You may have heard that the US Department of Health and Human Services wrote to the DEA calling for Cannabis to be rescheduled from a Schedule 1 drug to a Schedule 3 drug. After extensive review, DHHS drew many conclusions, including that cannabis has legitimate medical uses and is not more addictive than alcohol. The question everyone is asking, is “how would this reclassification effect the California cannabis industry?” Here are my thoughts:
- Conflict Between Federal and State Laws: Rescheduling cannabis to schedule III would not resolve the conflict between state and federal law. If fact it may make it worse. Under that scenario, doctors could write a prescription for cannabis that could be filled at a local pharmacy. Cannabis grown for the pharmacy would have to pass FDA approval and inspections, which are much more costly than those required by the DCC. Recreational cultivation, distribution, and retail would remain illegal federally unless cannabis is completely de-scheduled and treated like alcohol.
- 280E: If Cannabis becomes classified as a schedule III drug, Tax Code section 280E would no longer apply, and cannabis businesses should be able to deduct ordinary and necessary business expenses just as any other business.
- Banking: Rescheduling cannabis could give cannabis businesses greater access to financial institutions. This would be increased if Congress passes the SAFER Banking Act along with the rescheduling of cannabis which would exempt banks from liability associated with serving cannabis businesses.
We will keep you updated as the process progresses. If you have any questions about how you can prepare for this potential change in federal cannabis laws, call us anytime.
