State collects $25 million from 2020 tax amnesty program

Assembly Speaker Pro Tempore Steve Yeager prepares to present Assembly Bill 3

A tax amnesty program created by state lawmakers last year as part of a broad effort to balance the state’s pandemic-battered budget brought about $25 million into state coffers from delinquent taxpayers.

The payments, according to a preliminary report produced by the state Department of Taxation, will distribute about $10 million from the state’s general fund, $7.25 million to school districts and the K-12 budget account, and about $7.31 million to local governments. Those payments also resulted in the waiver of about $4.3 million in penalties and $8.1 million in interest, for a total of about $12.46 million.

The tax amnesty program was implemented as part of SB3 in the budget-cut focused 2020 special session, with an expectation that the program would yield about $21 million in funding from delinquent taxpayers. It ran between February and May of 2021, and applied to most types of tax in the state except for the lodging tax, real property transfer tax and any tax on property that is locally assessed.

Around 3,100 individual taxpayers made payments while the amnesty program was open.

State Department of Taxation Director Melanie Young told lawmakers during the 2020 special session that the state is owed about $350 million in delinquent taxes, including about $68.8 million due over the past three years, though only a small portion were considered collectable.

The program applies to monthly tax returns that were due and payable on or before June 30, 2020, and quarterly tax returns due on or before April 30, 2020, including for Sales and Use Tax, Modified Business Tax and Commerce tax, among others. 

Though specific information on individual delinquent taxpayers is considered confidential under state law, the agency shared that the oldest payment dated back to April 1998, and the largest payment was more than $1.5 million. The average payment made into the program was $1,891.

Editor’s Note: This story first appeared in Behind the Bar, The Nevada Independent’s newsletter dedicated to comprehensive coverage of the 2021 Legislature. Sign up for the newsletter here.

Lawmakers free up $58 million through full sweep of car registration fees; hold initial hearing on major budget reductions

Nevada lawmakers freed up an estimated extra $58.6 million on Wednesday and took several other small steps in their quest to mitigate expected massive cuts to the state budget.

An amendment dropped late Wednesday in the state Senate to SB3 will pull the entirety of the state’s Governmental Services Tax (assessed on car registration fees) toward the battered state general fund, which is one of the changes expected to add back $58.6 million to the state’s $1.2 billion budget shortfall. Gov. Steve Sisolak’s original budget proposal called for that tax revenue stream to be split between the general fund and the state’s highway fund.

And after several sluggish days, members of the Assembly on Wednesday held their first hearing on the bill implementing the bulk of Gov. Steve Sisolak’s proposed budget cuts and heard more than an hour of irate testimony from dentists, teachers and other members of the public upset with the state’s plan to balance the budget through massive spending cuts.

Most of the information on the proposed cuts had been presented during prior presentations during the initial days of the special session. But Assembly Speaker Jason Frierson said he expected the Assembly to vote out the major budget bill sometime Thursday, after drafting and approving an amendment reflecting the Legislature’s priorities in changing the proposed cuts.

Beyond giving a tentative timeline of a vote Thursday, Frierson opted not to share many specific changes that legislators were looking to restore, beyond a desire to reverse the proposed 6 percent cut in Medicaid reimbursements and other optional services suggested to be eliminated.

“There are tons of things on there that are painful, you know having to pick between Medicaid for seniors, autism services for children, and everything in between,” he said. “These are really, really tough decisions. I believe that replenishing the cuts in Medicaid are important because it also reflects a return on our investment from the federal government, and so I think that certainly is high on my list and on the list of many of my members.”

Frierson said lawmakers were also looking to mitigate or modify cuts to K-12 education and proposed once-a-month state worker furloughs where possible. The speaker also gave a flat “no” when asked whether lawmakers had given up a push for an increase in taxes to help quell the massive budget cuts, but declined to give specifics on what tax areas the Legislature might consider.

From left, Nevada State Senators, Dallas Harris, Melanie Scheible and Yvanna Cancela arrive at the Legislature on the eighth day of the 31st Special Session in Carson City on Wednesday, July 15, 2020. (David Calvert/The Nevada Independent)

Lawmakers pass bill amended to bring nearly $60 million more to mitigate cuts

Senators voted 19-2 in favor of SB3, a bill that seeks to fill the budget gap with several tried-and-true methods the state used in the past — asking mining companies to prepay taxes, collecting delinquent taxes through an amnesty program and diverting vehicle registration taxes from roads and into the general fund.

But after a hearing over the weekend in which Republicans questioned whether more could be squeezed from those revenue sources, lawmakers approved an amendment to the bill.

The measure now sends 100 percent of vehicle registration fee revenue into the general fund in the current fiscal year, replacing the prior proposal that split GST revenues 50-50 between the general and the highway fund. The change approved Wednesday brings in an additional $47.6 million, meaning the total revenue the bill will now yield above current levels is $71.4 million.

Fiscal analysts confirmed that the highway fund will only take a net hit of about $14 million, because it is receiving $38 million from the federal CARES Act, is cutting spending on a technology project and will be furloughing employees to save about $9 million. 

Officials with the Nevada Department of Transportation had testified on the earlier version of the bill, saying that with a reserve fund of $340 million and a generous federal match on road construction projects, the highway fund could absorb the diversion without any road projects getting off track.

Another change from the amendment was a re-estimation of how much would come from a tax amnesty program. The new projection, which recalculated revenue from local school support taxes, now says the amnesty program could bring in $21 million rather than the original $10 million.

And the amendment also changed a plan to have mining companies turn in two years of payments at once. After some Republicans raised concerns about how upending the payment schedule could put local governments that depend on mining in a lurch, the proposal was amended to only require companies pay tax due to the general fund ahead of time. Tax owed to local governments would continue on its original schedule.

The substance of the amended bill attracted opposition only from Sen. Ira Hansen, who argued that mining has become a “favorite whipping boy” and is being treated differently than other industries. He said the vast majority of operations are small and not very profitable and that singling them out for prepayment could “jeopardize their economic future.”

He clarified he wasn’t speaking on behalf of the mining industry as a whole.

"I think they would rather have me not say one word about it because they understand they have a significant PR problem in the state. And they would rather just pay it and act like they're very delighted to pay it,” he said. “But the truth is, we've held a gun to their head … when in fact they're one of the best industries Nevada has ever had.”

In an Assembly hearing that didn’t wrap up until nearly 11 p.m., members voted 30-10 to pass the bill. The vote did not fall on party lines — four Democrats split from their party and voted against it, and seven Republicans voted in favor.

