In December 2025, President Trump signed an Executive Order to accelerate the reclassification of marijuana from Schedule I to Schedule III under the Controlled Substances Act, a move that would lessen restrictions and penalties associated with the drug. For tax purposes, this would end the IRC 280E deduction and credit disallowance, which would be substantial for Cannabis businesses.
If the reclassification goes into effect and cannabis is rescheduled to Schedule III, this means IRC 280E would no longer apply to businesses with sales of cannabis/marijuana, regardless of whether it is sold for medical or recreational use under state law. These businesses could then deduct ordinary and necessary business expenses, changing their taxable income and cash flow.
Let’s keep in mind the acceleration will not be done overnight, and the process can take months to years to become effective.
For now, there is no change for the current tax year, unless final ruling is issued and becomes effective during the year. Also, bear in mind, IRC 280E relief will not be retroactive.
Stay tuned for additional updates as they become available.
If you have any questions regarding this important topic, please contact our office for assistance.
Article submitted by Béatrice R. Calen, EA
