Feds’ move to reclassify marijuana could reduce cannabis businesses’ tax burden

May 18, 2024
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Unsplash+ in collaboration with George Dagerotip

President Joe Biden last week endorsed the Department of Justice's (DoJ) move to reclassify marijuana from a Schedule I drug to a Schedule III drug.

Biden said in social media posts — X (aka Twitter) and YouTube — that the move would reverse “long-standing inequities” under the current criminalization of cannabis.

"Look folks, no one should be in jail merely for using or possessing marijuana," the president said in his video statement.

Not legalization, but lowering federal interest: The Justice Department move would not legalize marijuana outright for recreational use, which currently is the law in 24 states, two territories, and the District of Columbia. Medicinal use of cannabis products is approved in 38 states, three territories, and Washington, D.C.

Rather, it would change how cannabis is viewed by Uncle Sam. The Drug Enforcement Agency (DEA) places drugs into five categories, or schedules.

A Schedule I drug has no approved medical usage, according to the Drug Enforcement Agency (DEA). In addition to marijuana, other substances listed as Schedule 1 drugs include heroin, LSD, and ecstasy.

Schedule III drugs, on the other hand, are defined by the DEA as "drugs with a moderate to low potential for physical and psychological dependence." If cannabis is moved to this category, it would join, among others, testosterone and Tylenol with codeine.

Diverse support: The official publication of the DoJ proposal in the Federal Register, which will come after the White House Office of Management and Budget (OMB) officially reviews it, will kick off a public comment period on the move to reclassify marijuana.

Advocates of pot decriminalization obviously will be letting the federal government know of their support of this formal step in changing how marijuana is treated by Uncle Sam.

Joining them are cannabis businesses that see the reclassification to a less dangerous drug level as a way to make their enterprises profitable for the first time, notes a Wall Street Journal article.

“That is because the change could lift a heavy income-tax burden: Section 280E of the federal tax code currently bars cannabis businesses from claiming deductions on many basic business expenses. That rule often results in an effective tax rate of 70% or more, wiping out most licensed marijuana retailers’ earnings,” write Jennifer Maloney and Richard Rubin in their WSJ piece.

That article, Reclassifying Marijuana Could Unlock Billions in Tax Savings for Cannabis Companies, earns this weekend’s first Saturday Shout Out.

For those who want the official word, here are some shouts out to the DoJ, first for its May 16 press release, which has links to Questions Related to the Potential Rescheduling of Marijuana, as well as to its 92-page rulemaking notice.

A final shout goes out to the Congressional Research Services’ May 1 report Legal Consequences of Rescheduling Marijuana.

Well, that’s enough shouting for this Saturday. I’ll leave you to enjoy the rest of your day and weekend as you choose.

You also might find these items of interest:

 

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