Assemblywomen Robin Titus and Alexis Hansen took to the floor to praise the mining industry’s contributions to the state, from shaping its nascent years to making donations in rural communities. 

But Democratic Assemblywoman Shannon Bilbray-Axelrod poured cold water on those comments.

"As a third-generation Nevadan ... I think I'm very aware of what mining has or hasn't done for this state ... it's time they pay their share, and honestly this bill doesn't do nearly enough,” she said. “So thank you for what you have to say about mining, and I'm so happy that they're here in Nevada and rake the earth ... But this is our state, and they do things and it's not right, and you know it. And it's high time they pay. And this isn't the end of it."

Nevada Assemblywoman Sarah Peters on the eighth day of the 31st Special Session of the Legislature in Carson City on Wednesday, July 15, 2020. (David Calvert/The Nevada Independent)

The massive budget bill finally gets a hearing

Members of the Assembly finally heard the bill that will be responsible for balancing much of the state’s budget shortfall. However, the version of the legislation presented Wednesday wasn’t yet final, with significant changes expected to still come before the Assembly approves the legislation and forwards it on to the Senate.

GOP Assemblyman Al Kramer, during the question and answer portion of the hearing, asked whether the legislation’s proposed 6 percent across-the-board cuts to Medicaid were really necessary. Legislative staff said it’s not yet possible to know whether the federal government will extend federal matching dollars to the state’s Medicaid program, which would generate an additional $30 million in revenue to the state.

If that happens, the additional funding would be brought before the Legislature’s Interim Finance Committee, which could restore certain programs.

The bill also contains a provision that would allow the Department of Health and Human Services to reshuffle funds within its budget as needed, subject to the recommendation of the governor and approval of the Interim Finance Committee.

The bill faced significant criticism in an hour-and-a-half-long public comment session, where members of the public and policy advocates raised a host of concerns, including the legislation’s cuts to education funding, mental health services and Medicaid. 

As proposed, the $1.2 billion in budget cuts would slash several K-12 education programs, including support for “Read by 3” early-childhood reading, school supplies for teachers, and other categorical programs that aim to help students with extra needs. The proposed cuts to K-12 programs exceed $166 million, while cuts to the Nevada System of Higher Education are about $110 million.

Several mental health-focused organizations, including the National Alliance on Mental Illness’s Nevada chapter and the Nevada Psychiatric Association, lamented the bill’s proposed cuts to behavioral health spending. Lawmakers are considering $19.1 million in cuts to public and behavioral health, with the majority coming from the Southern and Northern Nevada Adult Mental Health Services agencies, as well as additional cuts in other areas of the Department and Health and Human Services (DHHS) budget, such as the proposal to eliminate psychosocial rehabilitation coverage from Medicaid.

“I would add that when we talk about cuts to the DHHS budget it is easy to see that these cuts directly affect those individuals and families who are dealing with mental health conditions. But I want to be very clear — mental health issues are in every cut, you're looking and considering today,” said Robin Reedy, executive director of NAMI Nevada. “So when you cut behavioral health funding at DHHS during a pandemic, you're exacerbating cuts being made elsewhere.”

The legislation also faced significant opposition from several dentists and dental hygienists who testified in opposition to the proposed elimination of Medicaid coverage of adult dental care and limits on dental services for pregnant women and children. Dental professionals testified that the legislation would exacerbate oral hygiene issues that can lead to more serious medical conditions and end up costing the Medicaid system more money down the road.

“Cuts to Medicaid services will enhance the burden on a patient population that’s already at a disadvantage in terms of access to care and affordability,” said Dr. Tyree Davis, chief dental officer with Nevada Health Centers, a federally qualified health center. “By removing adult dental coverage. Some patients will choose to go without care, and may experience other costly systemic health issues as a result.”

Dignity Health, which runs three acute-care hospitals in Southern Nevada, also testified against the legislation’s proposed across-the-board cuts to Medicaid. Hospitals have long advocated for rate increases and argue that a rate decrease would make it hard for them to stay afloat financially while also caring for coronavirus patients during the pandemic.

“We have no idea what the next six months will bring,” Dignity Health lobbyist Katie Ryan said, “and we'll need all the financial help we can get to make sure we can keep our doors open.”

Nevada State Senator Keith Pickard on the eighth day of the 31st Special Session of the Legislature in Carson City on Wednesday, July 15, 2020. (David Calvert/The Nevada Independent)

Tax Department employees upset with planned layoffs

Ahead of the bill hearing, roughly a dozen state employees at the Department of Taxation wrote in to legislators to protest the planned layoffs for the division.

Under Gov. Sisolak’s initial budget plan, the division would keep 33 positions vacant (including 10 in the Marijuana Regulation Division), lay off 23 workers and close its Henderson-based office. It’s part of plans by the governor’s office to limit state worker limits to under 50, while still implementing furloughs and freezes on merit pay to help address the budget shortfall.

But department employees who emailed legislators said they were being unfairly targeted, and that the layoffs or workforce reductions should be shared more evenly across state agencies.

Erica Scott, a revenue officer with the department, said requiring so many layoffs at the agency would “gut our already small department” and that it would harm the state’s ability to ensure tax compliance and revenue.

“I cannot sit quietly while other massive departments have not a single layoff and are still getting admin paid leave as we speak,” she wrote in an email to lawmakers. “Taxation was deemed essential and I have been working diligently the entire COVID19 shut down, collecting $1,470/every hour I worked in June 2020. How am I now not considered essential when generating revenue for the state is the exact thing that I do?”

Rhonda Gallant, a revenue officer with the department who has worked for the state for the past seven years, said the combined vacant positions and layoffs would result in a roughly 23 percent reduction in staff. She said such a reduction would make it harder for the state to implement a proposed tax amnesty program (as part of SB3) waiving penalties for delinquent taxpayers if they pay their accounts due.

“It is difficult for me to see how we could successfully implement that program and generate the revenue expected if we don’t have staffing to do our normal workload,” Gallant wrote in a letter to lawmakers.

Asked about how the potential layoffs would affect the amnesty program, Department of Taxation Director Melanie Young said the office planned to partner with business agencies to announce the amnesty program, and that many of the applications or work needed to run the program could be accomplished online.

“We’ve always done more with less,” she said.

Youth tobacco sales in Nevada are down as new federal law raising tobacco age to 21 takes effect

Vape pens in a store display

The rate of tobacco sales to minors was down significantly in the first three months of the year compared to the same period last year, according to state data presented to the Legislative Health Committee on Wednesday.

