September 17, 2019

The Honorable Gavin Newsom Governor, State of California State Capitol, First Floor Sacramento, CA 95814

RE: Assembly Bill 37 (Jones-Sawyer) – REQUEST FOR SIGNATURE

Dear Governor Newsom:

On behalf of the Rural County Representatives of California (RCRC), I respectfully request your signature on Assembly Bill 37. AB 37, authored by Assembly Member Reginald Jones-Sawyer, allows legal cannabis businesses to deduct their normal business expenses from their state income taxes. RCRC is an association of thirty-seven rural California counties, and the RCRC Board of Directors is comprised of elected supervisors from each of those member counties.

In 2015, the Legislature enacted the Medical Cannabis Regulation and Safety Act, and in 2016, the voters approved Proposition 64 legalizing cannabis for adult use. These two pieces of legislation levy a cultivation tax, a sales and use tax, and provide strict environmental, public safety, and public health standards for licensed cannabis businesses in California. Legal cannabis businesses operating under these new standards and regulations are now subject to significant taxes, fees and compliance standards. In order for California’s new cannabis laws to be successful, legal businesses must be able to successfully compete with illicit cannabis market operators as the industry in California has operated in an unregulated market, or in the case of medical cannabis, a quasi-legal market, for decades.

It is well-recognized that reducing the tax burden on legal businesses can greatly assist efforts to eliminate illicit market operations. Oregon, Colorado, and Hawaii have implemented policies allowing cannabis businesses to deduct business expenses from state income taxes. AB 37 would provide these much needed opportunities in a similar manner.

1215 K Street, Suite 1650, Sacramento, CA 95814 | www.rcrcnet.org | 916.447.4806 | Fax: 916.448.3154

ALPINE AMADOR BUTTE CALAVERAS COLUSA DEL NORTE EL DORADO GLENN HUMBOLDT IMPERIAL INYO LAKE LASSEN MADERA MARIPOSA MENDOCINO MERCED MODOC MONO MONTEREY NAPA NEVADA PLACER PLUMAS SAN BENITO SAN LUIS OBISPO SHASTA SIERRA SISKIYOU SONOMA SUTTER TEHAMA TRINITY TULARE TUOLUMNE YOLO YUBA The Honorable Gavin Newsom Assembly Bill 37 September 17, 2019 Page 2

Again, RCRC respectfully requests your signature on AB 37.

Sincerely,

PAUL A. SMITH Vice President Governmental Affairs

cc: The Honorable Reginald Jones-Sawyer, Member of the State Assembly The Honorable Rob Bonta, Member of the State Assembly The Honorable Ken Cooley, Member of the State Assembly The Honorable Bill Quirk, Member of the State Assembly The Honorable Tom Lackey, Member of the State Assembly The Honorable Jim Wood, Member of the State Assembly