By Catherine A. Burke, Esq.
President Trump is expected to sign an executive order tomorrow to reschedule marijuana (also known as cannabis or “marihuana” under federal law) from Schedule I of the Controlled Substances Act (the “CSA”) to Schedule III. That designation would represent a huge shift from drug policy over the past 50 years. It would signal that the White House—likely in reliance on the 2023 recommendation of the Department of Health and Human Services and on broad support for the rescheduling proposal that followed—has determined that cannabis has a low to moderate potential for physical and psychological dependence and may have some medical value.
Moving cannabis to Schedule III will not legalize recreational cannabis cultivation, sale, or other activities in state-authorized cannabis industries. However, it would pave the way for scientific research involving cannabis and a legal medical cannabis industry across the United States. After rescheduling, the Food and Drug Administration would gain oversight of cannabis and issue regulations about prescribing medical cannabis. The process for setting up that framework—which would include setting potency limits and prescribing standards, testing and inspecting cannabis crops, authorizing prescribers, and writing drug warning language—could take a significant amount of time.
Although rescheduling will not legalize recreational cultivation, sale, use, or other recreational cannabis activities under federal law, it would give cannabis businesses the opportunity to deduct their business expenses the same way that businesses in other industries do. Section 280E of the Tax Code prohibits deduction of ordinary business expenses, such as rent, employee wages, and inventory costs related to the trafficking or sale of Schedule I and Schedule II drugs under the CSA.
Rescheduling therefore offers the potential for significant economic benefits, both by reducing taxes on all cannabis businesses and opening a new medical market to those who can weather the FDA approval process.
If the President does reschedule cannabis, other legal developments are sure to follow, including banking reforms and addressing the conflict between placing cannabis on Schedule III and the U.S.’s position as a signatory to the Single Convention on Narcotic Drugs, an international treaty that strictly regulates cannabis.
Stay tuned for updates.Please contact Catherine A. Burke, Esq. of Gravel & Shea PC for more information or legal assistance