Nevada’s youth sales violation rate, a number that refers to the instances in which retailers are caught selling tobacco to youth under the age of 18, was 26.7 percent in 2019, exceeding the 20 percent threshold set by the federal government. This year, that number is 9.1 percent.

But Hillary Bunker, who leads the Tobacco Enforcement Unit in the attorney general’s office, told the committee that the change likely has more to do with a new federal law barring the sale of tobacco to anyone under 21, which was passed by Congress in December, than it does a new state law imposing penalties on businesses that sell tobacco to minors, which took effect Jan. 1.

The age to purchase tobacco in Nevada is still 18; the federal law gives states three years to come into compliance and pass their own so-called Tobacco 21 laws or risk losing federal funding. Still, Bunker said the new federal legislation prompted a slew of inquiries from tobacco sellers to her office about whether they have to follow the new federal law.

“Our office fielded, without exaggerating, I would say close to 200 phone calls from retailers between the end of December and mid- to late January, and I can tell you that not one of those phone calls asked about the new Nevada law,” Bunker said. “Every single one of them asked what the age of implementation was, if the federal government was going to come out and do checks, who do they sell to, what law are they supposed to be following.”

The new state law, which was passed during the 2019 legislative session, called for warnings on businesses that sell to minors for the first two violations and a civil penalty of up to $2,500 for the fifth or subsequent violation in a 24-month period. It also decriminalized the sale to minors and imposed civil fines of up to $500 against clerks.

Another part of the law is, however, having more of an impact: The legislation extended a 30 percent wholesale tax on certain tobacco products to e-cigarettes and their accessories, expected to raise about $8 million a year. The Department of Taxation collected $7.9 million from that tax in the first three months of the year, $3.3 million more than the average collections over the past calendar year.

“It’s hard to discern whether it’s completely due to vapor, but an increase, one would infer that it is, yes, probably due to [the new law],” Melanie Young, director of the Department of Taxation, told lawmakers.

However, the state has missed out on an additional unspecified amount of revenue from the tax because of a conflict in wording between two statutes that exempts products derived from tobacco from being taxed. Young said she didn’t immediately know which products or how many of them could have been subject to the tax.

Young also told lawmakers that it is not yet clear how actual collections of the tax will differ from projections made during the legislative session. The department’s January collections were inflated because of a change in when taxes are due, from when products are sold to when products enter the state. The department also expects to see a decrease in taxes starting in April because of the ongoing COVID-19 pandemic.

“We’ll have to see how the next few months play out on that to have a better feel for the amount of revenue, if it’s in line with what we projected,” Young said.

A third portion of the new state law directs a significant portion of the new revenue it generates, $5 million over two years, to vaping prevention activities. Department of Health and Human Services officials told lawmakers those efforts are well underway, with $1.1 million allocated to media campaigns to prevent youth vaping, $600,000 to reduce underage tobacco sales and $550,000 on community interventions, among other measures.

Lawmakers also expressed concern during the meeting about the high levels of youth vaping. According to data presented by the Department of Health and Human Services, 43.5 percent of high school students self-reported using electronic vapor products, and the proportion of current high school marijuana users who report usually using it by vaping increased from 2.1 percent in 2017 to 14.1 percent in 2019.

“That’s alarming,” said Republican Assemblywoman Robin Titus, a doctor by profession. “When we reopen schools ... we should maybe encourage these folks with their plans to have something addressing that too because it's the golden opportunity where folks have not been in school, they're coming up with new plans and some of this health prevention stuff, maybe should be in some of these plans.”

Lawmakers may take up a host of other changes to tobacco and vaping law in the 2021 legislative session, notably among them, a Tobacco 21 law to bring the state into compliance with the new federal law.  Other possible policies they could take up next session, as recommended by the Nevada Public Health Association and the Nevada Tobacco Prevention Coalition, include increasing the cigarette tax, increasing the other tobacco product tax, increasing tobacco licensing fees, and capping nicotine content for vapor products.

Eight-member state tax commission delegates to chairman the authority to negotiate settlements with marijuana companies

Marijuana displayed inside Inyo Fine Cannabis Dispensary

The Nevada Tax Commission has voted to give its chairman the authority to negotiate settlements on behalf of state marijuana regulators, with the agreements going before the full commission for final approval.

Chairman James DeVolld said on Monday that he thinks his new duties will deal with major litigation between the state and marijuana businesses that argued they were unfairly denied potentially lucrative dispensary licenses. A trial on that matter is scheduled for April. DeVolld said he doesn’t think his new work will deal with smaller settlements with individual marijuana companies such as a recent one in which a testing lab paid $70,000 to resolve allegations of regulatory violations.

“I wouldn’t be comfortable doing anything with the ongoing issues — you know, if somebody has done something incorrectly or not, according to the regulations,” DeVolld said in an interview after the meeting. “That should go to the full tax commission, not just to me.”

Commissioners also opted not to give DeVolld power to promulgate emergency regulations. He said he didn’t think it was a good idea for one person to develop those on their own.

Melanie Young, executive director of the Nevada Department of Taxation that has regulatory oversight of the legal marijuana industry, declined to say what prompted the move to delegate authority on settlements, with her lawyer citing attorney-client privilege. Young will be assisting with the settlement negotiations.

Will Adler, a lobbyist who is active on marijuana issues, said the board’s involvement might improve the processes of a marijuana regulatory system that has been criticized for being opaque.

“The more participation with the tax commission the better, if it’s done in a public format,” he said. “If it doesn’t add to any increased transparency or public inclusion, I don’t think it will be much better.”

The process of approving settlements for regulatory violations within the marijuana industry came under fire on transparency grounds at a February tax commission meeting in which a penalty for a marijuana testing lab was finalized. Other labs complained that the past history of discipline against the lab should have increased the penalty and led to a revocation.

Young said she was not aware of past discipline issues, and said disciplinary action was confidential until final. The department did not answer written follow-up questions about the lab’s past discipline.

Taxation officials are also facing complex litigation from dispensaries that did not win additional licenses for retail storefronts. One dispensary owner who is involved in litigation, David Goldwater of Inyo Fine Cannabis Dispensary, applauded the move to establish a point person to work on a settlement.

“It’s good to see the commission taking an active role in settling these suits,” Goldwater said. 

While Tax Commissioner Francine Lipman asked whether the arrangement would run afoul of open meeting laws, Deputy Attorney General Rosalie Bordelove said state law allows delegation of settlement duties to the chairman. She noted that it can be difficult to wrap up settlements within the time constraints of court cases and convene commissioners with meetings relatively far apart on the calendar.

