Home » News »
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) will issue guidance that addresses the federal tax consequences of increasing medical marijuana research.
Specifically, the guidance stems from the U.S. Department of Justice’s (DOJ) final order implementing President Donald Trump’s executive order on increasing medical marijuana and cannabidiol research. The executive order on increasing medical marijuana and cannabidiol research was issued on Dec. 18, 2025. It directed the Attorney General to complete the process for moving medical marijuana from Schedule I to Schedule III under the Controlled Substances Act (CSA).
The DOJ’s final order places marijuana contained in FDA-approved products or subject to a state medical marijuana license, as well as certain marijuana extracts and certain naturally derived delta-9-tetrahydrocannabinols, in Schedule III. It leaves unlicensed marijuana crops, bulk marijuana, and any marijuana and marijuana extract that has not yet been incorporated into an FDA approved drug product in Schedule I.
The Treasury and IRS, in its forthcoming guidance, expect the DOJ’s action to have significant positive tax consequences for businesses in the medical marijuana industry. Treasury and the IRS plan to issue guidance to address the principal federal tax issues stemming from the final order.
Section 280E of the Internal Revenue Code generally disallows deductions and credits for any amounts spent in carrying on a business that consists of trafficking in Schedule I or II controlled substances prohibited by federal or state law.
Accordingly, rescheduling generally removes section 280E as a bar to claiming deductions and credits for businesses that as a result of the order no longer traffic in Schedule I or II controlled substances. Guidance is expected to clarify the ways in which, for businesses with multiple activities, section 280E applies only to those activities related to trafficking in Schedule I or II controlled substances.
Further, guidance is expected to include a transition rule stating that rescheduling will be considered to first apply for a business’s full taxable year.
Check your inbox or spam folder now to confirm your subscription.