Be it enacted by the Legislature of the State of Arizona:

Section 1. Title 36, Arizona Revised Statutes, is amended by adding chapter 28.2, to read:

CHAPTER 28.2

REGULATION OF CANNABIS

ARTICLE 1. GENERAL PROVISIONS

START_STATUTE36-2821. Definitions

In this chapter, unless the context otherwise requires:

1. "Cannabis":

(a) Means all parts of the plant of the genus cannabis, the seeds of the plant, the resin extracted from any part of the plant and every compound, manufacture, salt, derivative, mixture or preparation of the plant, its seeds or its resin, including cannabis concentrate.

(b) Does not include industrial hemp or fiber produced from the stalks, oil or cake made from the seeds of the plant, a sterilized seed of the plant that is incapable of germination or the weight of any other ingredient combined with cannabis to prepare topical or oral administrations, food, drink or another product.

2. "Cannabis accessories" means any equipment, products or materials of any kind that are used, intended for use or designed for use in planting, propagating, cultivating, growing, harvesting, composting, manufacturing, compounding, converting, producing, processing, preparing, testing, analyzing, packaging, repackaging, storing, vaporizing or containing cannabis, or for ingesting, inhaling or otherwise introducing cannabis into the human body.

3. "Cannabis cultivation facility" means an entity that is registered to cultivate, prepare and package cannabis and sell cannabis to retail cannabis stores, to cannabis product manufacturing facilities and to other cannabis cultivation facilities, but not to consumers.

4. "Cannabis establishment" means a cannabis cultivation facility, a cannabis testing facility, a cannabis product manufacturing facility or a retail cannabis store.

5. "Cannabis product manufacturing facility" means an entity that is registered to purchase cannabis, manufacture, prepare and package cannabis products and sell cannabis and cannabis products to other cannabis product manufacturing facilities and to retail cannabis stores, but not to consumers.

6. "Cannabis products" means concentrated cannabis products and cannabis products that are composed of cannabis and other ingredients and that are intended for use or consumption, including edible products, ointments and tinctures.

7. "Cannabis testing facility" means an entity that is registered to analyze and certify the safety and potency of cannabis.

8. "Consumer" means a person who is at least twenty‑one years of age and who purchases cannabis or cannabis products for personal use or use by persons who are at least twenty‑one years of age, but not for resale to others.

9. "Department" means the department of health services.

10. "Industrial hemp" means the plant of the genus cannabis and any part of that plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration that does not exceed three‑tenths percent on a dry-weight basis.

11. "Local regulatory authority" means the office or entity that is designated by a locality to process cannabis establishment applications.

12. "Locality" means a city, town or county.

13. "Public place" means any place to which the general public has access.

14. "Retail cannabis store" means an entity that is registered to purchase cannabis from cannabis cultivation facilities and cannabis and cannabis products from cannabis product manufacturing facilities and to sell cannabis and cannabis products to consumers.

15. "Unreasonably impracticable" means that the measures necessary to comply with the rules adopted by the department require such a high investment of risk, money, time or any other resource or asset that the operation of a cannabis establishment is not worthy of being carried out in practice by a reasonably prudent businessperson. END_STATUTE

START_STATUTE36-2822. Cannabis; personal use; forfeiture prohibited

A. Notwithstanding any other law, except as otherwise provided in this chapter, a person who is at least twenty‑one years of age may:

1. Possess, consume, use, display, purchase or transport cannabis accessories or one ounce or less of cannabis.

2. Possess, grow, process or transport not more than five cannabis plants and the cannabis produced by the plants on the premises where the plants were grown.

3. Transfer one ounce or less of cannabis and not more than five immature cannabis plants to a person who is at least twenty‑one years of age without remuneration.

4. Assist another person who is at least twenty‑one years of age in any of the acts described in this subsection.

B. Cannabis and cannabis accessories that are in the possession of a person who is at least twenty‑one years of age pursuant to subsection A of this section are not subject to seizure or forfeiture in this state or any political subdivision of this state. END_STATUTE

START_STATUTE36-2823. Personal cultivation; requirements; civil penalty

A. It is unlawful for a person who is at least twenty‑one years of age to cultivate a cannabis plant unless:

1. The cannabis plant is cultivated in a location where the plant is not subject to public view without the use of binoculars, aircraft or other optical aids.

