According to the Department of Justice and DEA's recent announcement, the federal government has now placed FDA approved marijuana products and marijuana products handled under qualifying state issued medical marijuana licenses into Schedule III, effective April 22, 2026, while separately starting a new hearing process for recreational cannabis beginning June 29, 2026. Please read this entire post, because there is more.
For state licensed medical marijuana companies, this is a relief. IRC Section 280E applies to businesses trafficking in Schedule I or Schedule II controlled substances. Because the DOJ have now placed qualifying state licensed medical marijuana activity into Schedule III, those businesses no longer are subject to 280E.
According to a quick Google search, measured by projected U.S. sales, roughly 30% of the regulated cannabis market is medical, while about 70% is recreational. For businesses that sell both medical and recreational products, this likely creates a more complicated tax situation, because part of the business may now be outside 280E while another part may still remain subject to it.
To reiterate, the DOJ made clear that this immediate action applies to state medical marijuana licensees, while recreational marijuana rescheduling is still being evaluated in a separate administrative process, similar to what the DEA started a few years ago but abruptly stopped due to the change in administration.
Furthermore, the ruling states that:
"The Administrator (DEA) encourages the Secretary of the Treasury to consider providing retrospective relief from Section 280E liability for taxable years in which a state licensee operated under a state medical marijuana license."
This is huge for the New Mexico Top Organics case we have been closely following, and will likely give the petitioner (Nathanial Pollock and team) more ammo to win that case.
Some people may be wondering how this time the DOJ and DEA was able to move this quickly. The answer appears to be that they did not go through the ordinary rescheduling pathway under 21 U.S.C. Section 811(a) of the CSA. Instead, the Acting Attorney General relied on Section 811(d)(1), which allows an order controlling a drug under the schedule he deems most appropriate when control is required by United States obligations under certain international treaties, and it allows that to happen without the usual procedures.
That includes the Single Convention framework the DOJ referenced in the announcement. So essentially, when Trump signed the executive order to start the rescheduling efforts, the previous Attorney General Bondi could have rescheduled cannabis outright but for some reason they chose not to.
This could be why the United Nations Single Convention on Narcotic Drugs requires the federal government to "monopolize" the wholesale trade of Marijuana. The DOJ's order appears to preserve substantial federal control over marijuana in order for a medical marijuana company to enter a federally lawful channel.
It requires a registration process for manufacturers and require them to "store crops where DEA retains access," and the system requires a "purchase and resale" mechanism through which the government acquires and resells marijuana crops, less an administrative fee or "tax."
So this is not the government getting out of the way; it is the government building a new choke point.
Even though this action does not yet fix the problem for the entire cannabis industry, it cuts directly against the argument that cannabis is properly treated as a Schedule I or Schedule II substance. If the federal government is now acknowledging that state licensed medical marijuana belongs in Schedule III, then the foundation underneath 280E is weaker than ever.
At a minimum, the government is conceding that marijuana cannot be treated as categorically stuck in Schedule I or II in every relevant context. That does not finish the fight, but it absolutely hacks away at the logic that has been used to justify 280E for years.
Justin Botillier is a cofounder and CEO of Calyx CPA, a firm specializing in tax preparation, accounting, and business consulting for the cannabis and psychedelic industries. With two decades of experience in taxation and over a decade serving the cannabis industry, Justin and his team have helped clients save millions of dollars by leveraging aggressive and defensible strategies to mitigate the impact of 280E.
