Marijuana microbusiness entrepreneurs may be able to participate in Michigan’s Social Equity Program for opportunities to reduce application fees and regulatory costs.
The commercial cannabis industry is well known for its high costs to entry. Michigan’s medical marijuana facilities are required to have a minimum of $150,000 – $500,000 available capital upfront. This requirement along with annual license costs and tax expenses prevent many from entering the commercial medical market.
To further open the market to small businesses, Michigan’s adult use program has reduced license costs compared to the medical program. The Marijuana Microbusiness license was included under the Michigan Regulation and Taxation of Marijuana Act (MRTMA) to allow vertically integrated facilities with a small business model. With the state’s social equity initiatives, there may be additional cost saving opportunities for microbusiness owners living and operating in selected areas across the state.
With a bit of strategic tax planning, microbusiness investors may also be able to qualify for additional cost savings. By maximizing savings where possible, cost barriers to entry can be reduced to more agreeable thresholds for many microbusinesses.
What is Michigan’s Social Equity Program?
Under Michigan’s social equity program, microbusiness applicants and owners may be qualified for license and renewal fee reductions of up to 60%. The state’s social equity plan is “a plan to promote and encourage participation in the marijuana industry by people from communities that have been disproportionately impacted by marijuana prohibition and enforcement and to positively impact those communities.”
The reduction of fees is available and calculated as follows:
- 25% reduction for those who have been a resident of one of the selected disproportionally impacted communities for the past five years AND whose marijuana establishments will be located in disproportionately impacted communities.
- An additional 25% reduction if the individual(s) holding majority ownership have been a resident of one of the 19 disproportionally impacted communities for the past five years AND have a marijuana-related conviction.
- An additional 10% reduction if the individual(s) holding majority ownership have been a resident of one of the 19 disproportionally impacted communities for the past five years AND were registered as primary Caregivers for at least two years between 2008 and 2017.
19 communities were selected for Michigan’s social equity program:
- Benton Harbor
- East Lansing
- Highland Park
- Mt. Morris
- Mt. Pleasant
- Muskegon Heights
- River Rouge
Microbusiness owners who are residents of and operating in one of the above communities are eligible for the cost reductions under the social equity program. If the maximum criteria are met, microbusinesses can reduce their upfront fees by $8,400.
Caregivers and Michigan’s Social Equity Program
While the above incentives are available to all levels of adult use commercial businesses, Caregivers in these communities are the only individuals who can take advantage of the full cost savings under the social equity program. Microbusiness models may be ideal for Caregivers looking to bring their techniques and products to the commercial market for this and many other reasons. Additional savings available under the social equity program for Caregivers living and operating in the above communities results in much lower upfront costs for these individuals.
Caregivers interested in starting a microbusiness in a selected social equity community can complete an application form and Caregiver attestation in order to qualify for the application and license fee reductions.
With careful upfront cost planning, including buildout and equipment budgets, revenue and expense forecasts, and setting realist goals, microbusiness owners can better create and sustain a profitable business model. Additional fee reductions for Caregiver owned microbusinesses with a qualifying residence and business location in a social equity location can offer increased planning opportunities. Social equity program fee reductions are recurring. As long as the microbusiness remains eligible with the established criteria, participation in the social program continues each year.
Additional Resources Available to Microbusinesses Under the Social Equity Program
Microbusiness applicants qualifying under Michigan’s social equity program also have additional business resources available to them. Beginning in August 2019, the Michigan Marijuana Regulatory Agency began hosting outreach programs across the state with this information. Currently, six state departments participate in these programs, including the Department of Treasury and Michigan Occupational Safety & Health Administration.
Volunteer businesses such as attorneys, accountants, and consultants may also participate in the social equity program. These businesses may offer certain services at reduced or no cost for eligible social equity participants. Marijuana microbusiness owners who are eligible can take advantage of these additional business resources and cost savings opportunities.
For upcoming social equity outreach events, visit the MRA’s events list here.
Small Business Tax Incentives – Additional Cost Savings
With the passing of the 2017 Tax Cuts and Jobs Act, small businesses and qualified investors may be able to take advantage of tax savings opportunities. Depending on the business structure and nature of investments into the business, individuals can incorporate tax planning into their business strategy in order to take advantage of available tax burden reductions.
Different tax incentives are available for many self-employed business owners, LLCs, S Corporations and even C Corporations. Income limitations apply, as do with the business structure and source of the business funding. A CPA can help you determine which, if any tax incentives are available on an individual basis, and how they may affect your overall cost planning budget for your microbusiness.
Microbusiness owners and their investors should combine features available under both Michigan’s social equity program and qualified tax planning opportunities when possible. Doing so proactively can result in substantial tax and license cost savings.
Our Experts Can Help!
At Marijuana Microbusinesses, our team can help your microbusiness determine if it is eligible to participate under Michigan’s Social Equity Program. Our accounting experts can advise you on cost planning, budgeting, and tax benefits available for your individual situation. Our professionals will patiently work with you to understand your goals as a microbusiness owner and develop strategies to best align with your objectives.
To learn more about Marijuana Microbusinesses and how we can help your microbusiness begin and thrive, please visit our site here.
Kareyna L. Miller CPA is the founder of LC Solutions Michigan PLLC, a full service CPA and accounting firm focusing 100% in the cannabis industry. Kareyna has over 15 years of experience working with small businesses and understands the complexity of entrepreneurship and business ownership. She and her team have helped hundreds of small business owners navigate and understand the accounting challenges surrounding the cannabis industry.