DeVolld said his goal was to move settlements forward and avoid further legal costs to the state.

“You’ve got various parties that are associated with this and I think sometimes that’s hard to come up with an agreement,” DeVolld said. “The alternative is everybody goes to court and spends a bunch of money to do that so I think we’re just trying to shortcut that … I think that’s part of my job is to try and save taxpayers money.”

Updated at 2:10 p.m. to add comment from Will Adler.

Growing Pains: Records paint a picture of unrest in Nevada marijuana industry

Customers at Nuwu Dispensary

In just two years, the narrative surrounding Nevada’s legal marijuana industry has shifted from praise for the improbably smooth and lucrative launch of recreational cannabis sales to an industry divided by legal wrangling and clouded by questions about the adequacy of state regulation.

Many questions remain unanswered: Who’s on a secretive new governor-convened task force focused on “rooting out potential corruption” in the marijuana realm? Was there corruption to begin with, either by the state or by businesses? Will anyone lose a license? 

Thanks to a bill signed into law this spring, there’s a bit more sunlight on a process that was once completely shrouded in secrecy because of taxpayer confidentiality laws.

Over the next few weeks, a series of stories called “The Cannabis Files” will explore the trends laid out in the data released from SB32 and analyzed by The Nevada Independent. The records not only reveal who has a stake in the business, but paint a picture of a rapidly changing industry that is becoming increasingly corporate, with ownership transfers so frequent that elected officials find it hard to keep up.

Opening up the information “ushers in a new era of transparency that will benefit the industry and the public,” Gov. Steve Sisolak said when he signed the bill in May, and it offers a glimpse of the challenges that will lie ahead as Nevada once again overhauls its marijuana regulation next year and adopts a Cannabis Control Board oversight regime not unlike the one that reined casinos into a respected mainstream.

“I will say, overall, I think our industry is at a point that is not terribly different than gaming was,” said John Ritter, a board member with The Grove and the Nevada Dispensary Association. “I welcome the fact that the industry is treated seriously and being treated like gaming.”

Buyers outside marijuana dispensary

Hundreds of people line up to purchase recreational marijuana in Nevada at Reef Dispensaries on Saturday, July 1, 2017. Photo by Jeff Scheid.

A house divided 

Nevada’s launch of recreational marijuana sales in July 2017, six months ahead of schedule, was met with great fanfare, especially in light of troubles neighboring states encountered with their rollouts. 

But in spite of the high-flying revenue numbers — the state brought in $70 million in its first year, or 140 percent of what it had projected — critics now wonder whether corners were cut in the rush to unlock the recreational marijuana market, which dwarfs the size of the medical marijuana market. And they wonder whether the Department of Taxation that assumed responsibility of marijuana regulation in 2017 was prepared for a task that has since dominated its workload and that in the future will be assigned to a marijuana-specific board with more enforcement teeth. 

“This is another area where I think there was a rush to get revenue into state coffers,” Sisolak said on Thursday at the release of an audit of the state’s Marijuana Enforcement Division. “We’re doing everything we can to clean up those issues.”

Chief among those issues are questions about whether the state was unfair when it awarded 61 conditional dispensary licenses in late 2018, in response to more than 460 applications. While many dispensary owners agree the initial voter-approved dispensary cap is prudent to keep the quality of the stores high and avoid having one on every street corner, the concentration of those new licenses among just 17 businesses — including one business that captured a full 11 licenses — surprised and angered those who did not win. The state is involved in about a dozen lawsuits over the situation.

An audit launched in March and released last week concluded that the state’s licensing process was adequate, if not perfect. Auditors said more transparency about the scoring criteria and automation to reduce human errors while reviewing business applications would help, as well as redistributing licenses that can’t be used because they’re for jurisdictions that have a marijuana moratorium. 

The audit revealed no bombshells or conclusive evidence that the process was rigged. But the questions will be further litigated in court at trial, scheduled to begin this spring.

Court proceedings stemming from a lawsuit filed by dispensary owners who did not win additional licenses lasted for months this summer and led to a partial preliminary injunction in August that barred the state from granting some dispensaries final approval to open. Clark County District Court Judge Elizabeth Gonzalez agreed that there were flaws with the process, saying it “was impacted by personal relationships” and that a diversity category was “subject to manipulation by applicants,”  but did not toss the entire licensing round out of hand. 

Marijuana enforcement agency leader Jorge Pupo, whose dinners with certain applicants and apparent selective sharing of information about applications was a focal point of the court proceedings, left the post under circumstances that have not been fully explained. But one of the biggest consequences of the lawsuit and subsequent moratorium has been a split between the haves and have nots, with dispensary license winners blaming the losers for lawsuits that have jammed up their efforts to open the new stores.

“It’s created a giant schism with the industry,” said David Goldwater, a board member of the Nevada Dispensary Association and owner of Inyo Fine Cannabis Dispensary, which did not win additional licenses in the latest round.

Late last month, eight cases against the state were consolidated as they head for trial.

Employee at Acres Cannabis
Amber Jansen organizes marijuana merchandise inside the Underground, a cannabis farmers market inside Acres Cannabis in Las Vegas on Friday, April 20, 2018. Daniel Clark/The Nevada Independent

Foreign influence

On top of that dispute, a recent indictment alleges that two associates of former New York City Mayor Rudy Giuliani with ties to Eastern Europe conspired to get involved in the industry. Once they missed the deadline, they allegedly made illegal campaign donations to Republican gubernatorial hopeful Adam Laxalt and attorney general candidate Wes Duncan — financed by a foreign national — in hopes that they would sway well-positioned politicians to change the entire licensing scheme.

Though the two men were unsuccessful in obtaining a license, the revelation prompted Sisolak — a champion of the industry, if the marijuana world’s more than $700,000 in campaign donations in the 2018 cycle is any indication — to proclaim his outrage and order sweeping action.

Ask industry advocates, though, and they point to the haplessness of the conspirators: They appeared to hatch their plan in early September 2018, the same time as a deadline for a complicated application that some businesses had worked on filling out for months or years. They tried to woo a gubernatorial candidate who, in 2016, campaigned against legalizing marijuana and then lost the 2018 election.

“I think what happened with the Ukrainian thing was a Three Stooges thing,” said Clark County Commissioner Tick Segerblom, a champion of the industry now and in his former career as a state lawmaker.

