House Study Bill 242 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON KAUFMANN) A BILL FOR An Act relating to the medical cannabidiol program including 1 medical cannabidiol dispensaries and manufacturers, income 2 tax deductions, and sales and use tax, and including 3 retroactive applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2528YC (1) 90 ss/rh

H.F. _____ DIVISION I 1 MEDICAL CANNABIDIOL PROGRAM 2 Section 1. Section 124E.2, subsection 10, Code 2023, is 3 amended by striking the subsection and inserting in lieu 4 thereof the following: 5 10. “Medical cannabidiol” means any species of the genus 6 cannabis plant, or any mixture or preparation thereof, 7 including whole plant extracts and resins, that is delivered 8 in any of the following forms: 9 a. Oral forms, including but not limited to: 10 (1) Tablets. 11 (2) Capsules. 12 (3) Liquids. 13 (4) Tinctures. 14 (5) Sublingual forms. 15 b. Topical forms, including but not limited to: 16 (1) Gels. 17 (2) Ointments, creams, or lotions. 18 (3) Transdermal patches. 19 c. Inhaled forms, limited to: 20 (1) Nebulizable inhaled forms. 21 (2) Vaporizable dried raw cannabis. 22 (3) Other vaporizable forms of cannabis. 23 Sec. 2. Section 124E.8, subsection 1, paragraph a, Code 24 2023, is amended to read as follows: 25 a. The department shall issue a request for proposals accept 26 applications to select and license by April 1, 2018, up to 27 five ten medical cannabidiol dispensaries to dispense medical 28 cannabidiol within this state consistent with the provisions 29 of this chapter . The department shall license new medical 30 cannabidiol dispensaries or relicense the existing medical 31 cannabidiol dispensaries by December 1 of each year. 32 Sec. 3. Section 124E.8, subsection 2, Code 2023, is amended 33 by striking the subsection. 34 Sec. 4. Section 124E.8, Code 2023, is amended by adding the 35 -1- LSB 2528YC (1) 90 ss/rh 1/ 4

H.F. _____ following new subsection: 1 NEW SUBSECTION . 3A. The department shall not issue a 2 license for a medical cannabidiol dispensary to be located in a 3 county with a medical cannabidiol dispensary that was licensed 4 prior to January 1, 2023. 5 Sec. 5. Section 124E.9, subsection 1, Code 2023, is amended 6 to read as follows: 7 1. a. The medical cannabidiol dispensaries shall be located 8 based on geographical need throughout the state to improve 9 patient access. 10 b. A medical cannabidiol dispensary may dispense medical 11 cannabidiol pursuant to the provisions of this chapter but 12 shall not dispense any medical cannabidiol in a form or 13 quantity other than the form or quantity allowed by the 14 department pursuant to rule. 15 Sec. 6. MEDICAL CANNABIDIOL DISPENSARY LICENSES —— CURRENT 16 LICENSEES. 17 1. The department of health and human services shall accept 18 applications for new medical cannabidiol dispensary licenses 19 from current licensees between July 1, 2023, and October 1, 20 2023. 21 2. Notwithstanding section 124E.8, subsection 3, in 22 evaluating an application pursuant to this section, the 23 department shall consider only the security, physical layout, 24 and plan for technology at the proposed location. 25 3. A licensee submitting an application pursuant to 26 this section may hold a maximum of four medical cannabidiol 27 dispensary licenses, including the licensee’s current license. 28 DIVISION II 29 MEDICAL CANNABIDIOL —— INCOME TAXES 30 Sec. 7. Section 422.7, Code 2023, is amended by adding the 31 following new subsection: 32 NEW SUBSECTION . 44. Subtract, to the extent included, 33 the amount of business expense for a medical cannabidiol 34 manufacturer or medical cannabidiol dispensary licensed 35 -2- LSB 2528YC (1) 90 ss/rh 2/ 4

H.F. _____ pursuant to chapter 124E without regard to section 280E of the 1 Internal Revenue Code. 2 Sec. 8. Section 422.35, Code 2023, is amended by adding the 3 following new subsection: 4 NEW SUBSECTION . 15. Subtract, to the extent included, 5 the amount of business expense for a medical cannabidiol 6 manufacturer or medical cannabidiol dispensary licensed 7 pursuant to chapter 124E without regard to section 280E of the 8 Internal Revenue Code. 9 Sec. 9. RETROACTIVE APPLICABILITY. This division of this 10 Act applies retroactively to January 1, 2023, for tax years 11 beginning on or after that date. 12 DIVISION III 13 MEDICAL CANNABIDIOL —— SALES AND USE TAX 14 Sec. 10. Section 423.3, Code 2023, is amended by adding the 15 following new subsection: 16 NEW SUBSECTION . 110. The sales price of the sale of 17 a medical cannabidiol product by a medical cannabidiol 18 manufacturer or a medical cannabidiol dispensary pursuant to 19 chapter 124E. 20 EXPLANATION 21 The inclusion of this explanation does not constitute agreement with 22 the explanation’s substance by the members of the general assembly. 23 This bill relates to the medical cannabidiol program and is 24 organized in divisions. 25 DIVISION I —— MEDICAL CANNABIDIOL PROGRAM. The bill changes 26 the definition of “medical cannabidiol” to include specific 27 forms of oral, topical, and inhalable cannabis. 28 The bill increases the maximum number of medical cannabidiol 29 dispensary licenses in the state from 5 to 10. The bill 30 prohibits the department of health and human services from 31 issuing a new medical cannabidiol dispensary license for a 32 dispensary to be located in a county with a medical cannabidiol 33 dispensary that was licensed prior to January 1, 2023. The 34 bill strikes a provision requiring the department to locate 35 -3- LSB 2528YC (1) 90 ss/rh 3/ 4

H.F. _____ medical cannabidiol dispensaries based on geographical need 1 throughout the state. 2 The bill requires the department of health and human 3 services to accept applications for medical cannabidiol 4 dispensary licenses from current licensees between July 1, 5 2023, and October 1, 2023. In evaluating an application from 6 a current licensee, the department shall consider only the 7 security, physical layout, and plan for technology at the 8 proposed location. A licensee may hold a maximum of four 9 medical cannabidiol dispensary licenses. 10 The bill strikes a provision in current law requiring a 11 medical cannabidiol dispensary to agree to begin supplying 12 medical cannabidiol by December 1, 2018. 13 DIVISION II —— MEDICAL CANNABIDIOL —— INCOME TAXES. The 14 bill allows individuals and corporations to subtract from net 15 income, to the extent included, business expenses for a medical 16 cannabidiol manufacturer or medical cannabidiol dispensary. 17 This division of the bill applies retroactively to January 1, 18 2023, for tax years beginning on or after that date. 19 DIVISION III —— MEDICAL CANNABIDIOL —— SALES AND USE TAX. 20 The bill exempts sales of medical cannabidiol products by a 21 medical cannabidiol manufacturer or a medical cannabidiol 22 dispensary pursuant to Code chapter 124E from sales tax. 23 -4- LSB 2528YC (1) 90 ss/rh 4/ 4