1. But since it’s hard to predict how public health orders may change in the next 30 days, it’s also hard to say how those consumption areas will work in practice, according to Medical Cannabis Program Director Dominick Zurlo. 

“What I think is very safe to say is that, just like any other business or essential service, they will have to follow the COVID-19 guidlines that are set out in the public health orders and executive orders,” Zurlo said. Zurlo said he is not sure yet if DOH Secretary Kathyleen Kunkel will group consumption areas with restaurants in terms of restrictions, but stressed that how they operate will depend on how the number of COVID-19 cases increase or decrease. 

“If COVID 19 continues the way we are right now, then that’s going to make things a little easier.

Medical cannabis producers still on the hook for GRT, pending a state Supreme Court ruling

Despite a decision by the New Mexico Court of Appeals, medical cannabis producers are still required to pay gross receipts taxes—at least for now. 

Last month the New Mexico Supreme Court filed notice that it received a petition from the state Taxation and Revenue Department asking for the high court to overturn a court of appeals ruling. That opinion, filed in January, stated that medical cannabis is exempt from gross receipt taxes. The notice from the high court that it received the petition from the state also included instructions to hold off on enforcing its decision. 

Days after the January decision, medical cannabis producers began notifying patients that they would not charge gross receipts taxes, which are often erroneously referred to as sales tax. State law requires many businesses to pay gross receipt taxes for goods produced or services provided. Those businesses often pass the tax on to consumers. 

The issue goes back to an attempt by medical cannabis producer Sacred Garden to get a refund from the gross receipt taxes it paid from 2011 through 2016.

NM cannabis business group forgoes largest sale day of the year

For some cannabis users, this month is significant. For decades, the number 420 has been aligned with cannabis use. Even before medical cannabis was legalized in New Mexico, April 20 served as an unofficial day for cannabis users to celebrate. This year however, the whole month is 4/20. 

But because of the COVID-19 pandemic, a medical cannabis industry group in New Mexico is urging patients and producers to cancel events related to the once-in-a-century occasion. 

The New Mexico Cannabis Chamber of Commerce, which represents 15 medical cannabis producers and manufacturers, is now urging patients to forgo any public 420 celebrations and urging dispensaries to postpone any promotions until later this year. The group is also urging all dispensaries to continue to serve patients through alternative ways. 

Ben Lewinger, the director of the Cannabis Chamber of Commerce, said all of the group’s members, which also includes cannabis-adjacent businesses, agreed that keeping people home as much as possible is best.     

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NM deems medical cannabis essential during COVID-19 restrictions

As New Mexicans brace themselves for an unknown period of restricted over the counter medicine purchases due to the growing number of positive COVID-19 tests, the state’s Department of Health said medical cannabis patients can rest assured that their access to medicine won’t be interrupted. 

In a letter to medical cannabis producers, patients and other stakeholders, Medical Cannabis Program Director Dr. Dominick Zurlo said medical cannabis Licensed Non Profit Producers (LNPP) qualify as essential services under Secretary of Health Kathyleen Kunkel’s latest emergency health order. 

“Accordingly, LNPPs are not required to limit operations pursuant to that order,” Zurlo wrote. Medical cannabis patient cards that are set to expire between March 11 and June 13 will get a 90 day extension, according to Zurlo. He also encouraged patients to use telemedicine to consult with a medical professional for new patient and card renewal recommendations. Anticipating a possible staffing shortage for producers, Zurlo said the department is also “temporarily suspending” criminal background checks for new employees until producers send in their relicensing applications, which are due in June. #mc_embed_signup{background:#fff; clear:left; font:14px Helvetica,Arial,sans-serif; }
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NM Supreme Court tasked with cannabis GRT issue

Should medical cannabis producers continue to get a tax break? That’s the question the New Mexico Taxation and Revenue Department has asked the state’s high court. 

On behalf of TRD, the state’s Attorney General’s office filed a petition Monday with the New Mexico Supreme Court asking for clarification about whether medical cannabis is exempt from gross receipts tax, like prescription drugs. 

