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Nevada Marijuana Legalization, Question 2 (2016)

The Nevada Marijuana Legalization Initiative, also known as Question 2, was on the November 8, 2016, ballot in Nevada as an indirect initiated state statute. It was approved.

A “yes” vote supported legalizing the recreational use of one ounce or less of marijuana by individuals 21 and over.
A “no” vote opposed this measure to legalize the recreational use of one ounce or less of marijuana for individuals 21 and over. [1]

Question 2 took effect on January 1, 2017. Legal sales of marijuana began on July 1, 2017.

This election was one of Ballotpedia’s top 10 state-level races in 2016. Click here to read the full list.

Contents

Aftermath

Distribution licenses

Question 2 legalized the use of marijuana on January 1, 2017. However, the initiative was designed to legalize the sale of marijuana on January 1, 2018. In May 2017, the Nevada Department of Taxation approved regulations for implementing Question 2 that allowed sales to begin six months earlier on July 1, 2017, for some retailers. The retailers eligible to begin selling marijuana for recreational use on July 1, 2017, were licensed medical marijuana facilities in good standing with the state. [2]

The Department of Taxation also drafted a regulation to allow medical marijuana facilities to obtain licenses to distribute marijuana to recreational marijuana retailers. Question 2 was designed to allow alcohol distributors to distribute marijuana to retailers for 18 months. Members of the Independent Alcohol Distributors of Nevada sued and won an injunction on this regulation on May 30, 2017. [3] On June 20, 2017, Judge James Wilson of the First Judicial District Court extended the injunction, saying that Question 2 gave alcohol distributors the exclusive right to distribute marijuana to retailers for 18 months. [4] [5]

As of July 7, 2017, the Department of Taxation had not issued any distribution licenses to alcohol wholesalers due to application and zoning issues. Marijuana retailers were selling the marijuana they already had in stock. [6]

Statement of emergency

One week after legal sales of marijuana began, the Nevada Department of Taxation reported that sales were exceeding expectations, stores were running low on stock, and that a shortage would “bring this nascent market to a grinding halt.” [7] On July 7, 2017, department spokesperson Stephanie Klapstein siad, “Based on reports of adult-use marijuana sales already far exceeding the industry’s expectations at the state’s 47 licensed retail marijuana stores, and the reality that many stores are running out of inventory, the Department must address the lack of distributors immediately. Some establishments report the need for delivery within the next several days.” [8]

Gov. Brian Sandoval (R) issued a statement of emergency for marijuana regulations on July 7, 2017. [9] Mari St. Martin, the communications director for Gov. Sandoval, said the statement allowed for quick changes in regulations. [10]

The Department of Taxation’s executive director, Deonne Contine, said that seven alcohol wholesales applied for marijuana distribution licenses as of July 13, 2017. The department issued licenses to two of the alcohol wholesalers, while the other five had incomplete applications. [10] Riana Durrett, executive director of the Nevada Dispensary Association, stated, “There aren’t enough alcohol distributors serving that market. Without a resolution to this, sales can’t go forward and establishments will have to let employees go.” [11]

On July 13, 2017, the Nevada Tax Commission passed a new regulation in a unanimous vote. [10] The regulation allowed the Department of Taxation to award distribution licenses to medical marijuana facilities if the department concluded that awarding distribution licenses to alcohol wholesalers alone would result in a marijuana shortage. [12]

On August 10, 2017, the Department of Taxation determined that there weren’t enough alcohol wholesalers interested in distributing marijuana and approved awarding licenses to others. Executive Director Contine said, “The capacity of only liquor wholesalers to serve the market seems lacking. I think the evidence is fairly clear today that this market needs to be opened up.” [13]

On August 11, 2017, Judge James Russell of the First Judicial District Court halted the Department of Taxation from awarding licenses businesses other than alcohol wholesalers. Judge Russell said the department denied due process to the alcohol wholesalers and appeared to have a “pre-determined conclusion that alcohol distributors are insufficient.” [14] [15]

