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(a) It shall be unlawful to engage in any Commercial Cannabis Activity or to operate a Cannabis Business within the City without obtaining and maintaining:
(1) A permit therefor issued by the Office of Cannabis;
(2) A license therefor issued by a State Licensing Authority pursuant to Division 10 of the California Business and Professions Code; and
(3) Any such other licenses, permits, certifications, or registrations that may be required by State or City law.
(b) It shall be unlawful for any Person to engage in any Commercial Cannabis Activity for which a permit has been granted under this Article 16 if such permit has been revoked, or during any period in which such permit is suspended.
(c) If any license, permit, certification, or registration required for the operation of a Cannabis Business is denied, suspended, modified, revoked, or expired, the Cannabis Business and any Referring Department responsible for the action shall notify the Director of such action in writing within two business days.
(d) It shall be unlawful for any Person who is required to surrender a permit upon the sale of a Cannabis Business, as required by Section 1608 of this Article 16, to fail to do so.
(Added by Ord. 230-17, File No. 171042, App. 12/6/2017, Eff. 1/5/2018)
(a) The Director, in consultation with the Human Rights Commission, shall implement an Equity Program designed to foster equitable access to participation in the cannabis industry, including equitable access to promotional and ownership opportunities in the industry. The Equity Program shall provide assistance to communities unfairly burdened by the War on Drugs, and shall be designed to ensure full and equal access to resources and opportunities made available as a result of Proposition 64. In particular, the Cannabis Equity Program shall provide support to individuals who have experienced social indicators that exacerbate inequities, and shall create strategies to uplift communities where those inequities have been concentrated.
(b) Equity Applicants. The Equity Program shall offer priority permit processing, as provided in Section 1606, to an individual who meets the following Equity Criteria (“Equity Applicant”):
(1) Is a natural person;
(2) At the time of application, has assets, excluding non-liquid assets and retirement accounts, that do not exceed asset limits established by the Director;
(3) Submits an application for a Cannabis Business Permit in any of the following capacities:
(A) As the sole owner/operator of the Applicant;
(B) As an individual with an ownership interest of at least 40% in the corporate Applicant, and who is also the Chief Executive Officer of the corporate Applicant;
(C) As an individual with an ownership interest of at least 51% in the corporate Applicant; or
(D) As the Executive Director or member of the board of directors of a not-for-profit Applicant where a majority of the members of the board of directors satisfy the requirements of subsections (b)(2) and (4) of this Section 1604; and
(4) Meets three or more of the following additional criteria:
(A) At the time of application, is a member of a household that earns no more than 80% of the San Francisco Area Median Income, adjusted for household size;
(B) During the period 1971-2016, was arrested for, convicted of, or adjudged to be a ward of the juvenile court for any crime under the laws of California or any other jurisdiction relating to the sale, possession, use, manufacture, or cultivation of Cannabis;
(C) After 1995, either lost housing in San Francisco, as evidenced by eviction, foreclosure, or revocation of housing subsidy; resided in permanent supportive housing, as defined in Administrative Code Section 20.54.2, in San Francisco; stayed overnight at a Navigation Center, as described in Administrative Code Chapter 106, in San Francisco, for 90 non-consecutive days; stayed overnight at a Shelter, as defined in Administrative Code Section 20.41, in San Francisco, for 90 non-consecutive days; or resided in a City-funded Single Room Occupancy building;
(D) Has a parent, sibling, or child who, during the period 1971-2016, was arrested for, convicted of, or adjudged to be a ward of the juvenile court for any crime under the laws of California or any other jurisdiction relating to the sale, possession, use, manufacture, or cultivation of Cannabis;
(E) Attended a school under the jurisdiction of the San Francisco Unified School District for five years, either consecutively or in total, during the period 1971-2016; or
(F) During the period 1971-2016, lived for at least five years, either consecutively or in total, in San Francisco census tracts where at least 17% of the households had incomes at or below the federal poverty level, as determined by the Director.