Nevertheless, it’s prompted Sisolak to convene a secretive task force aimed at “rooting out potential corruption” in the industry. Sisolak has declined to so much as name the agencies that are part of the task force, saying he doesn’t want to compromise their investigations. While insiders say the force is comprised of law enforcement, Sisolak’s office said Friday it still needs time to answer a records request about the membership, three weeks after The Nevada Independent first submitted the inquiry.

In neighboring California, The Sacramento Bee found loopholes in the process of changing ownership on marijuana licenses that had allowed dispensary ownership to fall to a small number of people — including a Ukrainian-born businessman indicted on campaign finance charges — in spite of anti-monopoly rules. Sacramento is now considering a moratorium of its own on license transfers, and the FBI is investigating whether bribery of city officials played a role in the licensing process.

Still, Segerblom believes Sisolak’s response has cast too much suspicion on the system.

“I understood what [Sisolak] was saying but I think he tarnished the whole industry unnecessarily,” Segerblom said. “Does he know something I don't know? … While there could be a few problems here and there … it’s phenomenally successful.”

Senator Tick Segerblom standing in front of a cash register
Democratic Sen. Tick Segerblom makes the first marijuana purchase at The Source in Las Vegas on July 1, 2017. Photo by Joe Fury.

Moratorium on license transfers

Even more sweeping, state officials in mid-October called for an indefinite moratorium on transfers of licenses. Transfers are common, and can result from things like shareholders wanting to sell out or going through a divorce.

But critics say the process of transferring a license is too much easier than the initial application process, and could lead to unsavory characters getting a foothold in the industry. The Department of Taxation said it would not be processing new or existing applications as it tries to ensure “a more thorough and appropriate vetting process within the industry.”

The moratorium can also stall major mergers and buyouts, though, causing businesses to miss contractual deadlines and face fines. At an Oct. 23 Reno City Council meeting, officials with Deep Roots Harvest went so far as to say the hold is likely to scuttle New York City-based Acreage Holdings’ plans to acquire the company for $120 million.

“With everything that is going on at the state … there is a very low likelihood that that transaction will manifest,” Keith Capurro, part-owner of Deep Roots Harvest, which won five new dispensary licenses in the latest round.

“It’s definitely affecting folks,” Goldwater said. “We’re all trying to figure out the moratorium. It came as a surprise.”

Asked for details on the timeframe of the moratorium, Sisolak deferred to the leader of the Nevada Department of Taxation and his appointee to lead the forthcoming Cannabis Control Board: Tyler Klimas, a former lobbyist serving the governor’s office in Washington D.C. who was also previously a spokesperson for Gov. Brian Sandoval and the Silver State Health Insurance Exchange.

“No,” Sisolak said in a brief interview Thursday when asked if he knew when the moratorium would end. “I’ve got total confidence in [Taxation] Director [Melanie] Young and Tyler and they’re going to move forward.”

Tryke Companies, which owns Reef Dispensaries and this fall announced plans to be acquired by Cresco Labs, is urging quick action. Late last month, the company completed a Hart-Scott-Rodino Act review, a detailed antitrust probe involving the U.S. Federal Trade Commission and Department of Justice.

“While we fully support the Governor’s efforts to ensure a strong and empowered regulatory framework for Nevada cannabis, we strongly urge a swift resolution to the moratorium,” said Brett Scolari, Tryke’s general counsel. “We look forward to working with state officials on a quick resolution of the approval process in the coming months as we take the final step in this highly regulated public transaction.”

Some in the industry say they support the moratorium, although they sympathize with companies hampered by it. It’s a step toward bolstering public confidence in the business of marijuana, they say.

“Look at how the public perceived gaming 50 years ago —  that was a huge sin and it was looked down upon,” Ritter said. “Because of what Nevada did to clean up the industry, get the mob out, we proved that can be done and now gaming has proliferated across the world. That’s why I think that in the long term, making sure that this industry is properly regulated, that the owners and managers are properly vetted — in the long term [that’s] good for our industry.”

A man, asking to be identified only as Junior, selects marijuana products inside Exhale Nevada dispensary in Las Vegas on Friday, April 20, 2018. Daniel Clark/The Nevada Independent


Data released by the state through SB32 illustrate the trend of businesses once led by prominent local names selling for sometimes hundreds of millions of dollars to major, multinational companies that seek to launch powerful chains. It has troubled some local government officials who envisioned a more home-grown, local industry and not a Wal-Mart for pot.

“I think the idea was to keep it local and home-grown and sadly I think it’s been lost,” Reno Mayor Hillary Schieve said in an interview. “How is someone from Canada going to care about the local environment? … Are they watching out for the community?”

Some companies have gone public on the Canadian Stock Exchange — a move that critics say is making it harder to tell who is in control, but that industry advocates say is a fact of life because marijuana remains illegal on the federal level and traditional banking and access to capital is out of reach in the U.S.

“You can’t go to a bank and borrow money to expand,” said Segerblom, who was previously on the board of a publicly traded Canadian marijuana company that purchased Greenmart of Nevada. “You have to get to a stock exchange somewhere.”

The data also show an industry where female owners are firmly in the minority, in spite of efforts to promote diversity. High barriers for entry, which included $250,000 in liquid capital, appear to be getting higher as the industry grows in sophistication.

The professionalization also shows in the Nevada Dispensary Association’s recent decision to create a PAC aimed at shaping more unified state marijuana policy going forward. The PAC, called the Nevada Can Committee, aims “to assist Nevada's legal cannabis industry in coalescing its political efforts and engagement, including providing education and support for candidates for elected office,” said NDA Executive Director Riana Durrett, and “will support candidates from all parties and a variety of backgrounds.”

While some lament that a substance that landed low-level dealers in jail even a few years ago has evolved into a multibillion-dollar industry that is the purview of the wealthy and sophisticated, others say the industry’s evolution into an increasingly corporate political and legal powerhouse is a sign of a healthy and maturing industry, and is ultimately a good thing for the state.

“Nevada marijuana excise taxes fund our states education program … Growth in the cannabis industry is not just good for jobs and redevelopment, it is good for education,” said Bob Groesbeck, an owner with Planet 13. “We cannot speak specifically to all mergers and acquisitions taking place in Nevada – but generally we view this as a positive sign of a healthy industry.”

Check back with The Nevada Independent in the coming days and weeks for more stories in the “Cannabis Files” series on the most notable names in the industry, diversity in the business, and the consolidations and transfers that are changing the face of the nascent marijuana business in Nevada.

