- Los Angeles officials voted to draft amnesty for 500 cannabis businesses owing $400 million in back taxes.
- The proposed program waives late fees and interest totaling $135 million if businesses pay principal amounts.
- Recovered funds would be split between enforcement and equity grants for low-income and minority operators.
(LOS ANGELES, CALIFORNIA) — The Los Angeles City Council voted 13-0 on March 3, 2026, to direct the Office of Finance to draft an amnesty program for more than 500 licensed cannabis businesses that the city says owe roughly $400 million in back taxes, penalties and interest.
City officials framed the move as an effort to bring a large share of licensed operators back into compliance while recovering revenue that has proved difficult to collect under existing tools.
Councilwoman Imelda Padilla, chair of the Government Operations Committee, led the discussion and described the effort as a chance to reset relationships between the city and delinquent businesses. “The city finds itself with a unique opportunity to bring businesses into compliance,” Padilla said.
The proposal centers on a partial waiver: businesses would still have to pay the principal tax amounts, but the city would waive late fees and interest for those who enroll and follow through on repayment.
Under the terms outlined in the council action, the city would waive late fees and interest totaling about $135 million, made up of $100 million in penalties and $35 million in interest.
In exchange, participating businesses would enter payment plans and pay principal taxes within 36 months (3 years), a structure officials described as a way to convert long-outstanding balances into scheduled payments.
City estimates indicate the full headline debt figure does not translate into money the city can realistically recover, even if every operator wanted to pay.
Only about $150 million of the debt is collectible, officials said, because of a 3-year statute of limitations and because some businesses have closed.
Even within the collectible portion, the city’s projections depend on how many eligible operators sign up and how consistently they make payments across the multi-year window.
With an assumption that half of eligible operators participate, projections estimate the city will recover $30 million in principal while forgiving $20-25 million in penalties.
The action taken this week did not create the program immediately; it ordered city staff to draft the language that would govern eligibility, payment mechanics and the waiver itself.
Councilmembers Traci Park and Hugo Soto-Martinez were absent for the vote, while the rest of the council supported the motion unanimously.
Any final program would require the council to approve an ordinance and would also need approval from Mayor Karen Bass later in 2026, setting up months of legislative work and negotiation.
The proposal also ties the potential recovery to a specific allocation plan, putting a policy debate over priorities at the center of the ordinance-writing process.
Under the allocation framework described with the council action, 20% of recovered funds would go to the general fund and the Office of Finance, 40% would go to the LAPD and the city attorney’s office for illegal cannabis enforcement, and 40% would go to social equity grants for low-income and minority operators.
Supporters of the structure portrayed the split as a way to link an amnesty program to both enforcement against illegal cannabis and to equity objectives, though final negotiations could reshape how much goes to each bucket.
The measure comes as the city reports widespread delinquency among licensed operators, making the proposed amnesty program less a niche fix than a citywide compliance project within the legal market.
Officials said a majority of the city’s 700-738 licensed cannabis businesses—more than two-thirds—are affected, a pattern discussed publicly in connection with the city’s 10% gross receipts tax, competition from unlicensed sellers and pressure on legal sales.
The Office of Finance has also pointed to a changing market picture in which license growth from 2021-2024 coincided with declining tax revenue, even as more businesses entered the regulated system.
A snapshot in an October 2025 Office of Finance report showed delinquency spread across operators of different sizes, while also concentrated in a smaller number of very large accounts.
That report flagged 329 operators owing under $200,000 each and 48 owing over $2 million, figures that city officials have used to illustrate both administrative burden and the scale of a handful of major debts.
By December 2025, total debt rose to $417 million, reinforcing the city’s view that normal collection measures have not brought balances down fast enough.
City officials and participants in public discussions have also linked delinquency to compliance and enforcement decisions, since unpaid liabilities can intersect with licensing stability and the city’s focus on illegal operations.
Los Angeles has run broader tax relief efforts before, and officials have pointed to those results as a reference point for how many people might participate in an amnesty-style program.
A similar 2020 citywide amnesty collected $20.6 million from 6,190 participants over 12 months, though officials cautioned that cannabis market conditions and the design of a cannabis-specific program may differ.
As staff work on ordinance language, debate has already surfaced around how firm the city should be with defaulters and whether the program should remain voluntary.
One advocate, Sosa, called for mandatory participation with license revocation for defaulters and argued for equalized taxes like those on guns, tobacco and alcohol.
Any city ordinance will also land against a state tax backdrop that has shifted recently, which city officials cited as relevant to how legal operators experience total tax burden.
State relief in September 2025 capped California’s excise tax at 15% through 2028, a policy change that supporters of local action have referenced in arguments about keeping legal businesses viable while improving compliance.
For now, the council’s vote sets the drafting process in motion, with the key questions moving from whether Los Angeles will try an amnesty program to how strict the payment-plan rules will be, who qualifies, and when enrollment would open once an ordinance reaches the council and Bass for approval later in 2026.
