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Federal Cannabis Rescheduling: Key Implications for CPAs

Federal Cannabis Rescheduling: Key Implications for CPAs

In December 2023, we published an article on the Department of Health and Human Services (DHHS) recommendation to the Drug Enforcement Administration to reclassify cannabis from a Schedule I drug. The implications of the possible reclassification could be highly beneficial to operators of cannabis companies across the country.

Todd Tigges, leader of the national cannabis practice, shared his thoughts on the potential rescheduling with the Michigan Association of Certified Public Accountants Connections Winter 2024 issue.

According to Todd, the two biggest sides to the issue are the legal and tax ramifications. “Obviously, on the tax side, 280E goes away, first and foremost.” This is, Todd says, the biggest impact rescheduling would have from a tax perspective, as retailers would then be able to claim the ordinary and necessary expenses that other businesses already have access to, on their taxes. However, it would also mean that CPAs providing 280E services as their sole product for the cannabis industry may need to reconsider their strategies in that market. “Once 280E goes away, cannabis becomes like any other business, and compliance, from a tax standpoint, becomes relatively simple. So, opportunities are then going to lie in reporting and things of that nature.”

“Similar to the alcohol laws, those are still state-licensed. Rescheduling is not going to automatically open interstate commerce across the board.” Conversely, he adds, it could open doors for larger pharmaceutical companies to begin buying and consolidating smaller businesses and enter the industry. “They’re already familiar with, and can support, all the FDA regulations that would probably come along with this move to Schedule III.”

“I think as this plays out,” Todd advises, “people should just be cognizant of the potential opportunities, for both attorneys and CPAs, be it a merger, complete sales, or unwinding some of these unique organizational structures. There are a lot of planning opportunities to advise clients that have the potential to generate additional revenue.” He explains, “Many of these businesses, when they were set up, involved a number of different entities; some of them had implied interest, some of them had actual interest, and some of them had several service agreements in place with all these entities to support one another. So, the complexities for that, if 280E goes away, aren’t so necessary anymore.”

Our national cannabis practice is assisting clients in various stages of their entry into the cannabis market with knowledge and specialized professionals in each of our markets.


Subscribers may read the full article published by the MICPA in their Winter 2024 issue of Connections magazine.

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