By: Scott F. Roberts
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What is an Illinois Social Equity Applicant?
A resident of Illinois, you may qualify as a social equity applicant under the Cannabis Regulation and Tax Act if they can meet one of the following requirements:
- The individual(s) with at least 51% ownership and control over the entity applicant have resided in a disproportionately impacted area for 5 of the last 10 years; or
- The individual(s) with at least 51% ownership and control over the entity applicant have been arrested, convicted, or adjudicated delinquent for a prior marijuana offense that is eligible for expungement. You may also be a member of a family that has been impacted by previous marijuana arrests, convictions or adjudications that are eligible for expungement, or
- The entity applicant has at least 10 full time employees and at least 51% of those employees currently reside in a disproportionately impacted area, have been arrested for, convicted of, or adjudicated delinquent for a marijuana offense that is now eligible for expungement or is a member of an impacted family.
So, what does this do for you is you qualify as a social equity applicant under Illinois’s adult-se cannabis law? Well, to start, it gets you 200 points automatically awarded towards your Illinois cannabis application. That is a fifth of the overall points an application can receive, which would give any applicant a solid boost to their score. As a matter of fact, we generally advise Illinois cannabis companies who cannot qualify for social equity status to not even apply because it would be next to impossible to receive an Illinois cannabis license if you lose 20% of the points right off the bat.
A social equity applicant is also eligible to pay a reduced application fee, reduced license fee, and to receive grants and loans for business development. Not only can you get points added to your Illinois cannabis application, but you get to save money. It’s a win-win if you qualify. If you don’t, the best advice we can give is to find an Illinois social equity applicant to partner with, or try to qualify by hiring employees who qualify as mentioned in number 3 above.
How Can You Qualify as an Illinois Social Equity Applicant?
Disproportionately Affected Areas
One of the ways you can qualify as a social equity applicant under Illinois’s cannabis law is by living in a disproportionately affected area for 5 of the last 10 years. A disproportionately impacted area is one which either:
- has a poverty rate of at least 20%, or
- where 75% or more of the children in the area participate in the federal free lunch program, or
- at least 20% of the households in that area receive assistance under the Supplemental Nutrition Assistance Program, or
- has an average unemployment rate that is more than 120% of the national unemployment average for a period of at least 2 consecutive years.
The area must also have high rates of arrests, convictions, and incarcerations related to the sale, possession, use, cultivation, manufacture, or transportation of cannabis. The State of Illinois has released a map of areas that qualify as being disproportionately affected by the war on drugs.
Broadly speaking, areas within or near the following cities have been determined to meet this definition:
Prior arrests, convictions, or adjudications
Another way to qualify as a social equity applicant is by having a prior arrest, conviction, or adjudication delinquent for a marijuana offense or be a member of a family that has been impacted by a marijuana charge. In addition, a person can also qualify if they were convicted of certain offenses related to drug paraphernalia.
Crimes that qualify for expungement include possession of marijuana up to 500 grams, manufacturing and/or delivery of up to 30 grams of marijuana, and minor marijuana possession offenses.
This option is limited only to crimes that have occurred in Illinois, because the statute which makes these crimes expungable is specific to Illinois. To qualify, an applicant must provide record of their arrest, conviction, or adjudicated delinquent with their social equity application. If the charge has already been expunged, then you can provide a court record showing that an expungement was granted or court records of the original charges.
The same documentation can be provided to show that you are a member of a family that has been impacted by prior marijuana arrests, convictions or adjudication delinquent. This option is limited to parent, legal guardian, child, spouse, dependent, or if you were a dependent of someone who has a qualifying prior marijuana offense. The offense must have occurred prior to June 2019, the enactment of the Cannabis Regulation and Tax Act.
The last way to qualify as a social applicant is if the entity applicant has a minimum of 10 full time employees and at least 51% of those employees currently live in a disproportionately affected area or have been arrested for, convicted of, or adjudicated delinquent for a marijuana offense that is eligible for expungement under the Cannabis Regulation and Tax Act.
Full time requires the employee to work at least 35 hours a week. To meet this requirement, an applicant can submit employee’s W2s, pay stubs, or the New Hire Reporting Forms along with the social equity application. This is by far the most expensive way to qualify for social equity status in Illinois, but for some Illinois cannabis companies, it may be the only option.
How to apply?
To apply, you must provide a statement declaring that you believe you are a qualifying social equity applicant and include supporting documentation. This is part of Exhibit G for the Illinois Craft Grower and Infuser licenses and Exhibit D for the Illinois Cannabis Transport license.
Fees and Loans
It is possible for social equity applicants to take advantage of the fee discount immediately. There are 2 requirements that must be met. First, at the time the payment is due, the entity applicant, those who have a 10% or greater ownership interest in the entity, and all possible parent or subsidiary companies together have less than $750,000 of income total from the previous calendar year. Second, the social equity applicant, its owners, parent companies, and subsidiaries together must not have more than 2 other cannabis business licenses within the State of Illinois.
If you meet these requirements and can provide evidence backing it up, then your application fee can be cut in half. This would mean only paying $2,500 when filing your Illinois cannabis application. If the Department determines after reviewing your documents that you in fact do not qualify, then you will be notified and given 10 days to prove your social equity status or submit the remaining amount due for the application fee. It is important to be truthful and accurate when providing information to the Department. An application may get denied for providing false information.
Once qualified through the state, there are loans and grants that a qualified social equity applicant may apply for. The State of Illinois, through the Cannabis Regulation and Tax Act, has created a special fund called the Cannabis Business Development Fund. This fund is exclusively used to provide grants and low-interest rate loans to qualified social equity applicants. These loans and grants assist with paying for ordinary and necessary expenses to start and operate their cannabis business. This fund may also be used to assist with job training and technical assistance for residents in disproportionately impacted areas. The applications for these grants and loans can be found on the Illinois Department of Commerce website or by clicking here.
A qualified social equity applicant license holder may transfer or sell their license; however, if it is done within 5 years of receiving the license and it is going to someone who does not qualify as a social equity applicant, all discounts and credits must be paid back by the new license holder to the Cannabis Business Development Fund. This must be stated in the transfer agreement. Money due back to the Fund includes: any fees that were initially waived for the entity applicant under social equity status, any outstanding amount owed by the qualified social equity applicant for a loan, and the full amount of any grants that the qualified social equity applicant received.
Applying as a social equity applicant may seem like a lot of hoops to jump through, but the benefits significantly outweigh any costs. The State of Illinois provides various ways of meeting social equity status and assists with future business expenses which is a great help to any new business.
As Illinois cannabis attorneys, we strongly urge any cannabis company applying for an Illinois cannabis license to qualify for social equity status. A cannabis license application without a social equity applicant or without employees who can qualify stands virtually no chance of being awarded in Illinois cannabis license. As a wise man once said, “work with what you got.” If you can meet the requirements of social equity, why not work with what you got and benefit from it?
Mr. Roberts is the founder and managing member of Scott Roberts Law, a Detroit-based Cannabis Business Law Firm founded in 2014. Scott has spent his entire career representing businesses and helping them comply with municipal, state and local regulations, as well as assisting on transactional corporate and real estate matters. Scott is an accomplished attorney, author and public speaker, having spoke at CannaCon, Cannabis Industrial Marketplace, CannabisAid, and 420 Canna Expo, to name a few. He has also taught Continuing Legal Education on Marijuana business matters, meaning other attorneys see him speak to learn about the nuances of cannabis business law.