An update on the Trump administration’s rescheduling announcement
The US Treasury Department and the Internal Revenue Service will soon be providing explicit tax guidance for state-licensed medical cannabis businesses so that they can ease their federal tax burden.
The agencies announced their intentions in a press release issued one day after the acting Attorney General’s order to reschedule state-authorized medical cannabis products from Schedule I to Schedule III of the Controlled Substances Act.
“Treasury and the IRS expect DOJ’s action to have significant positive tax consequences for businesses in the medical marijuana industry, and Treasury and the IRS plan to issue guidance to address the principal federal tax issues stemming from the Final Order,” the release states.
“Rescheduling generally removes section 280E as a bar to claiming deductions and credits for businesses that as a result of the Final Order no longer traffic in Schedule I or II controlled substances under the CSA. Guidance is expected to clarify the ways in which, for businesses with multiple activities, section 280E applies only to those activities related to trafficking in Schedule I or II controlled substances.
“Guidance is also expected to include a transition rule providing that, for purposes of section 280E, rescheduling generally will be considered to first apply for a business’s full taxable year that includes the effective date of the Final Order.”
Historically, state-licensed cannabis operators have been prohibited from taking standard tax deductions, thereby artificially inflating their costs of doing business.
Last week, the Attorney General’s office and the DEA ordered state-licensed medical cannabis products to be rescheduled under federal law. The order also created a new registration pathway for state-authorized businesses to register with the federal government. The DEA launched an online portal on Wednesday to begin accepting applications.
The Attorney General’s office also announced that there will be administrative hearings before the DEA in late June to determine whether to advance a pending recommendation to move all “botanical cannabis” products from Schedule I to Schedule III. Prior hearings on the proposed rule, scheduled for last year, failed to take place following the issuance of an interlocutory appeal. Those hearings have now been terminated.
Persons seeking to participate in the new hearings must be either “adversely affected or aggrieved” by the proposed rule, and they must apply to the DEA by May 24th to be considered.
This national brief was republished from NORML. The joint press release is available from the U.S. Department of the Treasury. The Attorney General’s rescheduling order and notice of hearings are available from the U.S. Department of Justice.
