Congressional Push for Medical Cannabis Tax Guidance
A group of U.S. congressional lawmakers is advocating for the Internal Revenue Service (IRS) and the Department of the Treasury to issue immediate and clear medical cannabis tax guidance. This push follows the U.S. Department of Justice’s (DOJ) recent order to reschedule cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA) for state-licensed medical purposes, as previously reported by Hemp Gazette.
The letter, spearheaded by Representatives Steven Horsford (D-NV) and Steve Cohen (D-TN), highlights that state-legal cannabis businesses have historically been unable to claim ordinary business tax deductions and credits due to Section 280E of the U.S. tax code. This section prohibits such deductions for expenditures related to controlled substances listed in Schedules I and II. With medical cannabis now moved to Schedule III, Section 280E is no longer applicable to qualifying state-legal medical cannabis-related trades or businesses, according to a report by Marijuana Moment.
Implications of Rescheduling on Section 280E
The federal rescheduling order, issued by Acting Attorney General Todd Blanche last month, immediately shifted marijuana regulated by a state medical cannabis license to Schedule III. This change fundamentally alters the federal tax framework for a segment of the cannabis industry. However, marijuana products in state-legal recreational markets currently remain in Schedule I, pending further review.
Lawmakers, including Reps. Betty McCollum (D-WA), Eleanor Holmes Norton (D-DC), Rashida Tlaib (D-MI), Jared Huffman (D-CA), and Jesús G. “Chuy” García (D-IL), have emphasized the need for unambiguous medical cannabis tax guidance in two primary areas:
- Businesses operating under state-issued cannabis licenses that encompass both adult-use and medicinal purposes.
- Businesses holding separate state-issued cannabis licenses for adult-use and medicinal purposes.
The absence of clear and timely guidance could leave taxpayers uncertain regarding the application of the tax code, including the treatment of ordinary and necessary business deductions and access to tax credits. The letter also urged the Treasury and IRS to collaborate with federal partners, such as the Small Business Administration, to ensure widespread dissemination of this guidance.
Challenges for Mixed-Use Operations
While the Treasury and IRS announced last month that guidance is forthcoming, the lawmakers are pressing for swift action. They noted that clarifying guidance would promote uniform compliance, reduce potential tax disputes, and support efficient tax administration.
The IRS and Treasury previously stated they anticipate the DOJ’s action to have
Disclaimer: This article is for informational purposes only and does not constitute medical advice. Hemp Gazette does not provide medical recommendations, diagnoses, or treatment plans. Always consult a qualified healthcare practitioner before making any decisions regarding your health or any medical condition. Statements concerning the therapeutic uses of hemp, cannabis, or cannabinoid-derived products have not been evaluated by Australia’s Therapeutic Goods Administration (TGA). Medicinal cannabis products in Australia are accessed via prescription pathways under TGA regulation.
