Marijuana Rescheduling And Income Tax

The DOJ Final Order on marijuana rescheduling dropped last week. Acting Attorney General Todd Blanche ordered that “FDA-approved drug products containing marijuana, as well [as] marijuana in any form covered by a state medical marijuana license, be placed in schedule III of the CSA.”

The Order went further than many of us anticipated. It also includes a short section titled “Tax Implications.” Here is that section, in whole:

“The Acting Attorney General further notes that, as a consequence of this rule, state licensees will no longer be subject to the deduction disallowance imposed by Section 280E of the Internal Revenue Code, which applies only to businesses engaged in ‘trafficking in controlled substances . . . in a schedule I or II,’ 26 U.S.C. § 280E. Nothing in this rule constitutes a determination regarding federal tax liability, and qualifying state licensees should consult with tax counsel regarding the applicability of Section 280E to their specific circumstances.”