Court orders and rulings

On August 17, 2017, Judge Russell lifted the restraining order on the Department of Taxation, allowing non-alcohol businesses to be licensed. He said, “There appears substantial evidence supplied at that hearing there is a need for additional distributors over and above liquor distributors. The testimony was overwhelming according to the court’s review there was a need to expand beyond the alcohol distributors.” [16] On August 29, 2017, the state Tax Commission approved the state Tax Department’s plan to license businesses other than alcohol wholesalers as marijuana distributors. [17]

On September 1, 2017, the Independent Alcohol Distributors of Nevada (IADON) appealed the First Judicial District Court’s ruling to the Nevada Supreme Court. [18] On September 14, 2017, the state Supreme Court issued an injunction, prohibiting the Department of Taxation to provide distribution licenses to non-alcohol businesses until the case is resolved. [19]

Following oral arguments on October 3, 2017, the state Supreme Court ruled that the IADON “will likely suffer irreparable harm absent an injunction, and [IADON has] shown an arguable likelihood of success on appeal” and kept its temporary injunction in place until the appeal case was entirely resolved. The court did not invalidate any already-issued distribution licenses. Instead, it just ruled that no new licenses could be issued. [20]

On November 28, 2018, the Nevada Supreme Court dismissed the case as the 18-month period when non-alcohol businesses could not distribute marijuana had passed. [21]

Election results

Question 2
Result Votes Percentage
a Yes 602,463 54.47%
No 503,644 45.53%

Election results from Nevada Secretary of State

Overview

Status of marijuana in Nevada

Prior to the passage of Question 2, the possession or use of marijuana for recreational purposes was illegal in Nevada. The passage of Question 9 in 2000 legalized medical marijuana. Although the Department of Justice under Obama did not prosecute most individuals and businesses that use or sell marijuana in keeping with state and local marijuana laws, both medical and recreational marijuana were illegal under federal law in 2016. [22] Question 2 made some recreational marijuana legal under Nevada state law.

Changes to state law

Question 2 was designed to allow adults aged 21 or older to possess, consume, and cultivate some marijuana for recreational purposes. The initiative created a new 15 percent excise tax, with revenue from the tax being spent on enforcing the measure and schools. It also authorized and regulated marijuana retail stores, cultivation facilities, manufacturing facilities, testing facilities, and distributors. [1] [23]

State of ballot measure campaigns

TheYes on 2campaign raised $4.3 million. TheNo on 2 campaign received $3.8 million. The largest donor in support of Question 2 was the Marijuana Policy Project, while the largest donor in opposition was casino mogul Sheldon Adelson. The state’s largest newspaper, the Las Vegas Review-Journal, endorsed Question 2 in 2014, but changed positions in June 2016 and opposed the initiative. Polls indicated that support for the measure was around 51 percent prior to the election.

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Initiative design

Marijuana users

Question 2 was designed to make lawful the purchase, possession, and consumption of one ounce of less of marijuana or one-eighth of an ounce or less of concentrated marijuana for individuals age 21 and over. The measure also permitted these individuals to grow up to six marijuana plants for personal use. It required cultivation to take place in an enclosed area with a lock. [1]

Marijuana sellers

The measure authorized the operation of marijuana establishments. It authorized the Nevada Department of Taxation to regulate them. The measure mandated that for the first 18 months of licensing, the Department of Taxation would only accept license applications for marijuana stores, production facilities, and cultivation facilities from registered medical marijuana establishments. During the same time period, only registered wholesale liquor dealers would be permitted to apply for marijuana distributor licenses. [1] [23]

Question 2 prohibited marijuana establishments within 1,000 feet of a school or 300 feet of a community facility. Question 2 also set limits on the number of retail marijuana stores permissible in each county based on the county’s population size. The measure provided the following limitations: [1]

County population Counties as of 2014 [24] Number of retail stores
Greater than 700,000 Clark County Up to 80
100,000 to 700,000 Washoe County Up to 20
55,000 to 100,000 Up to 4
Less than 55,000 Carson City, Churchill County, Douglas County, Elko County, Esmeralda County, Eureka County, Humboldt County, Lander County, Lincoln County, Lyon County, Mineral County, Nye County, Pershing County, Storey County, White Pine County Up to 2

