Updated December 6, 2018
Last September 30, 2018, Governor Jerry Brown signed and approved Senate Bill 1409 which permits the cultivation of industrial hemp by California growers. Prior to its approval, only growers that qualified in the Pilot Program, and the Agricultural Act of 2014, could cultivate Industrial Hemp.
With SB 1409, starting January 1, 2019, individuals interested to grow industrial hemp are able to do so under the following conditions:
Research and development will be permitted in developing a new cultivar that must be certified by a seed certifying agency. The Department will require research and developers to outline and implement security and anti-diversion measures to prevent the unlawful use of industrial hemp or seed cultivars, as well as procedures for maintenance of records documenting the development of new seed cultivars.
Industrial hemp is used to produce more than 25,000 products. This means that it could be an alternative resource for products we use on a daily basis—that has a smaller impact on the environment.
If you want to know more about industrial hemp, its uses, and how to become a grower in California, contact a team member today!
Recently, California joined the growing list of states that have passed some level of pro-hemp legislation in the past few years. Bill SB 1409 was passed to open the doors to growing the state’s industrial hemp industry. Here’s what you need to know about the legislation – as well as three things to do now to start making money on hemp.
What is the Hemp Bill SB 1409?
California’s Hemp Bill, SB 1409, was signed into law by Governor Brown to go into effect on January 1, 2019. This bill adds an industrial hemp pilot program to the state’s legal cannabis industry. As it stands right now, the cultivation of hemp is regulated because of its classification as a “fiber or oilseed crop” under the California Uniform Controlled Substances Act that can only be grown by approved hemp seed cultivators. The list of approved cultivators hasn’t been added to since January 1, 2013. Every year, growers of industrial hemp register with a county agricultural commissioner and pay a renewal fee.
SB 1409 opens the possibility of becoming an industrial hemp seed cultivator to others who haven’t been certified before January 1, 2013. Industrial hemp is no longer going to be considered a fiber or oilseed crop. This doesn’t necessarily mean CBD food products can be sold; in fact, a recent release from the California Department of Public Health banned the sale of CBD food products. We’re still waiting to see how hemp will be regulated as we approach 2019.
Interestingly, SB 1409 also authorizes the California Department of Food and Agriculture to begin an “agricultural or academic research” pilot program for industrial hemp. Colorado and Oregon have carried out similar programs to help inform and structure their regulatory systems. Hemp remains illegal at the federal level, yet more than 30 states have passed some kind of pro-hemp legislation to date.
How to Make Money on Hemp
Obviously, there are still a lot of unknowns when it comes to California’s future regulation of industrial hemp. In addition, seed cultivator applicants won’t be permitted to submit a license request until January 2019. However, here are three things you can do now to get a first slice of California’s legal industrial hemp industry.
Find your niche.
Hemp has a wide range of uses: over 25,000 known uses, to be exact. It can be used in building materials, fabric and textiles, ink, skin lotion, and shoes, and the seeds are a great source of nutrition. If you want to make money off hemp products, the first course of action is to zero in on how you want to use hemp. Hemp-based consumer products, food/nutrition products, and pharmaceuticals are the most common industries, and probably the most accessible for new entrepreneurs. Hemp seeds are very nutritious: they contain a big dose of omega-3 fatty acids and are a better source of good protein than chia seeds or flax seeds. Hemp seeds are also known to contain a good portion of vitamin E and minerals like potassium, magnesium, calcium, iron, and zinc.
Keep in mind that with food product, pharmaceuticals, or beauty products, you may have to comply with FDA or FTC regulations in addition to California state compliance laws. Do your consumer research now to see whether your hemp fortune lies in nutrition or nail polish.
Start creating distribution channels.
Just because you can’t start growing hemp in 2018 doesn’t mean you can’t start creating your own distribution channels. Start to recruit customers for your niche product by building a brand presence online. Pick a topic, make a website, and start promoting or endorsing hemp products that already (legally) exist on the market. Becoming an expert in all things hemp will serve you well both on the customer and supplier side. Customers want someone they can trust to help them navigate the new hemp market. Hemp farmers want help recruiting customers to their product. It’s a win win for you and your suppliers.
Look for land.
If you do intend to become an independent hemp farmer, you will need a lot of space. Though hemp is relatively easy to grow, it’s not easy to be profitable without planting at least 50 acres. Now is the time to start your search for the space you need in January; competition for land will only get tougher as the January 1 deadline approaches.
For more tips on getting started in the cannabis (and soon to be hemp) industry, get in touch with one of our experts.
When it comes to taxes, many hemp businesses are unsure about Internal Revenue Code Section 280-E and whether or not it applies to their businesses. Section 280-E was passed in order to prevent drug dealers from taking business deductions on income from trafficking in controlled substances, like cocaine and marijuana. Here is what you should know about growing hemp versus marijuana and its application to 280-E.
The cultivation of hemp has been considered by the federal government to be a violation of the Controlled Substances Act because hemp is botanically related to marijuana. In addition, hemp also contains low levels of THC, which is the same psychoactive substance found in marijuana. These properties are why the government sought to include hemp by default in the Controlled Substances Act.
The government did make some distinction between hemp and marijuana with the passage of the Agricultural Act of 2014, which removed the federal restrictions on growing industrial hemp and permitted any states that have legalized the manufacturing of hemp to set up research programs in order to study the benefits of cultivating hemp.
Since the federal government has failed to create an exception for hemp in the list of Schedule I substances of the Controlled Substances Act, Section 280-E still applies to hemp growers and hemp distribution businesses.
As a result, hemp growers still face the same restrictions on permitted deductions as marijuana growers when it comes to taxation. The full list of deductions that are available to hemp growers can be found here.
In the same way that hemp growers are treated like marijuana growers for taxation purposes, hemp distributors must also follow the same rules as marijuana distributors. The full list of deductions that are available to hemp distributors can be found here.