DEA's Hearing Has Concluded, but the Window to Claim Refunds Is Still Closing

On July 15, the DEA concluded the administrative hearing on the Notice of Proposed Rulemaking for the rescheduling of "marijuana," which began on June 29, 2026. In their article, "The Quietest Fight of DEA's Life: Reflections on the Marijuana Rescheduling Hearing," our esteemed colleagues at Harris Sliwoski described a proceeding that was quieter and more one-sided than much of the industry commentary suggested. As described, the DEA presented two witnesses at the outset, opponents of rescheduling dominated the balance of the hearing, and the DEA offered limited objections or cross-examination. Whether that reflected strategy, complacency, or confidence in the ultimate outcome remains unclear. The final result may also take time: the administrative law judge is under no deadline to issue a recommendation, and the DEA has no fixed deadline to act after receiving it. Either step could take months.

Why All Cannabis Businesses Should Consider Amending Now

All cannabis businesses - whether they operate in medical, adult-use-only, or mixed markets - should consider amending their returns while the relevant statutes of limitations remain open. The uncertainty surrounding the rulemaking is not a reason for cannabis operators to wait. The legal basis for challenging Section 280E is stronger than it has ever been. The contributing factors include Congress's repeated restrictions on the DOJ's use of funds to prevent states from implementing their marijuana laws. HHS and FDA concluded that marijuana has a currently accepted medical use and meets the criteria for Schedule III, while the DOJ's Office of Legal Counsel rejected the DEA's prior medical-use test as impermissibly narrow. These issues are now before the Tax Court in New Mexico Top Organics, including whether marijuana is "within the meaning of" Schedule I or II and whether state-compliant cannabis activity is "prohibited by Federal law" for purposes of Section 280E.

And now, the Attorney General's separate decision to place marijuana subject to qualifying state medical licenses in Schedule III adds a more direct argument for all operators in all license types, not just medical. In mixed medical and adult-use markets, the same finished product may be cultivated, processed, tested, tracked, packaged, and held in the same inventory before being sold to either a medical patient or an adult-use customer. The product and its regulated chain of custody do not change when a customer presents - or does not present - a medical card. A business operating under a qualifying medical license therefore has a substantial position that Schedule III status attaches to the licensed product, not merely to the eventual purchaser. The government may argue that adult-use transactions remain outside the decision, but that does not resolve whether the same flower can shift from Schedule III to Schedule I solely at the point of sale.

Future IRS guidance will matter, but it will not give the IRS the final word on Section 280E. In Loper Bright, the Supreme Court overruled Chevron deference and held that courts must exercise independent judgment when interpreting federal statutes. The IRS may examine returns, deny refund claims, and defend its position in litigation, but it cannot make its interpretation binding on the Tax Court or the federal courts. The meaning of Section 280E - and its application to state-licensed medical products sold through mixed medical and adult-use markets - is now squarely in the hands of the judges.

Companies should therefore evaluate their open tax years now. Refund claims generally must be filed within three years after the return was filed or two years after the tax was paid, whichever is later, and neither the pending DEA proceeding nor anticipated IRS guidance automatically suspends that deadline. Amended returns do not guarantee a refund; they do, however, preserve the opportunity to pursue the issue. A company that waits may lose that opportunity before either the courts or the IRS provides an answer.

If your cannabis business has open tax years and you have not evaluated a 280E refund position, contact us through the Calyx CPA site. We can review your filed returns, identify which years remain within the refund window, and prepare amended returns that preserve the claim.

This article is intended for informational purposes only and does not constitute legal, tax, or medical advice.