2. The person takes reasonable precautions to ensure that the plant is secure from unauthorized access and access by a person who is under twenty‑one years of age.

3. The cannabis cultivation occurs only on property that is lawfully in possession of the cultivator or with the consent of the person who is in lawful possession of the property.

B. A person who violates this section is subject to a civil penalty of not more than seven hundred fifty dollars. END_STATUTE

START_STATUTE36-2824. Public smoking prohibited; civil penalty

It is unlawful for a person to smoke cannabis in a public place.� A person who violates this section is subject to a civil penalty of not more than two hundred fifty dollars. END_STATUTE

START_STATUTE36-2825. False identification; violation; classification

A. A person who is under twenty‑one years of age may not present or offer to a cannabis establishment or the cannabis establishment's agent or employee any written instrument or oral evidence of age that is false, fraudulent or not actually the person's own for the purpose of either:

1. Purchasing, attempting to purchase or otherwise procuring or attempting to procure cannabis.

2. Gaining access to a cannabis establishment.

B. A person who violates this section is guilty of a class 1 misdemeanor. END_STATUTE

START_STATUTE36-2826. Cannabis accessories

Notwithstanding any other law, in this state and any political subdivision of this state, a person who is at least twenty‑one years of age may manufacture, possess and purchase cannabis accessories and distribute and sell cannabis accessories to a person who is at least twenty‑one years of age. END_STATUTE

START_STATUTE36-2827. Cannabis establishments; authorization; limitation; forfeiture prohibited

A. Notwithstanding any other law, a retail cannabis store with a current and valid registration or a person who is at least twenty‑one years of age and who is acting in the person's capacity as an owner, employee or agent of a retail cannabis store with a current and valid registration may do all of the following in this state and any political subdivision of this state:

1. Possess, display, store and transport cannabis and cannabis products if the cannabis and cannabis products are not displayed in a manner that is visible to the general public from a public right‑of‑way.

2. Purchase cannabis from a cannabis cultivation facility.

3. Purchase cannabis and cannabis products from a cannabis product manufacturing facility.

4. Deliver, distribute and sell cannabis and cannabis products to consumers.

5. Lease or otherwise allow the use of property owned, occupied or controlled by any person, corporation or other entity for any of the activities conducted lawfully pursuant to this subsection.

B. Notwithstanding any other law, a cannabis cultivation facility with a current and valid registration or a person who is at least twenty‑one years of age and who is acting in the person's capacity as an owner, employee or agent of a cannabis cultivation facility with a current and valid registration may do all of the following in this state and any political subdivision of this state:

1. Cultivate, harvest, process, package, transport, display, store and possess cannabis.

2. Deliver and transfer cannabis to a cannabis testing facility.

3. Deliver, distribute and sell cannabis to a cannabis cultivation facility, a cannabis product manufacturing facility and a retail cannabis store.

4. Receive and purchase cannabis from a cannabis cultivation facility.

5. Receive cannabis seeds and immature cannabis plants from a person who is at least twenty‑one years of age.

6. Lease or otherwise allow the use of property owned, occupied or controlled by any person, corporation or other entity for any of the activities conducted lawfully pursuant to this subsection.

C. Notwithstanding any other law, a cannabis product manufacturing facility with a current and valid registration or a person who is at least twenty‑one years of age and who is acting in the person's capacity as an owner, employee or agent of a cannabis product manufacturing facility with a current and valid registration may do all of the following in this state and any political subdivision of this state:

1. Package, process, transport, manufacture, display and possess cannabis and cannabis products.

2. Deliver and transfer cannabis and cannabis products to a cannabis testing facility.

3. Deliver and sell cannabis and cannabis products to a retail cannabis store and a cannabis product manufacturing facility.

4. Purchase cannabis from a cannabis cultivation facility.

5. Purchase cannabis and cannabis products from a cannabis product manufacturing facility.

6. Lease or otherwise allow the use of property owned, occupied or controlled by any person, corporation or other entity for any of the activities conducted lawfully pursuant to this subsection.