Marijuana taxation

The measure imposed a 15 percent excise tax on marijuana sales by cultivation facilities. It mandated that annual licensing fees range from $3,300 to $30,000, depending on the type of license. Question 2 was designed to allocate revenue from the tax, licensing fees, and penalties first to the Department of Taxation and local governments to cover costs related to the measure, and then all remaining revenue to the State Distributive School Account. [1] [23]

Marijuana penalties

Question 2 permitted the government to enforce or implement policies prohibiting driving or operating a vehicle under the influence of marijuana, selling or giving marijuana to someone under 21, possessing or using marijuana on the grounds of schools or the Nevada Department of Corrections, or allowing workplaces to ban marijuana use. [1]

The initiative also established new penalties for cultivating marijuana within public view, smoking in a public place or moving vehicle, and providing marijuana to persons less than 21 years of age.

Text of measure

Ballot question

The question on the ballot was as follows: [23]

Shall the Nevada Revised Statutes be amended to allow a person, 21 years old or older, to purchase, cultivate, possess, or consume a certain amount of marijuana or concentrated marijuana, as well as manufacture, possess, use, transport, purchase, distribute, or sell marijuana paraphernalia; impose a 15 percent excise tax on wholesale sales of marijuana; require the regulation and licensing of marijuana cultivators, testing facilities, distributors, suppliers, and retailers; and provide for certain criminal penalties?

Ballot summary

The ballot summary was as follows: [23]

EXPLANATION—This ballot measure proposes to amend the Nevada Revised Statutes to make it lawful for a person 21 years of age or older to purchase and consume one ounce or less of marijuana other than concentrated marijuana, or one-eighth of an ounce or less of concentrated marijuana. It would also make it lawful for a person 21 years of age or older to cultivate not more than six marijuana plants for personal use, as well as obtain and use marijuana paraphernalia.

The ballot measure would also allow for the operation of marijuana establishments, which would be regulated by the Department of Taxation. Regulated marijuana establishments would include marijuana cultivation facilities, marijuana testing facilities, marijuana product manufacturing facilities, marijuana distributors, and retail marijuana stores. For the first 18 months, the Department of Taxation would only accept license applications for retail marijuana stores, marijuana product manufacturing facilities, and marijuana cultivation facilities from persons holding a medical marijuana establishment registration certificate. Similarly, for the first 18 months, the Department of Taxation would only issue marijuana distributors’ licenses to persons holding a Nevada wholesale liquor dealers’ license, unless the Department determines an insufficient number of marijuana distributors would result from this limitation.

If the ballot measure is approved, no marijuana establishments would be allowed within 1,000 feet of a public or private K-12 school or 300 feet of a community facility. There would also be limits on the number of retail marijuana store licenses issued in each county by the Department of Taxation. In a county with a population greater than 700,000, up to 80 retail marijuana store licenses would be allowed; in a county with a population greater than 100,000 but less than 700,000, up to 20 retail marijuana store licenses would be allowed; in a county with a population greater than 55,000 but less than 100,000, up to 4 retail marijuana store licenses would be allowed; and in a county with a population less than 55,000, up to 2 retail marijuana store licenses would be allowed. At the request of a county government, the Department of Taxation may issue retail marijuana store licenses in excess of the number otherwise allowed.

In addition to licensing, the Department of Taxation would be charged with adopting regulations necessary to carry out the provisions of this ballot measure. The regulations must address licensing procedures; licensee qualifications; security of marijuana establishments; testing, labeling, and packaging requirements; reasonable restrictions on advertising; and civil penalties for violating any regulation adopted by the Department.

Approval of the ballot measure would not prevent the imposition of civil or criminal penalties for driving under the influence of marijuana; knowingly selling or giving marijuana to a person under 21 years of age; possessing or using marijuana or marijuana paraphernalia in state correctional centers; possessing or using marijuana on school grounds; or undertaking any task under the influence of marijuana that constitutes negligence or professional malpractice. The measure would also not prevent employers from enforcing marijuana bans for their workers; marijuana bans in public buildings or on private property; and localities from adopting control measures pertaining to zoning and land use for marijuana establishments.

