Alaska Waffles Then Backtracks On “Outside Investment” in Its Marijuana Market

When it comes to investment in marijuana businesses from non-residents, states are either in or they’re out. Some states, like Colorado, Oregon and Washington, require in-state residency for a certain amount to qualify for investment or ownership in a cannabis business. Other states, like Illinois and Nevada, have no residency requirements, but count residency as a favorable factor in a licensing application. The policy question always looms: should a state allow outside investors to ensure that its cannabis businesses are well-capitalized or should it choose a more protectionist model that arguably lends itself to easier policing?

Alaska will (at least this week) be having strict residency requirements for its cannabis business licenses.
Alaska will (at least this week) be having strict residency requirements for its cannabis business licenses.

Alaska, a state with both medical and recreational marijuana, has battled itself over whether strict and onerous residency requirements should be in place for “outside investment” in its recreational marijuana industry or whether such investment should be an easy process with less invasive residency standards. For better or worse, it has now opted for the former.

In late November, Alaska’s Marijuana Control Board adopted rules relaxing residency requirements for owning and operating a marijuana business under Ballot Measure 2 (codified at A.S. 17.38), the state’s recreational marijuana initiative. The former regulations mandated that all recreational marijuana businesses be 100% Alaska-resident owned and capitalized. The all-Alaskan ownership standard never changed, but the definition of “resident” did. Specifically, the old regulations defined “resident” as “a person who meets the residency requirement for an Alaska permanent fund dividend in the calendar year in which that person applies for a marijuana establishment license under this chapter.” According to Alaska’s Department of Revenue,

The Alaska Department of Revenue, Permanent Fund Dividend Division is responsible for determining applicant eligibility for the distribution of an annual dividend that is paid to Alaska residents from investment earnings of mineral royalties. The annual payment allows for Alaskans to share in a portion of the State minerals revenue in the form of a dividend to benefit current and future generations.

Eligibility for the Permanent Fund Dividend hinges in part on certain fairly intense residency requirements. In particular, the Permanent Fund Dividend Division stipulates that “[a]n individual’s intent to establish residency, remain indefinitely in Alaska, or to return to Alaska and remain indefinitely is demonstrated through the establishment and maintenance of customary ties indicative of Alaska residency and the absence of those ties in another state or country.” Proof of establishing residency and the intent to remain indefinitely in Alaska may include proof through documentation of the following:

  • a contract to move household goods to Alaska dated prior to the qualifying year (Employer paid moving contracts are not an acceptable tie)
  • proof of home ownership, a home purchase contract, rent receipts, or other proof that the individual maintains a principal home in Alaska. (Employer paid housing is not an acceptable tie)
  • employment records
  • school records
  • voter registration and voting records
  • motor vehicle registration records

In evaluating whether an individual claiming Alaska residency has demonstrated intent to remain indefinitely in Alaska, the Department of Revenue will consider whether or not an individual has:

  1. taken steps to establish Alaska residency and sever residency in a previous state or country;
  2. ties to another state or country that indicate continued residency in the other state or country; and
  3. taken other action during the qualifying year, through the date of application, that is inconsistent with an intent to remain in Alaska indefinitely.

Though the Alaska Marijuana Control Board was at one point prepared to use the above criteria to determine residency for purposes of cannabis licensing in Alaska, as of November 24th, it stated that it would instead be using the residency criteria required for obtaining voter registration in Alaska. which are considerably less stringent than the residency requirements to receive the monetary dividend. One can meet Alaska voter registration requirements with a physical address in the state and by renouncing your state voter rights elsewhere. There was no minimum time required for a recreational marijuana applicant to have resided in Alaska.

But by December 1, Alaska’s Marijuana Control Board went back on relaxed “voter registration” residency standards and instead adopted the Permanent Fund Dividend criteria, meaning that anyone wanting an Alaska cannabis business license must be able to demonstrate at least one calendar year of residency in Alaska. So, if you are not already a year-long resident in the State of Alaska, you can pretty much forget any immediate ownership or investment in what likely will be (at least initially) a very limited recreational marijuana industry in the Last Frontier.

Alaska’s Department of Law (i.e., the Attorney General’s Office) still has to review the Board’s adopted rules to ensure that they comply with the Ballot Measure (and probably with the Cole Memo as well), so these rules aren’t fully final yet but it’s only a matter of time before they almost certainly will be.