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California regulators are adopting changes to the state’s marijuana licensing process that are intended to make it easier for businesses to qualify for tax deductions and other benefits in line with the Trump administration’s recent move to federally reschedule medical cannabis.
Under an action announced by the U.S. Department of Justice last week, marijuana products regulated by a state medical cannabis license immediately moved from Schedule I of the Controlled Substances Act to Schedule III, as did any marijuana products that are approved by the Food and Drug Administration (FDA). An administrative hearing scheduled for this summer will consider broader cannabis rescheduling, including for recreational products.
As such, Schedule III cannabis will no longer be subject to a federal tax rule known as 280E that prevents businesses from taking tax deductions that are available to other companies, while adult-use marijuana expenses are still not deductible for now.
On Thursday, the California Department of Cannabis Control (DCC) announced that it has “streamlined the process for changing a license designation” from recreational to medical under state law.
“Cultivation licensees no longer need to wait until renewal to request a change to their adult-use (A) or medicinal-use (M) designation,” the department said.
Additionally, DCC no longer requires a new local authorization for requests that change a license to medical designation only or add a medical designation to an existing adult-use designation.
“These changes are intended to simplify the request process and expedite the review process,” DCC said, noting that a change of license designation can be requested at any time by submitting a form. “Please remember, you must continue operating under your current license designation until the request has been approved by DCC.”
Officials also clarified that the announcement “should not be considered advice regarding whether or how licensees should participate in the federal medicinal cannabis program.”
“If guidance is required, licensees should consult with their legal counsel,” DCC said.
The department also noted that it requested to meet with Drug Enforcement Administration (DEA) officials who are working to implement federal cannabis rescheduling, but that the agency “has indicated it will share information publicly and all at once, rather than through state-specific briefings.”
“DCC will continue to monitor federal updates as they are released, and we remain committed to supporting regulatory alignment and simplifying processes wherever possible,” the department said.
In order to take advantage of tax deductions and other benefits in line with the move to Schedule III, state-licensed medical cannabis businesses must complete a form on DEA’s website that asks them to submit information about their operations.
Meanwhile, the U.S. Department of the Treasury and Internal Revenue Service (IRS) said they plan to issue new tax guidance for the marijuana industry following the rescheduling announcement.
Tom Angell is the editor of Marijuana Moment. A 25-year veteran in the cannabis and drug law reform movement, he covers the policy, politics, science and culture of marijuana, psychedelics and other substances. He previously reported for Forbes, Marijuana.com and MassRoots, and was given the Hunter S. Thompson Media Award by NORML and has been named Journalist of the Year by Americans for Safe Access. As an activist, Tom founded the nonprofit Marijuana Majority and handled media relations, campaigns and lobbying for Law Enforcement Against Prohibition and Students for Sensible Drug Policy.
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