For purposes of Section 1604(b)(3), an “ownership interest” in the corporate Applicant shall include a right, proportionate to the interest held, to share in the business’s profits, including dividends, distributions, or other payments; a right, proportionate to the interest held, to the proceeds of a sale of the business’s assets, liquidation of the business, merger of the business into another business, or another transaction that would signify the end of the original business; and a right, proportionate to the interest held, to vote on fundamental decisions relating to the business.
(c) Equity Incubators. The Equity Program shall offer priority permit processing, as provided in Section 1606, to Equity Incubators. For purposes of this Article 16, an Equity Incubator is an Applicant that does not qualify as an Equity Applicant, but that submits with its Cannabis Business Permit application a Cannabis Equity Incubator Agreement in which it identifies no less than one Equity Applicant in which, or in whose Cannabis Business, the Equity Incubator and its Owner(s) have no ownership interest or profit-sharing arrangement; agrees to provide any such identified Equity Applicant commercial space and security resources or, in either or both cases, the fair market value of same on a continuous basis for a total of no less than three years, beginning at any time after the Director verifies that the Equity Applicant has received all necessary approvals to begin building out its commercial space for use as a Cannabis Business; and commits to comply with the following additional operating requirements on a continuous basis for no less than three years, beginning no later than the date the Equity Incubator begins its operation as a Cannabis Business:
(1) Ensure that at least 30% of all Business Work Hours are performed by Local Residents. Business Work Hours performed by residents of states other than California shall not be considered in calculation of the number of Business Work Hours to which this requirement applies;
(2) Ensure that at least 50% of the Equity Incubator’s employees satisfy the requirements of subsection (b)(4) of this Section 1604;
(3) Provide a community investment plan demonstrating engagement with businesses and residents located within 500 feet of the site of the proposed Cannabis Business;
(4) Provide the identified Equity Applicant, directly or indirectly, with community outreach services, security services for the Equity Applicant’s Premises, and any support necessary for the Equity Applicant to comply with the Good Neighbor Policy required in Section 1609(b)(19); and
(5) Comply with one of the following additional operating requirements:
(A) Submit to the Director for review and approval a written, actionable “Equity Incubator Plan” describing how the Equity Incubator will encourage and support the establishment and growth of Equity Applicants in which, or in whose Cannabis Business, the Equity Incubator Applicant and its Owner(s) have no ownership interest or profit sharing arrangement, including but not limited to any Equity Applicant identified in the Equity Incubator Plan, by, among other things, providing business plan guidance, operations consulting, personnel, or1
and/or technical assistance. The services listed in the Equity Incubator Plan must be enumerated, and include an estimated dollar value of those services. The aggregate dollar value of the services must equal or exceed the sum of (i) 10% of the rent for, or, if the Equity Incubator owns the Equity Incubator’s Premises, 10% of the rental market value of, the Equity Incubator’s Premises, and (ii) the annual total costs of security services at the Equity Incubator’s premises. On or before March 1 of each year, the Equity Incubator shall submit to the Director an annual report covering the prior calendar year, signed by both the Equity Incubator and the Equity Applicant, describing the services provided under this subsection (c)(5)(A); or
(B) Provide an Equity Applicant in which, or in whose Cannabis Business, the Equity Incubator Applicant and its Owner(s) have no ownership interest or profit-sharing arrangement with rent-free commercial space either adjacent to the Equity Incubator’s Premises or off-site, in which the Equity Applicant may conduct its Cannabis Business. If such rent-free commercial space is provided off-site, the Equity Incubator must provide the greater of 800 square feet or the equivalent of at least 10% of the square footage of the Equity Incubator’s Premises. If such rent-free commercial space is provided adjacent to the Equity Incubator’s Premises, the Equity Incubator must provide either 800 square feet or the equivalent of at least 10% of the square footage of the Equity Incubator’s Premises. The Equity Incubator’s provision of this rent-free commercial space to an Equity Applicant may begin at any time after the Director verifies that the Equity Applicant has received all necessary approvals to begin building out its commercial space for use as a Cannabis Business, and the three-year minimum period in which the Equity Incubator must continue to provide rent-free space to the Equity Applicant shall be dated from the Equity Applicant’s earliest use of that rent-free space.
