Arizona Social Equity Ownership Program

Arizona building

The Smart and Safe Arizona Act (Proposition 207) became effective on November 30, 2020. This act governs the adult-use marijuana program of the state of Arizona.

Proposition 207 included the establishment of the Social Equity Ownership Program (“SEOP”) which will issue 26 licenses to entities whose owners are “from communities disproportionately impacted by the enforcement of previous marijuana laws.”

The cannabis regulatory authority in Arizona, The Arizona Department of Health Services (“ADHS”) released the draft regulations for the Social Equity Ownership Program (“SEOP”) on May 19, 2021.

Other than these rules, there is not much information regarding the program. So, the draft rules serve as a starting point for any person in Arizona that wants to apply for a establishment license as a social equity applicant.

How to apply in the Arizona Social Equity Ownership Program

According to the draft regulations, in order to apply in the Arizona Social Equity Ownership Program, the first step would be for the applicant to submit a non-refundable application fee of $5,000.

After the submission of the application fee, the applicant has to submit -electronically- the pertinent information regarding the identification of the company and attestations in compliance to the rules. The requirements have to be submitted in a format provided by the ADHS.

Further, the applicant will have to submit:

  • Documentation proving that the applicant is in good standing with the Arizona Corporation Commission
  • An attestation from each principal officer and each board member listed according to subsection (A)(1)(c) or (d) that, subject to the completion of expungement proceedings according to A.R.S. 36-2862 if applicable, the principal officer or board member:
    • Does not have an excluded felony offense, as defined in A.R.S. 36-2801
    • Will be eligible for a level I fingerprint clearance card issued according to A.R.S. 41-1758.07
  • Documentation that the applicant is eligible to apply under A.R.S. 36-2854(A)(9)
  • Documentation confirming that a principal officer or board member who meets the criteria in subsection (B)(1) cannot be removed from the principal officer’s or board member’s position without:
    • The written consent of the principal officer or board member, or
    • A court order for removal of the principal officer or board member
  • The applicant fee for a marijuana establishment license.

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Conditions for eligibility for the Arizona Social Equity Ownership Program

According to the rules, applicants must have lived in Arizona for three of the last five years, and they must meet at least three of the following five criteria:

  • Had a household income in at least three of the last five years that is less than 400% of the federal poverty level.
  • Was convicted of a violation of a federal or state law related to marijuana or marijuana paraphernalia and does not have an excluded felony offense OR is eligible for and has petitioned for expungement of charges relating to the possession of less than 2.5 ounces of Cannabis.
  • Has a spouse, surviving spouse, parent, child, sibling, or legal guardian who was convicted of a violation of state or federal laws related to marijuana or marijuana paraphernalia.
  • Has lived for at least three of the last five years in a “community that has been disproportionately affected by the enforcement of Arizona’s previous marijuana laws. (The state adds that these criteria are still being developed and will be added to the rules by September 1, 2021).
  • Complete an ADHS approved training course

Main points of the Social Equity Program

Reduction in Licensing Fees

Under the adult-use program, the initial licensing fee is $25,000. However, the Department has now proposed that the initial Arizona Social Equity Ownership Program licensing fee would be $5,000.

Regulations Regarding Owners, Principals Officers and/or Board Members

The draft regulations require that at least one or more of the principal officers or board members own at least 51% of the equity in the Arizona Social Equity Ownership Program licensee. A.A.C. § R9-18-303(B)(1) (draft).

However, there are two additional requirements for each principal officer or board member who is part of the 51% ownership group:

  • These individuals must petition the court to have any prior marijuana convictions expunged from their record. A.A.C. § R9-18-303(B)(2)(a) (draft).
  • These individuals must have family income in 2019 that does not “exceed two hundred percent of the federal poverty guidelines”. A.A.C. § R9-18-303(B)(2)(b) (draft).

Can You Remove a Principal Officer or Board Member?

The proposed licensee must provide the Department with documentation that confirms a principal officer or board member, who is also part of the 51% ownership group, cannot be removed from their positions without:

  • The written consent of that individual, or
  • A court order removing such individual from his or her position. A.A.C. § R9-18-303(B)(2)(a) & (b) (draft).

Although the Arizona Social Equity Ownership Program has other provisions, the above outlines the significant improvements from the adult-use program.

Update (June, 2021)

On June 2, 2021 the Arizona Administrative Office of the Courts posted a website with information on marijuana related records expungement. The website provides information on the voter-led initiative, forms and instructions, frequently asked questions, and more.

Proposition 207 includes a new statute (A.R.S. § 36-2862) that authorizes some people to petition a court for an order that will seal their marijuana-related criminal records. Eligible petitioners are those who were arrested, charged, convicted or acquitted of any of the following offenses:

  • Possessing, consuming, or transporting two and one-half ounces or less of marijuana, of which not more than twelve and one-half grams was in the form of marijuana concentrate;
  • Possessing, transporting, cultivating, or processing not more than six marijuana plants at your primary residence for personal use; or
  • Possessing, using, or transporting paraphernalia related to the cultivation, manufacture, processing, or consumption of marijuana.

There are three forms available on the new website:

The Arizona Supreme Court has adopted petition forms and instructions for people to use for this purpose. These forms should not be filed before the July 12, 2021 effective date.

If you want more information regarding what could you do in order to enter the cannabis industry in Connecticut, don’t hesitate to contact us.

If you want to be updated on the current state of Cannabis legalization, you should check out our map of marijuana legality by state.

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