Under the provisions of the ballot measure, all applicants for a marijuana establishment license would be required to pay a one-time application fee of $5,000. Additionally, the Department of Taxation may require the payment of an annual licensing fee ranging from $3,300 to $30,000, depending on type of license. The measure would also impose a 15 percent excise tax on wholesale sales of marijuana in Nevada by a marijuana cultivation facility. Revenue from this excise tax, as well as revenue from licensing fees and penalties collected by the Department of Taxation related to the regulation of marijuana, would first go to the Department of Taxation and local governments to cover the costs of carrying out the provisions of this measure. Any remaining revenue would be deposited in the State Distributive School Account.

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Lastly, this ballot measure would impose criminal penalties for certain violations related to the possession, use, sale, and cultivation of marijuana and marijuana plants. Criminal offenses would include violations of the marijuana cultivation laws set forth in the measure; public consumption of marijuana; a person falsely representing himself or herself to be 21 years of age or older in order to obtain marijuana; and knowingly giving marijuana to a person under 21 years of age.

A “Yes” vote would amend the Nevada Revised Statutes to allow a person, 21 years old or older, to purchase, cultivate, possess, or consume a certain amount of marijuana or concentrated marijuana, as well as manufacture, possess, use, transport, purchase, distribute, or sell marijuana paraphernalia; impose a 15 percent excise tax on wholesale sales of marijuana; require the regulation and licensing of marijuana cultivators, testing facilities, distributors, suppliers, and retailers; and provide for certain criminal penalties.

A “No” vote would retain the provisions of the Nevada Revised Statutes in their current form. These provisions prohibit the possession, use, cultivation, and sale or delivery of marijuana in the State of Nevada for non-medical purposes, as well as the possession, use, sale, delivery, or manufacture of marijuana paraphernalia for non-medical purposes. [25]

Full text

The full text of the measure can be found here on page 25.

Fiscal note

Question 2 proposes to amend the Nevada Revised Statutes to add several new sections that would require the Department of Taxation to regulate and administer the operation of facilities that cultivate, produce, and dispense marijuana products in the state. Question 2 additionally requires the Department to collect a 15 percent excise tax upon the wholesale value of marijuana sold by a marijuana cultivation facility in Nevada. The proceeds from the excise tax, less costs incurred by the Department of Taxation and counties, cities, and towns to carry out certain provisions of Question 2, must be deposited in the State Distributive School Account. Question 2 also decriminalizes the personal use, possession, or cultivation of marijuana under certain circumstances and provides for criminal penalties related to the unlawful cultivation, consumption, manufacture, or distribution of marijuana.

FINANCIAL IMPACT OF QUESTION 2

State and local governments will receive additional revenue from the following provisions of Question 2:

1. The Department of Taxation shall collect a one-time fee of $5,000 from each applicant for a marijuana establishment license. 2. The Department of Taxation may impose fees for the initial issuance and annual renewal of marijuana establishment licenses for retail stores, cultivation facilities, product manufacturing facilities, distributors, and testing facilities, with the maximum fee that can be imposed for each license specified in Question 2. 3. An excise tax of 15 percent must be collected on the fair market wholesale value of marijuana sold by a marijuana cultivation facility and remitted to the Department of Taxation. The Department must establish regulations to determine the fair market wholesale value for marijuana in the state. 4. Marijuana, marijuana products, and marijuana paraphernalia sold as tangible personal property by a retail marijuana store would be subject to state and local sales and use taxes under current statute.

The proceeds from the application fee, license fees, and excise tax, less costs incurred by the Department of Taxation and counties, cities, and towns to carry out certain provisions of Question 2, must be deposited in the State Distributive School Account. The proceeds from the state and local sales and use taxes generated on the retail sales of marijuana, marijuana products, and marijuana paraphernalia would be distributed to the state and local governments, including school districts, in the same manner these taxes are currently distributed.