CODIFICATION NOTE
(a) Cannabis Business Registration. The Office of Cannabis shall initiate a Cannabis Business Registration Period in order to collect information from Persons wishing to apply for Cannabis Business Permits. During the Cannabis Business Registration Period, such Persons shall have the opportunity to register with the Office of Cannabis, and to provide such information as may be required by the Director, including but not limited to:
(1) Information regarding the type(s) of Cannabis Business Permit(s) and State Cannabis License(s) for which they intend to apply in 2018;
(2) Information about the location of the proposed Cannabis Business, including but not limited to proof that the property owner has authorized the use of the property as a Cannabis Business;
(3) Copies of all applicable licenses, permits, certifications, and registrations issued by the City or the State and held by the Owner of the proposed business, including but not limited to Hazardous materials registrations, site permits, Business Registration Certificates, and/or Seller’s Permits; and
(4) Such other information, documents, and/or attestations as the Director may deem necessary or appropriate for registration.
(b) Registration a Condition of Eligibility for Temporary Cannabis Business Permit. Persons that do not register with the Office of Cannabis during the Cannabis Business Registration Period shall not be eligible to apply for or receive a Temporary Cannabis Business Permit, as set forth in subsection (d) of this Section 1605.
(c) Medical Cannabis Dispensaries.
(1) To ensure the continued availability of Medicinal Cannabis for individuals who qualify under California Health and Safety Code Sections 11362.7 et seq. to use Medicinal Cannabis, a Medical Cannabis Dispensary that holds a valid permit to operate from the Department of Public Health as of the effective date of this Article 16 may continue to operate as a Medical Cannabis Dispensary at the location identified in its Medical Cannabis Dispensary permit and consistent with the terms of Article 33 of the Health Code, provided that:
(A) The Owner of the Medical Cannabis Dispensary provides the Office of Cannabis with information identifying the type(s) of Cannabis Business Permits and State Cannabis Licenses for which the Owner intends to apply in 2018, and such other information as may be required by the Director;
(B) The Owner of the Medical Cannabis Dispensary applies for and obtains a temporary or permanent State Cannabis License;
(C) The Owner of the Medical Cannabis Dispensary applies for a Cannabis Business Permit within 30 days of the date that the Office of Cannabis makes such applications available; and
(D) The Owner of a Medical Cannabis Dispensary agrees to surrender its Medical Cannabis Dispensary permit to the Department of Public Health upon being awarded a Cannabis Business Permit.
(2) A Medical Cannabis Dispensary’s permit to operate, as issued under Article 33 of the Health Code, shall expire as a matter of law when it is surrendered to the Department of Public Health, as set forth in subsection (c)(1)(D) of this Section 1605, or upon the sunset of Article 33, whichever occurs sooner.
(d) Temporary Cannabis Business Permits. The Office of Cannabis shall make applications available for Temporary Cannabis Business Permits for all permit categories other than Storefront Cannabis Retailers. In order to be eligible for a Temporary Cannabis Business Permit, an Applicant must do all of the following:
(1) Submit an application, on a form to be prescribed by the Director;
(2) Demonstrate compliance with the Cannabis Business Registration process set forth in subsection (a) of this Section 1605;
(3) Demonstrate that as of September 26, 2017, the Applicant was engaging in Commercial Cannabis Activities relating to Medicinal Cannabis in the City and has continued to engage in such activities without interruption;
(4) Demonstrate that the proposed Cannabis Business complies with the Planning Code;
(5) Authorize and submit to the inspection of the proposed Premises by the Office of Cannabis, the Fire Department, the Department of Building Inspection, the Department of Public Health, and such other City departments, agencies, and offices as may be necessary to confirm that the proposed Cannabis Business will operate in compliance with law and with the applicable interim health and safety standards;
(6) Acknowledge the obligation to pay any non-refundable application and/or inspection fees that the Office of Cannabis and/or the Referring Departments may impose in connection with the application for a Temporary Cannabis Business Permit; and
(7) Demonstrate that the proposed Cannabis Business complies with applicable interim health and safety standards developed by the Director in consultation with the Department of Building Inspection, the Fire Department, the Police Department, and the Department of Public Health. The interim health and safety standards shall be sufficient to protect the health and safety of employees, neighbors, and Customers of the proposed Cannabis Business, and to prohibit unlawful access to Cannabis and Cannabis Products by underage individuals.
