DEA Cannabis Rescheduling - Calyx CPA



Cannabis Rescheduling and the IRS’s Response to Business Deductions

The recent decision by the Drug Enforcement Administration (DEA) to consider rescheduling marijuana under the Controlled Substances Act (CSA) marks a watershed moment in the history of American drug policy. Initially classified as a Schedule I drug, marijuana was deemed to have no medical value and a high potential for abuse, placing it alongside substances like heroin and LSD. This strict classification has governed its legal status, restricting not only its use but also research into its potential benefits.

The push for rescheduling comes on the heels of a comprehensive review by the U.S. Department of Health and Human Services (HHS), which highlighted marijuana’s accepted medical use and lower abuse potential relative to other Schedule I drugs. The proposal to shift marijuana to Schedule III, which includes drugs like ketamine and some anabolic steroids, suggests a significant change in federal perspective, recognizing both medical value and a lower risk of dependency.

For businesses in the cannabis industry, this reclassification could open up several financial opportunities, particularly regarding taxation. Currently, under IRS code 280E, cannabis businesses are unable to deduct ordinary business expenses because marijuana is classified as a Schedule I substance. The move to Schedule III would alleviate this issue, allowing these businesses to claim deductions that were previously disallowed. This could significantly reduce their tax burden, making operations potentially more profitable and sustainable.

The process of rescheduling marijuana from Schedule I to Schedule III may take longer than the media portrays. Initially, the proposal must pass through the scrutiny of the White House Office of Management and Budget (OMB), a step that ensures all legal and policy implications are thoroughly evaluated. This review can vary in length but is critical in shaping the framework under which marijuana would be regulated going forward.

Following the OMB review, the proposal enters a public comment period, where stakeholders from various sectors—medical, legal, business, and the general public—can provide feedback. This stage is vital for incorporating community and expert opinions and typically lasts several months, further extending the timeline.

Once the public comment period concludes, the DEA reviews the feedback and makes any necessary adjustments to the proposal. This step can also be time-consuming, as it may require additional rounds of revision and approval to address complex issues raised during the public comments.

The final rule is then published in the Federal Register, formalizing the rescheduling of marijuana. This publication is the trigger for the IRS to begin adjusting its policies, including the re-evaluation of tax codes such as 280E, which currently prevents cannabis businesses from deducting typical business expenses.

The IRS will likely respond by issuing new guidelines and possibly updating forms and instructions to accommodate the changes in marijuana’s scheduling. However, these adjustments won’t be instantaneous and will require time to implement. The IRS must ensure that their systems, procedures, and publications reflect these changes accurately, a process that could extend over several months post-rescheduling.

Throughout this period, businesses must stay informed and prepared for changes in compliance requirements, both from a scheduling and taxation perspective. It’s important to note that while the IRS adjustments will provide future relief, they will not apply retroactively to previous tax years before the reclassification is officially in effect. 

It is vital that you act now. As cannabis businesses anticipate the shift from Schedule I to Schedule III, it goes without saying that good advice is essential to effectively navigate the new regulatory landscape, while poor advice can result in permanent harm to your business.

Recognizing that the IRS will not allow retroactive application of tax deductions, minimally businesses should consider filing protective claims for refund to preserve the right to amend past returns based on the outcome of future legal changes. Additionally, firms like Calyx CPA are confident that the CSA’s application to states with cannabis programs will eventually be overturned. Following the example of companies like Trulieve, which received $113 million in refunds from amending their tax returns, they encourage cannabis businesses to maintain meticulous records and consider filing amended returns where feasible. They advocate for a proactive approach in managing audits and potential disputes with the IRS, emphasizing the necessity of sound legal arguments and rigorous compliance with emerging regulations.



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Psychedelics Oregon


California’s Pioneering Legislation for Psychedelic Therapy

In an era where mental health innovation is more crucial than ever, California stands at the forefront of a transformative shift. The recent passage of Senate Bill 1012, introduced by Sen. Scott Wiener, marks a significant development in the use of psychedelics for therapeutic purposes. Here’s a deep dive into what this groundbreaking legislation entails and its potential ripple effects, particularly for states like Oregon.

A New Dawn for Psychedelic Therapy

Under SB 1012, California is set to establish regulated service centers where adults aged 21 and older can access substances such as psilocybin, MDMA, mescaline, and DMT in a professionally supervised setting. This initiative, aptly named the “Regulated Therapeutic Access to Psychedelics Act,” is not merely about accessibility but is structured to ensure safety and efficacy through stringent oversight (Marijuana Moment).

The Framework of Regulation

The proposed service centers will operate under the aegis of the newly formed Division of Regulated Psychedelic Substances Control within the California Department of Consumer Affairs. This division will oversee the training and licensing of facilitators who must hold medical licenses, thereby ensuring that participants are in capable hands. This regulatory mechanism aims to foster a safe environment for those exploring psychedelic therapies as avenues for profound healing (KQED).

Health Safeguards and Accessibility

Participants in the program will undergo thorough health and safety screenings to tailor their experiences safely. The bill interestingly does not limit access to individuals with predefined medical conditions, broadening the potential benefits to a wider audience. It also emphasizes the importance of follow-up care, which includes integration services to help individuals process their experiences meaningfully (The Marijuana Herald).

The Broader Implications

Proponents of the bill argue that psychedelics hold immense potential in treating conditions resistant to conventional treatments, such as severe depression and PTSD. This legislation comes in response to Governor Gavin Newsom’s earlier veto of a more extensive decriminalization bill, signaling a cautious but progressive approach towards psychedelic therapy. The governor’s guidance has shaped this legislation to focus more narrowly on therapeutic use, ensuring that it’s paired with appropriate safety protocols (Marijuana Moment).

What This Means for Oregon and Beyond

California’s legislative advancements serve as a potential blueprint for other states, including Oregon, which has shown interest in similar reforms. The Oregon community, particularly businesses and healthcare providers, should closely monitor California’s rollout and outcomes to adapt and prepare for possible legislative shifts in their state. This movement isn’t just about changing laws but is a part of a larger shift towards integrating more holistic and progressive treatments into mental health care (DoubleBlind Mag).

As this bill progresses through further legislative stages, it will be crucial to watch how it influences not only the landscape of mental health treatment in California but also sets a precedent for other states considering similar pathways. For professionals and businesses in the cannabis and psychedelic sectors in Oregon, staying informed and prepared is key to navigating the potential changes that might come with such legislative models.

In essence, California’s move towards regulated psychedelic therapy is a beacon of innovation in mental health care, providing a glimpse into a future where these powerful substances are harnessed safely and effectively to heal and transform lives.