In 2014, New Mexico cannabis producer Sacred Garden asked the TRD for a refund on the gross receipts tax the company paid that year. That request was denied by TRD. But the state Court of Appeals agreed with the cannabis company and ruled that medical cannabis indeed qualifies for the same tax exemption as prescription drugs. In the state’s petition to the state Supreme Court, Special Assistant Attorney General Cordelia Friedman argued that because federal law prevents doctors from writing prescriptions for cannabis, it does not fall under the same tax exempt category as prescription drugs in New Mexico. 

“The term ‘prescription’ does not appear in the [Lynn and Erin Compassionate Use] Act or the regulation promulgated to provide guidance for individuals wanting to obtain ‘registry identification cards’ to receive medical marijuana,” Friedman wrote. 

The state Court of Appeals ruled in January that a recommendation from a doctor to use cannabis to alleviate symptoms of certain medical conditions is essentially the same as a prescription.

Medical cannabis reciprocity on hold

Medical cannabis patients from other states will have to wait until they can purchase or use their medicine in New Mexico. 

Even though medical cannabis reciprocity is written in state law and rules and regulation, the head of New Mexico’s program told NM Political Report that medical cannabis producers will not be able to sell to out of state patients until July. 

Dr. Dominick Zurlo, the Medical Cannabis Program director, confirmed that the state’s Department of Health Secretary Kathyleen Kunkel has signed off on a rule change that outlines rules for reciprocal patients. “It’s been signed and promulgated, which means it’s been basically distributed and become a regulation,” Zurlo said. “In the regulation itself, it does state it will take effect on July 1st.”

That’s partly because, Zurlo said, the seed-to-sale tracking software the state uses is due for an upgrade. Under the new rules, already-qualified cannabis patients from states that have a medical cannabis program could go to any dispensary in New Mexico to register as a reciprocal patient. 

“What it really comes down to is we’re not doing an upgrade that just includes this,” Zurlo said. “We’re actually doing a much broader upgrade and an upgrade that is going to have a much greater impact for patients in improving the system and improving how patients actually get registered in the program.”

Zurlo said part of the update will include an online portal where some patients can register and be approved by providers online. 

Between now and July, medical cannabis patients in New Mexico can expect to see the beginnings of consumption areas, or sanctioned places to use medical cannabis.

Pending cannabis card requests denied after law change

It seems a “typographic error” is to blame for confusion among some who tried to enroll in the state’s Medical Cannabis Program. 

But besides an incorrect date, the letters themselves also added to the confusion for some who sought to become medical cannabis patients. The program sent a number of denial letters to potential patients who failed to provide proof of New Mexico residency. That’s because their applications were not processed in time.  

Last fall a state district court judge ordered the program to issue patient cards to those who had an approved qualified condition, regardless of whether or not they live in New Mexico. In less than six months, more than 600 people from outside New Mexico managed to get medical cannabis patient cards before Gov. Michelle Lujan Grisham signed a law which specifies the program is only for New Mexico residents. But two patients who reached out to NM Political Report said they were confused by the date on a letter requesting proof of residency sent by the program.   

“Our agency cannot process your application until we have received a New Mexico driver’s license or a New Mexico identification card in your name and a New Mexico mailing address,” the letters read. 

But the two letters NM Political Report reviewed were dated January 20, 2020, about a month before Lujan Grisham signed the law change.

The line between trafficking and transporting

Last August, about four miles east of theNew Mexico-Arizona border, a New Mexico State Police officer clocked a white van heading east going about 12 miles per hour over the posted speed limit in a construction zone. According to the officer’s report, once he pulled the van over and approached the passenger-side window he detected “an overwhelming odor of marijuana.” In fact, the officer wrote in his initial report, “The smell was so strong that I had to move back a bit.” 

The passenger of the van, Cevin Stambough, told the officer he was a New Mexico medical cannabis patient and had about five grams of cannabis on him. Stambough showed the officer the small amount of cannabis, but the officer told Stambough the smell of cannabis was too strong to be the result of just five grams. The officer was right. After a search warrant he reportedly found “10 individual plastic bags of marijuana” along with roughly 2 pounds of cannabis concentrate or extracts. All together, the officer found about 14 pounds of cannabis or cannabis derivatives.