(e) Review, award, and denial of Temporary Cannabis Business Permits. The Director shall ensure that the Premises are inspected by all relevant City Departments, and shall review all documentation submitted by the Applicant for the Temporary Cannabis Business Permit in support of the application. If the application is incomplete, the Director shall advise the Applicant of the deficiencies, and give the Applicant 30 days in which to correct them. If the application is complete, the Director shall determine whether the Applicant has demonstrated compliance with subsection (d) of this Section 1605, and any implementing regulations. After determining whether the Applicant has met these standards, the Director shall either award, award with conditions, or deny the Temporary Cannabis Business Permit.
(f) Appeal of Denial of Application for Temporary Cannabis Business Permit. The decision of the Director to award, award with conditions, or deny a Temporary Cannabis Business Permit may be appealed to the Board of Appeals in the manner prescribed in Article 1 of the San Francisco Business and Tax Regulations Code.
(g) Activities Authorized by Temporary Cannabis Business Permit. A Temporary Cannabis Business Permit issued under this Section 1605 shall authorize the Permittee to engage in all of the activities authorized by a Cannabis Business Permit of the same category, as set forth in Sections 1623 - 1629 of this Article 16.
(h) Duration. A Temporary Cannabis Business Permit issued under this Section 1605 shall be valid for a period of 120 days and may be extended for additional 120-day periods at the discretion of the Director. Notwithstanding the prior sentence, the Director shall not issue a new temporary permit after January 1, 2019, and shall not extend the term of a Temporary Cannabis Business Permit issued to an applicant for a Cannabis Business Permit under this Article 16 past December 31, 2024.
(i) Temporary Cannabis Business Permit does not guarantee rights regarding a permanent permit. A Temporary Cannabis Business Permit does not obligate the Director to issue a permanent permit pursuant to Section 1615 of this Article 16, or create a vested right in the holder to either an extension of the temporary permit or to the granting of a subsequent permanent permit.
(j) Duty to apply for permanent permit. A Person that is awarded a Temporary Cannabis Business Permit under this Section 1605 must apply for a Cannabis Business Permit, as set forth in Section 1606, within 30 days of when the Office of Cannabis makes applications for such permits available. The Director shall not accept applications for Temporary Cannabis Business Permits after making applications for Cannabis Business Permits available.
(k) Registration of Pre-Existing Non-Conforming Operators. A Pre-Existing Non-Conforming Operator shall be eligible to receive technical assistance and apply for a Cannabis Business Permit, as set forth in Section 1606 of this Article 16, provided it registers with the Office of Cannabis during the Cannabis Business Registration Period and provides the following information and documentation:
(1) Information regarding the type(s) of Commercial Cannabis Activities that the operator conducts;
(2) Information regarding the type(s) of Cannabis Business Permit(s) and State Cannabis License(s) for which the operator intends to apply in 2018;
(3) Demonstration that as of September 26, 2017, the operator was engaging in Commercial Cannabis Activities relating to Medicinal Cannabis in the City;
(4) Copies of all applicable licenses, permits, certifications, and registrations issued by the City or the State and held by the Owner of the proposed business, including but not limited to Hazardous materials registrations, site permits, Business Registration Certificates, and/or Seller’s Permits;
(5) An affidavit or declaration made under penalty of perjury by an Owner certifying that the Pre-Existing Non-Conforming Operator will not engage in Commercial Cannabis Activities in a location where such activities are not authorized by or consistent with the Planning Code; and
(6) Such other information, documents, and/or attestations as the Director may deem necessary or appropriate for registration.
