New Tax Rules In Cannabis: What Are The Consequences DEA Rescheduling?
In a significant shift for the cannabis industry, marijuana is set to be reclassified as a Schedule 3 controlled substance. While this change does not address the ongoing federal prohibition, removal of the 280E IRS tax code will have substantial consequences for the cannabis space, particularly for retailers and plant-touching operators.
Tax Relief And Financial Implications
The rescheduling will greatly benefit the tax framework affecting cannabis companies. Historically hindered by the punitive Section 280E of the IRS code, which prevented businesses dealing with federally illegal substances from deducting ordinary business expenses, the industry faced an excessive tax burden. These figures from Whitney Economics concluded that the industry paid $1.8 billion in excess taxes due to IRS restrictions in 2022.
This shift in cash flow is expected to significantly enhance company balance sheets and improve the overall financial health of the sector. Companies that were profitable on paper but financially constrained will likely see marked improvements in their financial statements.
As cannabis rescheduling seems to be right around …