Governor responds to injunction on marijuana licenses, judge's criticism of state's vetting process

Man's hands holding and showing marijuana products above a sales counter

The Nevada Department of Taxation says it’s “committed to continue moving forward” after a judge issued an injunction on some of the marijuana dispensary licensees the agency approved in December and offered criticisms of the state’s vetting process.

Taxation officials noted that a “vast majority” of licensees will still be able to move forward toward opening their dispensaries because the injunction Clark County District Court Judge Elizabeth Gonzalez issued on Friday is limited to licensees who didn't provide complete identification of every member of their leadership team. 

It wasn’t immediately clear which, or how many, licensees are affected. An agency spokeswoman said that the department is working with the attorney general’s office to determine who is affected, and she added that the department has final inspections scheduled for numerous dispensaries in the coming months.

Nevada Department of Taxation Director Melanie Young said in a statement that her agency looks forward to moving forward with the governor’s “new direction for Nevada’s regulatory marijuana system, which is based on transparency, compliance and the highest possible standards.”

Gonzalez’s injunction, which came after a multi-day court hearing that stretched over three months, is a response to a lawsuit against the state brought by about a dozen businesses that were rejected for coveted — and limited — dispensary licenses. Last fall, the state received more than 400 applications to open dispensaries and approved 61 conditional licenses for 17 different companies.

Gonzalez agreed with the plaintiffs that the state had lowered the bar on background checks from what was approved by voters in 2016, and that personal relationships between applicants and state employees had a bearing on the licensing process. She also said that the state did not do a thorough job of vetting applications for compliance.

Gov. Steve Sisolak’s office issued a statement noting that the flawed process predated his term in office, and highlighting legislation he spearheaded to ramp up the regulatory framework.

"The certificates in question were awarded in December of 2018 based on processes and procedures put into place before Governor Sisolak took office,” the statement said. “At the start of the Governor’s first term, he announced a complete overhaul of the marijuana regulatory system in Nevada.”

Sisolak noted that the agency brought on a new director at the beginning of the year — Young — and that he signed a bill that removes confidentiality provisions on certain marijuana license application data. He also pointed to another bill he signed, AB533, which calls for the creation of a new Cannabis Compliance Board to regulate the industry that is modeled after the Nevada Gaming Control Board. 

“The Governor looks forward to providing updates in the near future on the transfer of oversight of Nevada's regulatory marijuana system from the [Department of Taxation’s] Marijuana Enforcement Division to the Cannabis Compliance Board,” his office said in a statement.

Amendment would make public the names of businesses that applied for marijuana licenses, scores

As the state faces criticism and lawsuits over its secretive process for licensing marijuana dispensaries, new legislation is calling for the disclosure of the names of business entities that applied and more details about scoring methodology.

Nevada Department of Taxation Director Melanie Young on Tuesday presented an amendment to SB32, which would expand transparency in the state’s marijuana regulation processes. Currently, the agency will not even release the business names of the 61 entities that in December won conditional licenses to open a dispensary, citing confidentiality provisions that date to an era when the state aimed to protect medical marijuana cardholder identities.

“This amendment is an important step in a multi-pronged approach to greater transparency in marijuana licensing under my administration,” Gov. Steve Sisolak said in a statement. “As our legal marijuana industry has evolved and flourished, it’s more important than ever that the industry and the public enjoy the benefits of a completely open and transparent process from licensing to operation so that our marijuana industry can become the gold standard in the nation."

The measure would be effective retroactively, so it would encompass all entities that have applied since May 1, 2017. It would also reveal the action taken with regard to those applications, the methodology used in scoring and ranking applicants, evidence showing how the methodology was applied, and the names of entities that were subject to disciplinary action.

It would exclude information compiled by investigative staff and law enforcement, blueprints and schematics related to the layout of a marijuana company building, information about security measures and other materials that might jeopardize public safety.

Also private would be “personal information,” trade secret information, and documents related to the finances, earnings and revenue of the applicant or individual people involved in the application. Young said in general, names of individual people who are part of an ownership group that applied will not be public, unless that person applied under their name as part of a sole proprietorship.

Applicants who did not win licenses in the most recent application round have filed lawsuits against the state over the process. One filed last week on behalf of 11 marijuana businesses argued that the level of secrecy on how the winners were determined has been so high that it’s creating an environment ripe for corruption.

Young, who took over the agency earlier this year, said she supported the proposal.

“I share Gov. Sisolak’s commitment to increasing transparency within the marijuana licensing process,” Young said in a statement. “I look forward to working alongside the governor’s office and the legislature to implement this and other needed reforms to shed more light on how marijuana licenses are issued.”

Nobody testified for or against the amendment, which was posted publicly shortly before the meeting, during a brief hearing in the Senate Revenue and Economic Development Committee. Riana Durrett of the Nevada Dispensary Association did not immediately have comment on the proposal.

Eleven marijuana businesses sue, arguing state 'arbitrarily' issued dispensary licenses, lack of transparency could be hiding corruption

A customer and retailer exchanging money at a cannabis retailer

Nearly a dozen cannabis businesses that applied but failed to receive dispensary licenses after a recent application period are suing the Nevada Department of Taxation, saying the agency’s marijuana regulations are invalid and that a lack of transparency in awarding licenses is opening the state up to corruption.

The lawsuit filed earlier this week in Clark County seeks a preliminary injunction barring enforcement of current marijuana regulations and invalidating certain actions the department has taken thus far — including granting 61 conditional licenses and denying hundreds more applications. It’s the latest in a string of lawsuits since the state announced in early December that it had granted additional licenses, but refused to reveal even the business names of those who won without the winners’ written consent.

“The Department of Taxation — refusing to reveal the information necessary to audit the process under the guise of ‘privacy concerns’ — has cavalierly taken the position of: ‘just trust us,’” the motion says. “The lack of transparency is of even graver concern given the fact that the market has established that cannabis licenses are worth tens of millions, even hundreds of millions, of dollars. Given the Department’s lack of transparency in the 2018 application scheme, the system is therefore ripe for corruption on all levels.”

The Nevada Department of Taxation didn’t respond to the specific allegations in the filing.

“The Department has not yet been served with this case, so we haven’t had the opportunity to see the specific complaints,” the agency said in a statement. “However, our newly appointed executive director, Melanie Young, is committed to providing further clarity on the Department’s licensing process as we move forward with our attorneys on litigation.”