(Added by Ord. 230-17, File No. 171042, App. 12/6/2017, Eff. 1/5/2018; amended by Ord. 279-18, File No. 181041, App. 11/20/2018, Eff. 12/21/2018; Ord. 302-18, File No. 180912, App. 12/21/2018, Eff. 1/21/2019; Ord. 274-19, File No. 190842, App. 11/27/2019, Eff. 12/28/2019; Ord. 198-21, File No. 210865, App. 11/5/2021, Eff. 12/6/2021; Ord. 222-22, File No. 221002, App. 11/4/2022, Eff. 12/5/2022)
(a) Except as provided in subsection (b) of this Section 1606, the Director shall issue Cannabis Business Permits only to Applicants that meet one or more of the following criteria:
(1) Qualify as an Equity Applicant or an Equity Incubator;
(2) Possess a valid permit to operate a Medical Cannabis Dispensary issued pursuant to Article 33 of the Health Code prior to the effective date of the ordinance, in Board File Number 171042, establishing this Article 16;
(3) Were issued a Temporary Cannabis Business Permit under Section 1605 of this Article 16;
(4) Have demonstrated to the Director’s satisfaction that the Applicant operated in compliance with the Compassionate Use Act of 1996, and was forced to discontinue operations as a result of federal prosecution or threat of federal prosecution;
(5) Applied for a Medical Cannabis Dispensary Permit that required referral to and approval by the Planning Commission, and received approval from the Planning Commission prior to the effective date of the ordinance, in Board File Number 171042, establishing this Article 16;
(6) Registered with the Office of Cannabis as a Pre-Existing Non-Conforming Operator, as set forth in subsection (k) of Section 1605 of this Article 16; or
(7) Possessed a valid permit to operate a Medical Cannabis Dispensary, issued under Article 33 of the Health Code prior to January 6, 2018, or a valid Temporary Cannabis Business Permit, issued under Section 1605(d), but were forced to discontinue operations due to the termination of a lease, provided that:
(A) The lease terminated before December 31, 2018;
(B) The lease termination was not due to the lessee’s breach of the lease;
(C) The Owner of the proposed Cannabis Business is identical to the Owner of the former Medical Cannabis Dispensary; and
(D) The Permittee seeks an application for a Cannabis Business Permit no later than July 1, 2019.
(b) The Director may award a Cannabis Business Permit to an Applicant that does not meet the criteria set forth in subsection (a) of this Section 1606 if the total number of Cannabis Business Permits awarded to Equity Applicants in the permit category sought by the Applicant has reached 50% of the total number of Cannabis Business Permits awarded in that permit category.
(c) The Office of Cannabis shall review and process applications for Cannabis Business Permits in an order that reflects the Applicant’s priority category:
(1) First priority: applications from Equity Applicants that, independently or in combination with one or more other Equity Applicants, hold a 100% ownership interest in the Cannabis Business for which they have applied for a Cannabis Business Permit;
(2) Second priority: applications from current Temporary Cannabis Business Permitees1
that demonstrate to the satisfaction of the Director that they meet all of the following criteria:
(A) Hold Type 6, Type 7, or Type N licenses, within the meaning of 17 C.C.R. 40118, as may be amended from time to time, and current approval from the California Department of Public Health to operate as a “shared-use facility,” as defined in 17 C.C.R. 40190, as may be amended from time to time;
(B) Have current agreements allowing for use of a shared-use facility owned or leased by the Permittee by one or more current holders of Type S licenses, as defined in 17 C.C.R. 40190, as may be amended from time to time, that qualify as Equity Applicants under Section 1604(b) of this Article 16, and that are not owned or controlled by any Owner of the Permittee that owns or leases the shared-use facility; and
(C) Commit in the agreements described in subsection (c)(2)(B), above, to use of their shared-use facility by one or more Equity Applicants to a degree that the Director finds to be reasonable, taking into account the available space within the facility, the current use of the facility space by the Permitee’s 1
business, and the demand for shared-use facilities among Equity Applicants.
(3) Third priority: all Equity Applicants that do not meet the criteria for first or second priority processing;
(4) Fourth priority: applications from Equity Incubators;
(5) Fifth priority: applications from Applicants that meet the requirements of Section 1606(a)(4) or 1606(a)(6).
