Cannabis rescheduling could cut costs for Humboldt County dispensaries – Times-Standard
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On Thursday, President Donald Trump signed an executive order directing federal agencies to expedite the reclassification of cannabis to a Schedule III drug.
Local cannabis businesses that navigate tax and banking burdens due to federal drug laws could see some positive impacts if reclassified.
Ross Gordon, policy chair of cannabis lobbying organization Origins Council, said as far as small farmers are concerned, the impacts aren’t going to be massive.
“But dispensaries will see a larger tax benefit, and that could potentially help everyone in the legal supply chain,” he said.
Cannabis is classified federally as a Schedule I drug under the Controlled Substances Act, alongside heroin, MDMA, and LSD. This classification points to a high potential for abuse, no accepted medical use and a lack of safety in the substance.
The proposed change to Schedule III wouldn’t federally legalize cannabis for recreational use, but could alleviate investing and tax burdens and open up more medical research into the plant.
The order opens possibilities of financial changes for local companies.
Businesses that sell Schedule I or II substances can’t deduct standard business expenses from their federal income taxes, under Section 280E of the internal revenue code.
And due to cannabis being federally illegal, financial institutions classify banking and investing in cannabis businesses as high risk and traditional institutions often won’t work with them. Businesses face high interest rates on loans, can’t accept major credit cards at the register and often rely on third-party vendors for financial work that add costs.
More federal changes would be required before these changes could be realized. But many see Trump’s support of the move as an indication that the federal government will take further steps to decriminalize a substance that’s been recreationally legal for adults to use in California since 2016.
“This is a dramatic mark. It’s a flag in the sand saying, ‘Hey, we’re going to move this conversation,’ ” said Nathan Whittington, Ferndale grower and lecturer at Cal Poly Humboldt’s cannabis studies program.
“There’s a whole lot of questions that are going to come out of it,” he added.
Decades of research and efforts of cannabis advocates point to the medical benefits of cannabis, in the face of federal rules stating it has none. Schedule three drugs have a recognized medical value under the CSA.
Under the Biden administration, the Department of Health and Human Services (HHS) recommended to the Drug Enforcement Agency that cannabis be controlled under Schedule III in 2023.
This followed research by federal agencies finding 30,000 licensed health care practitioners are authorized to recommend the medical use of marijuana for more than 6 million registered patients for at least 15 medical conditions. The Food and Drug Administration found credible scientific support for the use of cannabis to treat anorexia related to a medical condition, nausea and vomiting, and pain, but efforts have lagged in taking moves towards legalization of cannabis.
“(The order) doesn’t make it legal to possess cannabis as a person. It doesn’t make our farmers legal under federal law. And so, in order for that to happen, really, cannabis needs to be descheduled, legalized. And this is not what this executive order does,” said Gordon.
The order directs the Attorney General to expedite completion of the process of rescheduling marijuana to Schedule III of the CSA. The order also directs agencies to research hemp-derived cannabinoid products.
Sage Alexander can be reached at 707-441-0504.
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