Issues raised by the plaintiffs range from concerns about the breadth of criteria the taxation department allowed itself to use in scoring to allegations that some business entities received more licenses than legally allowable in each jurisdiction to fears that the licenses granted will essentially form a monopoly and starve the smaller businesses that helped the industry get off the ground in the first place.

John Ritter, who’s a board member of the Nevada Dispensary Association and affiliated with marijuana company The Grove, which is involved in the suit, said his company has been used as a model for other dispensaries, and the state has referred people to take tours of the company to learn about the industry. So he was surprised to be denied in the latest licensing round.

He said he asked taxation officials what the criteria the department used to score applicants, but was denied further explanation of the process. Appointments with the department to review scores were not available until after the 30-day window to appeal the applications, and during the score review, applicants were only allowed to take notes, not pictures of their scores, Ritter said.

Ross Miller, a former secretary of state and one of the lawyers working on the lawsuit, said the applicants have been denied appeals to the tax department, ignored in their request for help from the tax commission and thwarted when they have tried to request public records.

“They expanded the original intent of the confidentiality provision, which was intended to protect medical records, patient confidentiality. They then expanded it and used that provision to try to apply broader protections,” said Miller. “But as they have now interpreted that, they won’t tell you absolutely anything about what’s going on at the department.”

Plaintiffs also find it suspicious that some locally owned companies have recently been sold to publicly traded entities around the time they were applying. In one example, a company that ended up winning numerous licenses announced in November — during the scoring period — that it had been acquired by a large multinational company.

“Did that mean that the department said, ‘Our applicants are changing and we’ve got to know who these other applicants are. We’ve got to get all their information and we’ve got to do background checks on all their owners?’” Ritter asked.

But he said he assumes background checks were not conducted, because conditional licenses were awarded to the company three weeks later, and the state had been relying on temporary workers with the firm Manpower to screen the applications.

Lawyers for the applicants say they believe the tax department has taken liberties beyond what the Legislature allowed in statute, including the plan to consider any criteria — even ones that were not initially laid out —  in evaluating an application.

Although the regulations were approved unanimously by lawmakers on the Legislative Commission in February 2018 (after they were warned that there would be no regulation on the industry at all if the language was not approved, because temporary regulations were expiring), plaintiffs believe they are invalid. They want the current version not to be enforced, and to revert back to an earlier version of the rules.

The regulation “textually permits the Department to rank applications and allocate conditional licenses based upon arbitrary, irrelevant, vague, ambiguous, undisclosed, and unpublished criteria, rather than criteria ‘that are directly and demonstrably related to the operation of a marijuana establishment,’ as textually required by Nevada law,” the motion says.

Attorney Vincent Savarese says the lack of information being released prevents the public from holding the state agency accountable to its own laws.

“It allows wiggle room for corruption that cannot be accounted for,” Savarese said. “And I’m not saying there has necessarily been actual corruption, but I am saying that this lack of transparency would permit corruption to take place behind closed doors that no one can account for.”

Read the full motion below.

Audit: State missed out on $500K marijuana tax revenue because of recordkeeping issues

Discrepancies in data entry by marijuana businesses are estimated to have cost the state more than $500,000 in tax revenue in a six-month period among a subset of companies tested by state auditors.

An audit of the Nevada Department of Taxation’s Marijuana Regulation and Enforcement operations found that information reported to the state in tax returns didn’t match information entered into a seed-to-sale tracking software nearly three-quarters of the time. The report also faulted the department for using only a fraction of the money lawmakers allocated to ramp up security in state offices working with the mostly cash industry, and for not helping auditors obtain documentation that could have given a clearer understanding of the recordkeeping problems.

Chairwoman Teresa Benitez-Thompson described the audit, discussed Thursday at a meeting of the Legislative Audit Subcommittee, as “less than stellar.” Others acknowledged that Nevada’s marijuana regulatory structure popped up in a matter of months and the field is something of uncharted territory.

“I understand where you’ve been. You’re trying to fly an aircraft while you’re building it, and I guess to your credit, you’ve remained in flight,” said Democratic Sen. David Parks, a member of the subcommittee. But, he said, “there just seems to be an undertone in this entire report that there seems to have been a lot of lack of cooperation.”

Taxation department Director Melanie Young, who took office earlier this year, said she could only assume that the refusal had to do with the volume of records requested or concern that it went against licensees’ due process rights.

“I’m going to have to apologize for the department not providing those records. That was done under previous administration,” she said.

Among auditors’ findings:

  • There was “inaccurate and incomplete data” in the seed-to-sale tracking software METRC (an acronym for Marijuana Enforcement Tracking Reporting Compliance), which exists to ensure that cannabis is not diverted to or from the black market or out of state. They said the department has not been conducting “effective monitoring and oversight of the system” — it does not reconcile data in METRC with tax returns — and has not provided “sufficient guidance” to licensees.
  • Data in the METRC system didn’t match with the totals reported on tax returns in 72 percent of the returns that were examined — 86 of 120 of the returns tested.
  • Auditors reviewed tax returns from 10 cultivators and five retail marijuana stores with what they had logged in METRC. Wholesale tax returns didn’t match METRC data in 70 percent of cases, retail marijuana tax returns didn’t match in 57 percent of cases, and sales tax returns didn’t match about 60 percent of the time.
  • Auditors could not determine why the rates did not match because when they asked the Department of Taxation to obtain additional documentation from licensees, the department initially accepted but later declined to do so.
  • High-potency products meant for medical marijuana patients were improperly sold to recreational customers in 43 percent of cases examined by auditors. “Medical marijuana products contain high THC levels and are intended to be used for the exclusive benefit of a person to mitigate the symptoms or effects of a debilitating medical condition,” the audit said. “Allowing recreational users to consume medical products threatens the health and safety of the consumer, the general public, and the integrity of the industry.”
  • Dispensaries that have recreational and medical marijuana licenses are not properly logging sales. One logged all sales as those to medical patients even though 81 percent of products were sold to recreational customers; eight dispensaries recorded all sales as recreational when 18 percent should have been labeled as medical.
  • The department is not effectively using METRC to track waste during the marijuana production process and hasn’t come up with a way to isolate inappropriate transactions.  “Marijuana products are susceptible to loss and theft and misappropriations can be covered up through the waste process,” auditors said.
  • In spite of the risks of operating in an all-cash industry, the Department of Taxation spent only 7 percent of the $340,000 that lawmakers allocated in 2017 to upgrade security at offices that collect taxes by the end of fiscal year 2018. The department pegged that to leadership turnover and higher-than-expected quotes.

