The U.S. Drug Enforcement Agency is expected to reclassify marijuana, shifting the legal federal framework around the drug for the first time in more than 50 years.
The DEA’s proposal, which still must be reviewed by the White House Office of Management and Budget, would recognize the medical uses of cannabis and acknowledge it has less potential for abuse than some of the nation’s most dangerous drugs, according to the Associated Press.
Moving marijuana from a Schedule I drug to a Schedule III drug doesn’t make it federally legal, but it would be a significant change for cannabis businesses and their employees. The change would open up access to instant cash flow and banking opportunities, as well as loan opportunities, both of which could lead to much faster expansion of the industry. It would also open the door to research grant opportunities and, most importantly, end a rigid tax regime that until now has stifled growth in the highly regulated industry.
The DEA’s proposal comes after President Joe Biden called for a review of federal marijuana law in October 2022, and has moved to pardon thousands of Americans convicted federally of simple possession of the drug.
Classifying marijuana as Schedule III drug is the most consequential regulatory move the DEA has made on marijuana since classifying it as having “no currently accepted medical use and high potential for abuse” under the Controlled Substance Act in 1970. It would also eliminate a tax code law that was put in place in response to a clever drug dealer finding a loophole on his taxes in 1974.
Rescheduling marijuana eliminates the IRS Tax Code 280E, which prevents individuals from writing off business expenses involved in the trafficking of narcotics translating to a 70% or sometimes higher effective tax rate for marijuana dispensaries instead of the regular 21% corporate rate.
The rescheduling would also open up the marijuana industry to banking, more than it is already. Traditional large banks have avoided financing or even holding accounts for marijuana businesses or their employees.
Congress has spent nearly four years kicking around the SAFE Banking Act, which would provide certain protections to banks that choose to provide financial services to the legal marijuana industry. The law passed the U.S. House of Representatives in 2021 but has advanced no further.
Besides instant liquidity, the rescheduling could open up loans, which could lead to much faster expansion of industry in states where marijuana is legal.
This article originally appeared in Crain’s Detroit Business.
Dustin Walsh, Crain's Detroit Business , 2024-04-30 20:39:38
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