Federal officials said they plan to issue new tax guidance for the marijuana industry following a move by the Trump administration to reclassify cannabis that was announced on Thursday.
Under an order from Acting Attorney General Todd Blanche, marijuana regulated by a state medical cannabis license will immediately move to Schedule III. Marijuana products such as those in state-legal recreational markets remain in Schedule I for now, however, subject to a hearing process this summer to consider broader rescheduling of cannabis.
The U.S. Department of the Treasury and Internal Revenue Service (IRS) said they “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 move.
Rescheduling won’t federally legalize cannabis, but it will benefit state-licensed marijuana businesses by allowing them to take federal tax deductions they’re currently barred from under an IRS code known as 280E that doesn’t apply to Schedule III substances.
“Accordingly, 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
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