(7) Seventh priority: applications that demonstrate a commitment on the part of the Applicant to provide benefits to the community in which the Cannabis Business is located, including but not limited to workforce opportunities and community benefits contributions; and
(8) Eighth priority: all other applications.
(d) Each Owner Treated as Applicant. Unless this Article 16 specifically provides otherwise, each Owner of a Cannabis Business or proposed Cannabis Business shall be subject to the same obligations that this Article 16 imposes on an Applicant. Such obligations include, but are not limited to, the obligation to provide to the Director the information that this Article 16, and any regulations promulgated thereunder, require from an Applicant.
(e) As of the effective date of the ordinance in Board File No. 200144 enacting this subsection (e), the Director shall decline to accept for processing any new applications for Cannabis Business Permits under this Article 16 in the following categories: Cannabis Retailer, Storefront Cannabis Retailer, Delivery-Only Cannabis Retailer, Medicinal Cannabis Retailer, and Cannabis Microbusiness (to the extent relating to retail activity). No later than June 30, 2027, the Controller shall submit to the Board of Supervisors a report that analyzes various impacts of the moratorium on new applications for retail-related Cannabis Business Permits, including its financial impacts on the City and the City’s cannabis industry, operational impacts on the Office of Cannabis, and impacts on City neighborhoods.
(Added by Ord. 230-17, File No. 171042, App. 12/6/2017, Eff. 1/5/2018; amended by Ord. 302-18, File No. 180912, App. 12/21/2018, Eff. 1/21/2019; Ord. 301-19, File No. 191174, App. 12/20/2019, Eff. 1/20/2020; Ord. 176-21, File No. 210421, App. 10/29/2021, Eff. 11/29/2021; Ord. 106-23, File No. 200144, App. 6/23/2023, Eff. 7/24/2023)
CODIFICATION NOTE
1. So in Ord. 176-21.
(a) For the purpose of regulating the Commercial Cultivation, Manufacture, Testing, Distribution, Sale, and Delivery of Cannabis, the Director may issue the following permits:
(1) Cannabis Cultivation Facility;
(2) Cannabis Manufacturing Facility;
(3) Cannabis Testing Facility;
(4) Cannabis Distributor;
(5) Cannabis Microbusiness;
(6) Medicinal Cannabis Retailer;
(7) Cannabis Retailer;
(8) Delivery-Only Cannabis Retailer; and
(9) Cannabis Nursery.
(a) Permits Nontransferable. No permit issued under this Article 16 shall be transferable under any circumstances, including but not limited to the sale of the Cannabis Business.
(b) Permits Portable. A Cannabis Business Permittee that closes its Cannabis Business may retain its Cannabis Business Permit for up to 18 months from the date of closure, and may conduct Commercial Cannabis Activities under that permit at a different Premises provided:
(1) There is no change in ownership;
(2) The Referring Departments complete all necessary review and inspections of the new Premises, and report their determinations to the Office of Cannabis;
(3) The Permittee demonstrates that the new Premises complies with the requirements of this Article 16 and the Planning Code; and
(4) The Director finds that there are no grounds for denial of a Cannabis Business Permit, as set forth in subsections (d)-(e) of Section 1615 of this Article 16.
(c) Ownership; Changes in Ownership; Changes in Form or Structure.
(1) Any change affecting any ownership interest of a Cannabis Business, including, but not limited to, any change in ownership that affects an ownership interest of less than 20% of the Cannabis Business, must be promptly disclosed, in writing, to the Director.
(2) Any change affecting any ownership interest of a Cannabis Business that results in a Person holding an aggregate ownership interest of 20% or more of a Cannabis Business, when that Person did not previously hold an aggregate ownership interest of 20% or more in the Cannabis Business, shall require the Permittee to promptly obtain a permit amendment. Such permit amendment shall be reviewed by the Director in a manner consistent with subsection (c)(5), and shall not be granted unless the Director determines that, if the relevant Person (i.e., the Person who newly holds an aggregate ownership interest of 20% or more in the Cannabis Business) had been an Owner at the time the Permittee applied for a permit awarded under this Article 16, that permit would have been granted.
