By Andrew Kingsdale (published here with permission)
Originally published February 3, 2022 on the blog of the Law Offices of Omar Figueroa
Does one have to be a New York resident to own or manage a New York state-licensed cannabis business? No, but the license applicant does need to have a certain nexus to the state. With certain exceptions, non-residents may use a business or other legal entity to satisfy the nexus requirements.
We start with definition of an “applicant”under New York’s new cannabis law, the Marijuana Regulation and Taxation Act (MRTA):
“Applicant” unless otherwise specified in this chapter, shall mean a person applying for any cannabis, medical cannabis or cannabinoid hemp license or permit issued by the New York state cannabis control board pursuant to this chapter that: has a significant presence in New York state, either individually or by having a principal corporate location in the state; is incorporated or otherwise organized under the laws of this state; or a majority of the ownership are residents of this state. For the purposes of this subdivision, “person” means an individual, institution, corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership or association, or any other legal entity.
MRTA (New York Consolidated Laws, Chapter 7-A) §3, ❡1 (highlight added).
Under this definition, a non-New York resident has at least three options to apply for a New York cannabis license:
- Join or form a corporation that establishes a principal corporate location in New York;
- Incorporate or otherwise organize a business entity under New York law; OR
- Join a business entity of which the majority of ownership are New York residents.
To meet one of more of these conditions, the license applicant could be a business entity of which the non-New York resident is an owner, manager, director, and/or other officer. We generally recommend forming a business entity to apply for cannabis licenses and permits anyway, so this solution is not a stretch.
Of course, there are always “exceptions to the rule” (and this is no exception!). For example, adult-use cooperative licenses are restricted to New York residents (see MRTA, §70, ❡2(a)). Furthermore, corporations with principal officers and/or board members who are not U.S. citizens (nor lawfully admitted for permanent residence in the United States) may be denied New York cannabis licenses (see MRTA, §137(c)).
Additional details on residency requirements may appear in the Cannabis Control Board’s implementing regulations, which will be released late Winter to early Spring this year. But for now, it appears that the MRTA has left open several viable pathways for non-New York residents to be part of New York’s licensed commercial cannabis businesses.