The Department of Taxation and the Fiscal Analysis Division cannot determine the amount of revenue that will be generated for state and local governments, including school districts and the State Distributive School Account, from the application fee, licensee fees, excise tax, and sales and use taxes, because the following factors cannot be estimated with any reasonable degree of certainty:

1. The number of applications that would be received by the Department for marijuana establishment licenses; 2. The number of initial and annual licenses that would be issued by the Department and the amount of the fee that the Department would charge for each initial and annual license issued, if the Department decides to impose the license fees authorized within Question 2; 3. The quantity of marijuana that will be sold by marijuana cultivation facilities and the fair market value that will be established by the Department through the regulatory process that will be subject to the excise tax; 4. The quantity of marijuana, marijuana products, and marijuana paraphernalia and the price of these items that will be sold by retail marijuana stores that will be subject to state and local sales and use taxes.

Additionally, businesses that receive marijuana establishment licenses from the Department may also be subject to additional taxes and fees imposed by the state of Nevada or by local governments, including, but not limited to, the Modified Business Tax, the Commerce Tax, and state and local business license fees, which would increase revenues from these tax sources dedicated to the state or local government entity imposing the tax or fee. However, because the Fiscal Analysis Division cannot estimate the number of licenses that will be issued, the revenue that may be generated by the marijuana establishments, or the wages that may be paid to persons employed by the establishments, the resultant increase in revenues dedicated to the state and local governments cannot be determined with any reasonable degree of certainty.

The Fiscal Analysis Division has identified the following areas that may affect expenditures for state and local governments as a result of Question 2:

1. The Department of Taxation has indicated that it will incur one-time costs for equipment and programming of its computer system totaling approximately $600,000. The Department has also indicated that it will need an additional 14 positions to implement and administer these provisions, beginning on January 1, 2017, which, along with associated operating costs, would result in a cost of approximately $637,000 for the last six months of Fiscal Year 2017 (January 1, 2017–June 30, 2017) and approximately $1.1 million in each subsequent fiscal year. The Department has estimated that the total costs for implementation and administration of Question 2 would be approximately $1.2 million in Fiscal Year 2017 (the first year in which the provisions would become effective), and approximately $1.1 million per fiscal year thereafter. The Department has indicated that some expenditures will be required before revenue from the excise tax and fees authorized in Question 2 are collected; however, the Fiscal Analysis Division cannot determine how the Department will choose to implement Question 2, the timing of expenditures that will be incurred by the Department, or the method that will be used to fund these initial costs. 2. Question 2 requires the Department of Taxation to conduct a background check of each prospective owner, officer, and board member of a marijuana establishment license applicant. Question 2 also requires the operator of each marijuana establishment to determine the criminal history of each worker or volunteer for suitability of employment as established in Question 2. The Department of Public Safety has indicated that if it will be required to process the background checks, the caseload increase will require one to two additional positions, which would cost approximately $50,000 to $100,000 per fiscal year. However, the Fiscal Analysis Division cannot determine the process that the Department of Taxation will choose to conduct these background checks. 3. The provisions of Question 2 that criminalize and decriminalize certain actions related to marijuana will require changes to the Nevada Offense Codes used in the Central Repository for Nevada Records of Criminal History maintained by the Department of Public Safety. The Department of Public Safety has indicated that an independent contractor may be required to implement the changes to the Nevada Offense Codes, which would result in a financial impact of approximately $10,000 to $40,000, based on previous contracts for these types of services. The Fiscal Analysis Division has determined that a financial impact on state government may occur only if an independent contractor is used to make the changes to the Nevada Offense Codes. 4. The provisions of Question 2 that criminalize and decriminalize certain actions related to marijuana may increase or decrease the workload of various state and local government agencies with respect to enforcement, investigation, incarceration, probation, and parole. The Fiscal Analysis Division cannot determine the net effect of these provisions on the workload of these agencies with respect to these functions.

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The Fiscal Analysis Division cannot determine what actions may be taken by state and local governments to carry out the provisions of Question 2, the amount of expenditures that may be incurred, or how those expenditures would be funded. However, Question 2 specifies that excise tax revenues, fees, or penalties collected must first be used to defray certain costs incurred by the Department of Taxation and counties, cities, and towns, with the excess revenue to be deposited in the State Distributive School Account. Additionally, state and local governments, including school districts, will receive sales and use tax revenue from the retail sales of marijuana, marijuana products, and marijuana paraphernalia, as well as from other taxes and fees that may be paid by businesses that receive marijuana establishment licenses. Therefore, the Fiscal Analysis Division cannot determine the financial impact upon state or local governments, including school districts and the State Distributive Account, because the revenues and expenditures resulting from Question 2 cannot be estimated with any reasonable degree of certainty.