(3) Any change in the direction, control, or management of a Cannabis Business must be promptly disclosed, in writing, to the Director, and such change shall require the Permittee to promptly apply for and obtain a permit amendment. An application for such a permit amendment shall be reviewed by the Director consistent with subsection (c)(4), and shall not be granted unless the Director determines that, if the relevant Person (i.e., the Person newly exercising direction, control, or management with respect to the Cannabis Business) had been an Owner at the time the Permittee applied for a permit awarded under this Article 16, that permit would have been granted.
(4) A Permittee seeking a permit amendment as required under this subsection (c) shall pay the required filing fee for a permit amendment and provide such information, from the categories of information described in Section 1609, as may be required by the Director. The decision to grant or deny a permit amendment shall be entrusted to the Director’s discretion in the same manner, and subject to the same criteria, as the decision to grant or deny a permit as set forth in Section 1615, except as set forth in subsection (c)(9), below.
(5) Notwithstanding any other provision of this subsection (c), prior to the award of any Cannabis Business Permit, permanent or temporary, and for five years following the date on which the Director has acknowledged receipt of an application for a Cannabis Business Permit from a particular Applicant or Permittee, an aggregate ownership interest of 50% or more in that Applicant or Permittee may not be transferred to any Person or combination of Persons who were not Owners of the Permittee at the time that a Cannabis Business Permit was first awarded to that Applicant or Permittee under this Article 16. Nothing in this subsection (c)(5) shall prohibit a holder of a Temporary Cannabis Business Permit from transferring an aggregate ownership interest of 50% or more in the Permittee prior to the award of a permanent Cannabis Business Permit to that Permittee after five years have passed from the earliest date on which the Director acknowledged receipt of an application for a Cannabis Business Permit, whether temporary or permanent, from that Permittee. In the event that, prior to the award of a Cannabis Business Permit or prior to five years after the date on which the Director acknowledged receipt of the application for a Cannabis Business Permit from that Permittee, an aggregate ownership interest of 50% or more in a Permittee is transferred to any Person or combination of Persons who were not Owners of the Permittee at the time that a Cannabis Business Permit was awarded, in violation of this subsection (c)(5), and the Permittee fails to undo the prohibited ownership transfer within six months of receiving notification of such violation from the Director, the Permittee shall promptly surrender the permit to the Director. This restriction shall not apply to any testamentary or intestate transfer of ownership triggered by an Owner’s death. This obligation is not dependent on the Director’s requesting the surrender, but arises by operation of law six months following notice from the Director that the sale of the Cannabis Business has violated the transfer restriction in this subsection (c)(5). If the Permittee fails to surrender the permit to the Director, the Director may, after giving the Permittee notice by mail and electronically of the proposed action and an opportunity to respond, revoke the permit.
(6) A change in the form or structure of a Permittee shall not be considered a change affecting an ownership interest in a Cannabis Business for purposes of this subsection (c). Notwithstanding any other provision of this subsection (c), a Permittee may undertake any change in its form or structure, as long as the change in form or structure does not cause any change affecting an ownership interest. The Permittee must promptly disclose its change in form or structure, in writing, to the Director, and such change shall require the Permittee to promptly apply for and obtain a permit amendment as set forth in subsection (c)(4).
(7) Whenever, under this Article 16, an Owner is anything other than an individual, every individual who exercises direction, control, or management of that Owner shall also be treated as an Owner for purposes of this Article 16.
(8) Notwithstanding any other provision of this subsection (c), it shall not be considered a change affecting an ownership interest in a Cannabis Business if an individual transfers an ownership interest in a Cannabis Business to a Person that is entirely owned and controlled by that same individual, but any subsequent transfer of an ownership interest in that Person shall be considered a change affecting an ownership interest in the Cannabis Business. All transfers described in this subsection (c)(8) must be promptly disclosed, in writing, to the Director.