D. Notwithstanding any other law, a cannabis testing facility with a current and valid registration or a person who is at least twenty‑one years of age and who is acting in the person's capacity as an owner, employee or agent of a cannabis testing facility with a current and valid registration may do all of the following in this state and any political subdivision of this state:

1. Possess, cultivate, process, repackage, store, transport or display cannabis.

2. Receive cannabis from a cannabis cultivation facility, a cannabis retail store, a cannabis product manufacturing facility or a person who is at least twenty‑one years of age.

3. Return cannabis to a cannabis cultivation facility, a cannabis retail store, a cannabis product manufacturing facility or a person who is at least twenty‑one years of age.

4. Lease or otherwise allow the use of property owned, occupied or controlled by any person, corporation or other entity for any of the activities conducted lawfully pursuant to this subsection.

E. A cannabis cultivation facility may not produce cannabis concentrates, tinctures, extracts or other cannabis products.� A cannabis cultivation facility may not use pesticides in the cultivation of cannabis.

F. Any item that is lawfully in the possession of a cannabis establishment pursuant to this section or a person who is at least twenty‑one years of age and who is acting in the person's capacity as an owner, employee or agent of a cannabis establishment pursuant to this section is not subject to seizure or forfeiture in this state or any political subdivision of this state.

G. This section does not prevent the imposition of penalties for violating this chapter or rules adopted by the department or a locality pursuant to this chapter. END_STATUTE

START_STATUTE36-2828. Cannabis establishments; registration; application; inspection

A. A cannabis establishment shall submit to the department an application or renewal application for an annual registration to operate.� A renewal application may be submitted up to ninety days before the expiration of the cannabis establishment's registration.

B. The department shall begin accepting and processing applications to operate cannabis establishments one year after the effective date of this section.

C. On receiving an application or renewal application for a cannabis establishment, the department shall immediately forward a copy of each application and half of the registration application fee to the local regulatory authority for the locality in which the applicant desires to operate the cannabis establishment, unless the locality has not designated a local regulatory authority.

D. At least forty‑five but not more than ninety days after receiving an application or renewal application for a cannabis establishment, the department shall issue an annual registration to the applicant, unless the department finds that the applicant is not in compliance with rules adopted by the department.

E. If an application is denied, the department shall notify the applicant in writing of the specific reason for the denial.

F. Every applicant for a cannabis establishment registration shall specify the location where the cannabis establishment will operate. A separate registration is required for each location at which a cannabis establishment operates.

G. The department may inspect cannabis establishments and the books and records maintained and created by cannabis establishments. END_STATUTE

START_STATUTE36-2829. Underage possession; forfeiture; drug awareness program; civil penalty

Notwithstanding section 13‑3405, a person who is under twenty‑one years of age and who is found to possess one ounce or less of cannabis shall forfeit the cannabis and complete not more than four hours of instruction in a drug awareness program.� If the person does not complete the drug awareness program within one year, the person is subject to a civil penalty of not more than three hundred dollars. END_STATUTE

START_STATUTE36-2830. Applicability of chapter

This chapter does not:

1. Require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale or growing of cannabis in the workplace.

2. Affect the ability of employers to have policies restricting the use of cannabis by employees or to discipline employees who are under the influence of cannabis in the workplace.

3. Allow driving under the influence of cannabis or driving while impaired by cannabis or supersede laws related to driving under the influence of cannabis or driving while impaired by cannabis.

4. Permit the transfer of cannabis, with or without remuneration, to a person who is under twenty‑one years of age or allow a person who is under twenty‑one years of age to purchase, possess, use, transport, grow or consume cannabis.

5. Prohibit a person, employer, school, hospital, detention facility or corporation or any other entity that occupies, owns or controls a property from prohibiting or otherwise regulating the possession, consumption, use, display, transfer, distribution, sale, transportation or growing of cannabis on or in that property.

6. Limit any privileges or rights of a medical marijuana patient, primary caregiver or medical marijuana dispensary under chapter 28.1 of this title. END_STATUTE

START_STATUTE36-2831. Research

Scientific and medical researchers who have previously published may purchase, possess and securely store cannabis for purposes of conducting research.� Scientific and medical researchers may administer and distribute cannabis to a research participant who is at least twenty‑one years of age after receiving informed consent from the research participant. END_STATUTE

START_STATUTE36-2832. Cannabis regulation fund; transfer

The cannabis regulation fund is established consisting of fees and taxes collected and civil penalties imposed under this chapter. The department shall administer the fund and shall use the monies in the fund for implementation and enforcement of this chapter. Monies in the fund are continuously appropriated.� Monies in the fund may not be transferred to any other fund except as provided in section 42‑3382. END_STATUTE