Prepared by the Fiscal Analysis Division of the Legislative Counsel Bureau – August 12, 2016 [25]

Support

The Coalition to Regulate Marijuana Like Alcohol in Nevada, also known as Yes on Question 2, led the campaign in support of Question 2. [26] The Marijuana Policy Project of Arizona and Nevada Canabis Industry Association sponsored the campaign. [27] [28]

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BLM Nevada Weeds and Invasives Program

Maintaining or restoring land health is one of BLM’s highest priorities. Among the obstacles to maintaining healthy lands and restoring impaired ecosystems are noxious and invasive weeds. These plants dominate many sites, can cause long term damage to plant communities, and degrade resource values.

In the Great Basin, Mohave Desert, and other parts of the intermountain west BLM’s “”War Against Weeds”” now has two parts. The rapid spread of noxious weeds on western range and forest lands over the past half century has been well documented. The other part of the “War Against Weeds” is non-native invasive annual grasses, i.e., cheatgrass, medusahead, red brome, and others. Based on satellite imagery from 2003, about 11 million of the almost 48 million acres of BLM Nevada lands had at least 10% cover of cheatgrass and other annual grasses. While this may not seem like much, when such areas burn, the cheatgrass can be released, greatly increasing in coverage, initiating a cheatgrass fire cycle, and ecologically dominating that site.

Noxious weeds impact native ecosystems by:
• Reducing biodiversity
• Altering hydrologic conditions
• Altering soil characteristics
• Altering fire intensity and frequency
• Modifying successional pathways
• Competing for pollinators
• Displacing rare plant species
• Serving as reservoirs of plant pathogens
• Replacing complex communities with simple communities

In BLM Nevada weed specialists are actively engaged in 25 different cooperative weed management groups. All the BLM districts have cooperative weed management groups. The groups are composed of land owners; employees of County, State and Federal agencies; and members of the public. BLM also contracts several Weed Districts and Conservation Districts for weed control..

The two most common forms of noxious and invasive weed treatments on BLM lands are reseeding as part of ES/R and herbicides. BLM weed specialists receive training and hold federal and state licenses for the use of herbicides. Some herbicides are “restricted use herbicides,” which means a state license is needed to buy them. These are not the herbicides available at Lowes. Tordon and Escort, two herbicides widely used on BLM lands are restricted use herbicides. Tordon is commonly used on the knapweeds. Escort is used on whitetops and leafy spurge. People using such herbicides on public lands must hold state certification and be under the supervision of someone with federal certification.

Project Story

Fountaingrass Control Initiative

Restoration staff from the Las Vegas Field Office recently coordinated and led a volunteer weed control project at Laughlin Junior/Senior High School in partnership with the Southern Nevada Cooperative Weed Management Area (CWMA). The school’s football team joined CWMA partners to remove green fountaingrass plants from areas near the football field at the school and replace them with native grass plants. The replacement plants, alkali sacaton (Sporobolus airoides), were grown at the National Park Service’s native plant nursery at Lake Mead.

Green, or crimson, fountaingrass (Pennisetum setaceum) is a non-native plant introduced as an ornamental landscape plant. It is very invasive, spreading by wind-blown seeds and escaping from urban areas into natural environments, including BLM managed public lands. There it crowds out native plants, alters wildlife habitats and increases the risk from wildfire. For these reasons, the State of Nevada has declared it a noxious weed, requiring landowners and land managers to control it. The Las Vegas Field Office received a grant from the National Fish and Wildlife Foundation to help develop the Southern Nevada CWMA and implement the Fountaingrass Control Initiative, and continues to be an active partner in the CWMA.

Story by Johnny Jones, Great Basin Institute, and Kirsten Cannon, Southern Nevada Public Affairs Specialist

Volunteers plant native grasses at Laughlin High School. Photo by Johnny Jones.