(9) Notwithstanding any other provision of this subsection (c), a Permittee must obtain a permit amendment if a change in ownership results in a decrease in an Equity Applicant’s ownership interest, as defined in Section 1604(b), in the Cannabis Business, a change in the Equity Applicant’s role as Chief Executive Officer or member of the Board of Directors, or a material change in the degree of the Equity Applicant’s participation in the direction, control, or management of the Cannabis Business. Applications for a permit amendment in accordance with this subsection (c)(9) must include the terms of the change in ownership. The Director shall require, as a condition of granting a permit amendment under this subsection where the combined ownership interest in the Cannabis Business by all verified Equity Applicants following the amendment would total less than 20%, that the Cannabis Business commit to take one or more specific actions to support the City’s equity goals as described in Section 1604(a) on an ongoing basis through the life of the Cannabis Business Permit. Applications for such a permit amendment shall include a detailed written description of the proposed equity action(s), the dates by which the Cannabis Business will take the action(s), an estimated dollar value for each action, and the dollar amount of gross sales of cannabis by the Cannabis Business during the most recently completed fiscal year. The Director shall not approve such permit amendment unless the Director finds that that proposed action(s) represent a substantial commitment to equity by the Cannabis Business for the life of the Cannabis Business Permit, taking into consideration the dollar amount of gross sales of cannabis by the Cannabis Business during the most recently completed fiscal year, and the Director’s assessment of the likely impact of the proposed action(s) in support of the City’s equity goals. In approving such permit amendment, the Director shall include as conditions of the amended permit specified equity action(s), and a further requirement that the Cannabis Business provide annual reports to the Director on or before February 1 of each year for the life of the Cannabis Business Permit, documenting the Cannabis Business’s action(s) taken during the prior calendar year to satisfy all permit conditions. Actions a Cannabis Business may propose in its permit application to satisfy the equity commitment required upon a reduction in the combined ownership interest in the Cannabis Business by all verified Equity Applicants below 20% include but are not limited to the following:
(A) Contributing, on an annual basis, an amount of cash, in-kind goods, services, and/or technical assistance equivalent to 1% of the gross sales of cannabis by the Cannabis Business during the most recently completed fiscal year prior to the submission of the application for permit amendment to one or more community organizations that serve equity goals, as described in Section 1604(a), and in which the Cannabis Business has no ownership or other financial interest;
(B) Providing training, mentorship, and employment opportunities to workers who meet at least three of the criteria set forth in Section 1604(b)(4);
(C) Ensuring that a substantial portion of Cannabis-related products promoted and/or sold by the Cannabis Business are sourced from businesses that are one of the following: (i) Equity Applicants that have been awarded Cannabis Business Permits (“Equity Operators”); or (ii) Cannabis Businesses that have been verified as the local equivalent of Equity Applicants or Equity Operators in jurisdictions outside San Francisco with a local equity program, as defined in Section 26240(e) of the California Business and Professions Code, as may be amended from time to time;
(D) Providing financial support, technical assistance, rent-free commercial space, and/or other support to one or more Equity Operators or Equity Applicants in which, or in whose Cannabis Businesses, no Owner of the Cannabis Business seeking a permit amendment has any ownership interest or other financial interest.
(d) Interim Cannabis Business Permits. Once the Director receives a surrendered Cannabis Business Permit to Operate, as set forth in subsection (b) of this Section 1608, the new Owner of the business may apply to the Director for an Interim Cannabis Business Permit, subject to any required Planning Department approvals, for a period not to exceed 90 days from the date of surrender (an “Interim Permit”). An Interim Permit may not be renewed. The Director may grant an Interim Permit provided that:
(1) The new Owner has submitted a completed application for a Cannabis Business Permit to the Office of Cannabis, and a completed application for a State Cannabis License to the appropriate State Licensing Authority;
(2) The new Owner applies for the same type of Cannabis Business Permit as was held by the prior Owner;
(3) The Premises to which the Cannabis Permit applies complies with all existing health, safety, and fire ordinances, and applicable state laws governing Cannabis Businesses; and
(4) An Interim Permit is necessary to ensure uninterrupted operations of a Cannabis Business at the Premises, or to minimize interruption of its operations.
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