A trio of cannabis tax experts agreed during a webinar on Wednesday that federal marijuana rescheduling is now likely to be delayed until at least 2026, if not canceled altogether by the new administration of President Donald Trump.
A key factor in that analysis was the nomination this week of Terrance Cole to run the Drug Enforcement Administration, a staunchly anti-cannabis career public servant.
The fear on the cannabis industry side is an obvious financial one: If rescheduling isn’t completed under Trump, then marijuana businesses of all sizes will remain on the hook for federal taxes under the onerous 280E provision, which bars standard business deductions for any company trafficking in Schedule I or Schedule II narcotics. Rescheduling was poised to save the industry billions under the rescheduling proposal from President Joe Biden’s administration, but it’s far from clear if Trump will finish the job.
“Cole is going to have a lot of power over how this rescheduling proceeding moves forward, if it moves forward. We’re still trying to digest what that means and read the tea leaves,” said Hannah King, a partner at Dentons law firm.
“It’s going to depend on this new administration’s policy goals… Certainly, cannabis generally, legalization of cannabis, rescheduling is not a priority of this administration,” King said.
From a procedural standpoint, King said, it’s not even clear whether the hearing that was originally scheduled for December on marijuana rescheduling will ever be held, or if the new incoming DEA will simply cancel the entire process.
“There’s a lot of uncertainty, if nothing else, about the timing of rescheduling,” King said. “We’re in this place where rescheduling is probably not going to happen in 2025. I could be wrong. I hope I’m proven wrong on that. But it may be 2026.”
Greenspoon Marder partner Nick Richards, also a longtime cannabis tax attorney and former counsel at the Internal Revenue Service, agreed with King’s assessment but emphasized there are still a variety of tax strategies that cannabis companies are currently testing out to see if they can minimize the burdens of 280E.
Richards noted that there’s still an ongoing court case brought by Massachusetts-based Canna Provisions, which aims to overturn a Supreme Court cannabis precedent from 2005 called Gonzales v. Raich. If that case is successful, it’ll remove marijuana from the federal Controlled Substances Act in states that have chosen to legalize, and 280E will cease to apply, he said.
A ruling from a federal appellate court on that case is expected any day now, Richards pointed out, after which the plaintiffs could either revel in a victory or prepare for the expected appeal to the U.S. Supreme Court. That means there’s yet hope that the industry could also secure a major win through the judiciary.
“It’s a fun fight. It could win,” Richards said of the Canna Provisions suit, which is being spearheaded by nationally prominent law firm Boies Schiller Flexner LLP.
Richards and King also outlined that there are now several different legal tax theories being utilized by marijuana businesses to claim exemption to 280E, like the way Trulieve obtained a refund of more than $100 million from the IRS. Some rely on varying U.S. constitutional amendments to argue that the tax burden is excessive, while others rely on the federal legality of hemp and THCA.
“There’s a spectrum of arguments” that marijuana companies are using to argue to the IRS that 280E doesn’t or shouldn’t apply to them, King said.
The trick is that none of them have yet been fully vetted in tax court, King and Richards admitted, which means the federal marijuana tax waters remain murky.
Regardless, the panel emphasized that no matter which course a given cannabis company takes in dealing with the IRS and 280E, having qualified professionals on the team is paramount.
King and Richards were joined on the panel by Calvin Shannon, a CPA with advisory firm BGM.
“It’s going to depend on this new administration’s policy goals.” Read More
