935 CMR, § 501.181 - Minimum Acceptable Equity Standards Governing Municipalities and Host Communities

(1) 935 CMR 501.181 is governed by M.G.L. c. 94G §§ 3 and 4, as amended by St. 2022, c. 180. Pursuant to M.G.L. c. 94G § 3, the Commission must establish minimum acceptable standards for Host Communities to promote and encourage full participation in the regulated Marijuana industry by people from communities that were disproportionately harmed by Marijuana prohibition and enforcement and to positively impact those communities.

(2) M.G.L. c. 94G § 4(a)(xxxi) and (xxxii) empowers the Commission to establish procedures for municipalities to promote and encourage full participation in the regulated Marijuana industry during negotiations of HCAs with Social Equity Businesses and to develop minimum acceptable standards governing HCA negotiations with Social Equity Businesses. The Commission is further authorized to develop best practices for HCA negotiations between municipalities and License Applicants that have been designated as Social Equity Program Participants or Economic Empowerment Priority Applicants.

(3) Equity Standards for Host Communities to Promote and Encourage Full Participation in the regulated Marijuana industry.

(a) Municipalities are presumed to have met the Commission's minimum acceptable equity standards for promoting and encouraging full participation in the regulated Marijuana industry by taking one of the following actions:

1. Adopting an ordinance or bylaw to exclusively permit Social Equity Businesses for 3 years or until the goals of the exclusivity period have been met;

2. Adopting the Model Ordinance or Bylaw created by the Commission to permit Social Equity Businesses; or

3. Creating a Local Approval Process for equity applicants that is administered on a 1:1 basis, where a General Applicant may be approved only after a Social Equity Business has commenced operations. Host Communities may choose to administer a 1:1 Local Approval Process until such time as 50% of the Licensees operating in the Host Community are Social Equity Businesses.

(b) Notwithstanding 935 CMR 501.181(3)(a), a Host Community shall adopt, but not be limited to, the following transparent practices to promote and encourage full equity participation:

1. A Host Community shall publicize certain information in a conspicuous location at its offices and on its website which shall, at minimum, include:

a. All required steps of a Host Community's Local Approval Process, including, but not limited to, all associated fees, deadlines, and meeting schedules for local bodies involved in the Local Approval Process;

b. Identification of key individuals involved in a Host Community's Local Approval Process including, but not limited to, their name, title, business address, and business contact information such as email address or phone number;

c. A list of all documentation required by a Host Community's Local Approval Process, in downloadable form and paper form;

d. Identification of application criteria for local approval to operate a MTC and scoring methodologies relied on by a Host Community;

e. General scoring information for all applicants and a Host Community's scoring of each individual applicant;

f. A Host Community's explanation, in narrative form, of its reasoning for the approval or denial of an application; and

g. Any other information required by the Commission.

2. A Host Community shall develop an equity plan to promote and encourage full participation in the regulated cannabis industry by individuals from communities disproportionately harmed by cannabis prohibition and enforcement and shall publicize its equity plan in a conspicuous location at its offices and on its website. A Host Community's equity plan shall:

a. Encourage applications from business and individuals that would meet the definition of Social Equity Businesses, Social Equity Program Participants, and Economic Empowerment Priority Applicants as determined by the Commission; and

b. Include goals, programs, and measurements a Host Community will utilize to promote and encourage equity participation.

3. A Host Community shall publish data regarding its total applicant pool, which shall identify each Social Equity Business and License Applicant that has been designated as a Social Equity Program Participant or Economic Empowerment Priority Applicant, or who have been pre-verified pursuant to 935 CMR 501.101(4),

4. The Commission may require the Host Community to report data to the Commission.

(c) A municipality or Host Community shall adhere to best practices for HCA negotiations with individuals or entities pre-verified or verified pursuant to 935 CMR 501.101(4), Social Equity Businesses, and License Applicants that have been designated as Social Equity Program Participants or Economic Empowerment Priority Applicants including, but not limited to, the following:

1. A Host Community shall develop a standard evaluation form, or use a form developed by the Commission, that scores components of an application. The evaluation form shall include consideration of equity in the overall evaluation score, which must comprise not less than 25% of the total evaluation score. This equity component shall include:

a. whether an individual, entity, or License Applicant is pre-verified or verified pursuant to 935 CMR 501.101(4);

b. whether the License Applicant is a Social Equity Program Participant;

c. whether the License Applicant is an Economic Empowerment Priority Applicant;

d. whether a License Applicant or pre-verified individual or entity has a prior Marijuana-related criminal offense or conviction;

e. whether a License Applicant or pre-verified individual or entity is part of an Area of Disproportionate Impact, as identified by the Commission; or

f. whether a pre-verified individual is of Black, African American, Hispanic, Latino, Native American or indigenous descent, or a majority of a pre-verified entity or License Applicant entity is comprised of individuals that are of Black, African American, Hispanic, Latino, Native American or indigenous descent.