START_STATUTE36-2833. Consumer privacy

To ensure that individual privacy is protected, the department may not require a consumer to provide a retail cannabis store with personal information other than government‑issued identification to determine the consumer's age, and a retail cannabis store is not required to acquire and record personal information about consumers. END_STATUTE

Sec. 2. Title 42, chapter 4, Arizona Revised Statutes, is amended by adding article 10, to read:

ARTICLE 10. CANNABIS

START_STATUTE42-3381. Definitions

In this article, unless the context otherwise requires:

1. "Cannabis" has the same meaning prescribed in section 36-2821.

2. "Cannabis cultivation facility" has the same meaning prescribed in section 36-2821.

3. "Cannabis product manufacturing facility" has the same meaning prescribed in section 36-2821.

4. "Retail cannabis store" has the same meaning prescribed in section 36-2821.END_STATUTE

START_STATUTE42-3382. Levy and collection of tax on cannabis; disposition of monies

A. There is levied and shall be collected by the department in the manner provided by this chapter a tax at the rate of fifty dollars per ounce, or proportionate part thereof, on the sale or transfer of cannabis from a cannabis cultivation facility to a retail cannabis store or cannabis product manufacturing facility.

B. The department of health services may adjust the rate annually to account for inflation or deflation based on the consumer price index published by the United States department of labor, bureau of labor statistics.

C. Notwithstanding section 42‑3102, the department shall deposit, pursuant to sections 35‑146 and 35‑147, monies levied and collected pursuant to this section in the cannabis regulation fund established by section 36‑2832.

D. The department of revenue shall distribute, every three months, revenues generated by the tax imposed pursuant to this section in excess of the amount needed to implement and enforce title 36, chapter 28.2 in any fiscal year as follows:

1. Thirty percent to the department of education.

2. Ten percent to the department of health services for use in voluntary programs for the treatment of alcohol, tobacco and cannabis abuse.

3. Ten percent to the department of health services for a scientifically and medically accurate public education campaign educating youth and adults about the health and safety risks of alcohol, tobacco and cannabis.

4. Fifty percent to the state general fund. END_STATUTE

Sec. 3. Rulemaking

Not later than one hundred eighty days after the effective date of this act, the department of health services shall adopt rules necessary for implementation of this act. The rules may not prohibit the operation of cannabis establishments, either expressly or through rules that make the operation of a cannabis establishment unreasonably impracticable. The rules shall include:

1. Procedures for the issuance, renewal, suspension and revocation of a registration to operate a cannabis establishment consistent with the requirements of title 41, chapter 6, Arizona Revised Statutes.

2. A schedule of application, registration and renewal fees. Application fees may not exceed five thousand dollars, adjusted annually for inflation, unless the department determines a greater fee is necessary to carry out the department's responsibilities under this act.

3. Qualifications for registration that are directly and demonstrably related to the operation of a cannabis establishment.

4. Security requirements for cannabis establishments, including for the transportation of cannabis by cannabis establishments.

5. Requirements to prevent the sale or diversion of cannabis and cannabis products to persons who are under twenty‑one years of age.

6. Labeling requirements for cannabis and cannabis products that are sold or distributed by a cannabis establishment.

7. Health and safety regulations and standards for the manufacture of cannabis products and both the indoor and outdoor cultivation of cannabis by cannabis establishments.

8. Restrictions on the advertising and display of cannabis and cannabis products.

9. Civil penalties for the failure to comply with rules adopted pursuant to this section.

10. Procedures for collecting taxes levied on cannabis cultivation facilities.

Sec. 4. Conforming legislation

The legislative council staff shall prepare proposed legislation conforming the Arizona Revised Statutes to the provisions of this act for consideration in the fifty‑second legislature, second regular session.

Sec. 5. Requirements for enactment; two-thirds vote

Pursuant to article IX, section 22, Constitution of Arizona, this act is effective only on the affirmative vote of at least two-thirds of the members of each house of the legislature and is effective immediately on the signature of the governor or, if the governor vetoes this act, on the subsequent affirmative vote of at least three-fourths of the members of each house of the legislature.