The department accepted all 13 of the recommendations auditors made to improve its systems, but noted that they launched recreational marijuana sales at a breakneck pace in 2017, and said that METRC is only one of the tools they use to ensure compliance.

“The deficiencies identified in the Metrc system and its monitoring do not impair the Department’s overall ability to provide for public safety oversight of the marijuana industry,” the department said in a written response to auditors.

Nevada’s marijuana industry consists of 65 retail stores and more than 900 individual licenses or conditional licenses. Single businesses often have multiple licenses because they include a store, a distribution operation, cultivation and production.

In its first year, the industry brought the state nearly $70 million in revenue from a 10 percent excise tax on retail sales and a 15 percent wholesale tax.

Nobody representing the marijuana industry spoke up during the public comment period about the issues raised in the audit. But Benitez-Thompson said they were partly to blame.

“Obviously the regulatory oversight we’re going to beef up and make sure that we as a state of Nevada are providing and funding a regulatory system that ensures safety and compliance,” she said. “But to the point, the onus of entering this information into METRC falls on the industry, and it’s not happening, and that’s the industry’s to own.”

Nevada Marijuana Audit by Michelle Rindels on Scribd

Panel questions whether state has staff, authority to adequately regulate marijuana industry

Cannabis advisory board

The chair of a committee that is helping design a new oversight structure for Nevada’s marijuana industry questioned on Friday whether the state’s current regulatory body is large enough and powerful enough to manage the complicated task at hand.

J. Brin Gibson, who is Gov. Steve Sisolak’s general counsel and chairs the advisory panel developing the Cannabis Compliance Board, said the ratio of Nevada Department of Taxation investigators and auditors to marijuana licensees seemed low compared with the structure in place to regulate gambling in Nevada. While there are about four times as many gaming licenses as marijuana business licenses, the Gaming Control Board has about 10 times as many staff members as the marijuana division of the tax department.

“When I look at the numbers of your employees and I look at the number of your licensees, when you compare that to the gaming space,” he said during the advisory panel’s first meeting, “I'll just admit it — I'm skeptical that you're able to do the kind of investigation and enforcement actions that this kind of privileged license requires.”

Citing concerns about transparency in Nevada’s current marijuana regulation system, Sisolak signed an executive order last month tasking the board with preparing a bill for lawmakers that would create a Cannabis Compliance Board. With a mid-March deadline for finalizing the bill concept, panelists are culling ideas from the Nevada casino regulation regime that’s considered the international gold standard.

In a meeting that lasted nearly six hours, they heard detailed presentations from the Gaming Control Board and gambling industry experts. UNLV Professor Greg Gemignani shared a historical retrospective detailing how Nevada’s gambling industry, plagued with corruption and bloodshed and threatened with a federal crackdown in its early years, cleaned up its act and took on strict regulation starting in the 1950s.

Under the current regime, applicants seeking a casino license must undergo a rigorous background check that can sometimes last months or years and includes a review of five years of bank statements and tax returns, an investigation of social media accounts and personal visits by investigators to places where the applicant has lived to interview people who have worked with the applicant.

Panelists noted parallels between gambling and cannabis, which both had their roots in illegal activity before being corralled into Nevada’s mainstream. A major difference is that the Gaming Control Board has matured over six decades, while marijuana’s regulatory structure has only been evolving since 2013, when lawmakers voted to authorize medical marijuana dispensaries.  

Taxation officials reported Friday that in the year since recreational sales began, there had been no documented instances of diversion, when legal marijuana from one state ends up in another market illegally. The agency said it had eight instances in which it suspended someone’s license for anywhere from five days to five months, but has not yet revoked someone’s license or had a hearing in which someone challenged the finding of violation.

That fact surprised Gibson.

“It just strikes me as almost improbable, nearly impossible, that you've yet to have a single hearing on a civil penalty,” he said. “That's just absolutely incredible.”  

Panelists also discussed what they view as a loophole in the agency’s ability to regulate the market. The Nevada Department of Taxation has no staff that is POST [Peace Officer Standards and Training] certified, meaning they have the training and authorization to carry out law enforcement activities.

The department said it only worked with legal licensees and did not have the authority to address criminality in the black market, although Jorge Pupo, deputy executive director of the marijuana enforcement division, said the agency has a good working relationship with police. He cited an example where the department worked with police to shut down a clandestine, illegal marijuana party in a warehouse.

By contrast, the Nevada Gaming Control Board has 91 certified peace officers who do investigations, analyze intelligence and make arrests.

“In order to allow people to collect their rightful dues for their investment in this industry, you've got to control the black market,” Gibson said. “And so the fact that there are no POST-certified employees of your agency concerns me greatly.”

Member and Clark County Commissioner Chris Giunchigliani said she was concerned that taxation officials didn’t track instances when people call the police on a licensee. And panelist and state Sen. Yvanna Cancela said the lack of law enforcement authority leaves gaps when it comes to things such as illegal advertising or delivery services — people can’t call regulators and expect them to enforce those laws.

“I agree,” Pupo said. “The problem is, we don't have any authority, right? But it is a problem, and we recognize that it is a problem.”

Panelists also suggested there needs to be more accountability on marijuana agent cards, which are afforded to people who work at, own or serve on the board of a marijuana business. Regulators need to track whether applicants accrued any disqualifying criminal convictions after they gained the agent card, panelists said.  

Giunchigliani said she was aware of two marijuana industry employees who were fired from one business for theft but immediately hired by another business, with no communication about the disciplinary action.

The taxation department outlined the work it has already done in enforcing marijuana laws and regulations. Violations are categorized from Category I — the most serious, which is grounds for revoking a license — to Category V, which are for violations “that are inconsistent with the orderly regulation of the sale or production of marijuana or marijuana products.”

The state has assessed $603,250 in fines and collected $181,500 of that, with some of the fines reduced through settlement agreements.

The agency also said it conducted 234 investigations in the first year of legal recreational marijuana sales, and substantiated 146 of those complaints. There is currently one establishment in danger of license revocation, but that process is on hold as the business works through settlement discussions with the enforcement division.

The panel is expected to meet again next week, although the exact topics have not yet been decided and several state employees have been assigned research tasks ahead of it. Melanie Young, the recently appointed director of the Nevada Department of Taxation, said Gibson directed her to analyze the marijuana division’s staffing levels and how they compare to what the Gaming Control Board’s levels would be if it had a similar number of licensees.

“I think we’re really excited to work with Gov. Sisolak and the team and see where we can make improvements,” she said.