2. In circumstances where a Host Community imposes a cap on the number of Marijuana Establishments or MTCs that may obtain local approval to operate, if a Host Community later decides to allow additional Marijuana Establishments or MTCs, at least 50 percent of those licenses, but no less than 1 license, above the previously-established cap shall be reserved for: License Applicants that are Social Equity Businesses; License Applicants that have been designated as Social Equity Program Participants, Economic Empowerment Priority Applicants, or both; or individuals or entities verified or pre-verified pursuant to 935 CMR 500.101(7), including pre-verified individuals or entities that have already been designated as Social Equity Businesses, Economic Empowerment Applicants, or both. A Host Community seeking exemption from this regulatory requirement may submit a waiver request pursuant to 935 CMR 501.850. Such request must include identification of proposed compensating features, as provided under 935 CMR 501.850(2)(b).

(d) Host Communities must adopt local rules or bylaws to comply with 935 CMR 501.181(3) on or before May 1, 2024. A Host Community shall submit an attestation in a form and manner determined by the Commission affirming that it has adopted local laws to effectuate compliance with 935 CMR 501.181(3) and identifying the specific laws passed. In addition, a Host Community shall submit its equity plan and any other documentation of its compliance with 935 CMR 501.181(3).

(e) Any interested person may file a complaint with the Commission alleging noncompliance with an equity requirement under 935 CMR 501.181. If the Commission substantiates an allegation of noncompliance with 935 CMR 501.181, a Host Community shall be fined after first receiving notice and opportunity for corrective action pursuant to 935 CMR 501.310 and 935 CMR 501.320. A Host Community shall be fined in an amount equal to the annual total of CIFs received from all Marijuana Establishments and MTCs operating in the Host Community during the prior calendar year.

1. The Commission shall afford a Host Community a right to a hearing pursuant to 935 CMR 501.500.

2. All fines collected shall be deposited into the Cannabis Social Equity Trust Fund established in M.G.L. c. 94G, § 14A.

3. The Commission may identify on its website any municipality or Host Community that has been assessed a fine for equity noncompliance.

4. Fine assessments pursuant to 935 CMR 501.181(3) shall take effect no sooner than May 1, 2025.

(4) Equity Standards for Host Communities during HCA Negotiations with Equity Parties.

(a) A Host Community shall prioritize negotiations of HCAs with equity parties. The equity party to negotiations of an HCA for an application for licensure is: a License Applicant that is a Social Equity Business; a License Applicant that has been designated as Social Equity Program Participants, Economic Empowerment Priority Applicants or both; or an individual or entity verified or pre-verified pursuant to 935 CMR 500.101(7), including pre-verified individuals or entities that are not yet a License Applicant but have already been designated as Social Equity Businesses, Economic Empowerment Applicants, or both. A Host Community may waive or reduce fees for an equity party to an HCA negotiation, including, but not limited to CIFs, zoning and occupancy fees.

(b) Required practices. At minimum, a municipality or Host Community shall take the following actions during HCA negotiations with an equity party to promote and encourage their full participation:

1. Engage in an ongoing dialogue by providing multiple opportunities for discussion and negotiation of HCA terms including, at minimum, two conferences with an equity party;

2. Include any attorney, authorized representative, or other advocate, if elected by an equity party, in all negotiation discussions and conferences;

3. Promote language access by providing a certified interpreter or translator to assist an equity party who is a Non-English speaker during all negotiation discussions and conferences;

4. Provide reasonable opportunities for an equity party to review a proposed HCA, HCA term or condition outside of a negotiation conference, or to seek review or input by a third party of their choice.

5. Negotiate the terms of an HCA in good faith, including consideration of flexible terms that may mitigate particular challenges affecting an equity party, such as access to capital, with all terms and clauses conspicuously identified and openly discussed; and

6. Allow an equity party to propose an amendment to, or seek cancellation of, an HCA within 30 days from the date of execution of the HCA.

(c) Prohibited practices.

1. No municipality or Host Community shall negotiate an HCA with an equity party through the use of undue influence, duress, coercion, intimidation, threats, or any strong-arm tactics.

2. No municipality or Host Community shall threaten loss of an equity party's position in its local application queue or delay to the processing of an equity party's application.

3. No municipality or Host Community shall compel an equity party to sign an HCA in any manner that conflicts with the practices required in 935 CMR 501.181(4)(c).

4. No municipality or Host Community shall negotiate or discontinue negotiations with an equity party in bad faith.

(5) Equity Standards for Host Communities to Positively Impact Communities that were Disproportionately Harmed by Marijuana Prohibition and Enforcement

(a) A Host Community must develop a plan to positively impact one or more of the following communities:

1. Past or present residents of the geographic "areas of disproportionate impact," which have been defined by the Commission and identified in its Guidance for Identifying Areas of Disproportionate Impact. The designation of these areas will be re-evaluated periodically.

2. State-designated Economic Empowerment Priority Applicants

3. State-designated Social Equity Program participants

4. Massachusetts residents who have past drug convictions

5. Massachusetts residents with parents or spouses who have drug convictions.

(b) A Host Community shall publicize said plan in a conspicuous location at its offices and on its website. The plan shall outline the goals, programs, and measurements the Host Community will pursue.

Notes

935 CMR, § 501.181

Adopted by Mass Register Issue 1507, eff. 10/27/2023. Amended by Mass Register Issue 1535, eff. 11/22/2024.