By Melissa Diaz, CPA | High Rock Accounting
The federal marijuana rescheduling hearing wrapped up on July 15. Two weeks of testimony inside DEA headquarters in Arlington, and then the record closed. The medical side already moved. Back in April, an order from the Acting Attorney General placed state-licensed medical cannabis into Schedule III, effective right away. This summer’s hearing was about the bigger question. Does adult-use marijuana follow?
The hearing was strange, to say the least. The DEA spent five decades defending Schedule I. This time the agency was the one arguing for the move. Its own witnesses spent two weeks explaining marijuana’s medical value and its safety next to alcohol and opioids. The groups brought in to oppose the change were left arguing against the government’s own doctors. Industry advocates came away encouraged, and I think they should be.
Next comes the paperwork. Participants have until August 17 to file closing briefs, capped at 50 pages. Then the judge writes his recommendation. Then the DEA administrator makes the final call. And then, almost certainly, someone challenges that call in federal court. No deadlines were set for any of it. My prediction is that the real finish line lands sometime in 2027.
That sounds slow. It is. But slow still beats stuck.
So what does this mean for your books right now? Everything depends on your license.
If you hold a medical-only license, the win already arrived. Section 280E no longer applies to you. For years, that one rule blocked cannabis businesses from deducting normal costs like payroll, rent, and marketing, which pushed effective tax rates past 70%. Now medical operators can write off ordinary expenses like any other company. Treasury signaled the relief covers the full 2026 tax year for those who qualify. That means real tax savings, recognizable immediately.
If you hold a recreational-only license, nothing changed yet. 280E still applies with full force. Keep operating in compliance, and get ready to move fast if adult-use follows medical. Talk to High Rock Accounting about alternative strategies for managing 280E exposure.
And if you are a vertically integrated operator holding dual licenses? The relief follows the activity, not the license. Your medical activity is out from under 280E. Your adult-use activity is still fully in it. So you have to draw a clean, defensible line between the two, and paperwork alone won’t hold up. The IRS has a long history of attacking cost splits that happen to favor the taxpayer.
There are a few ways operators are handling this. Some are moving the medical business into its own legal entity. Some run separate cost centers inside one company and trace expenses directly. Some track all the way down to the SKU and batch level. Each carries a different audit risk. The right choice depends on how much deduction is actually on the table and how clean your records are today. Some are still pursuing full 280E relief under other IRS challenges, which you can reach more about here.
One more thing, plainly. This is not legalization. Banking is still a headache. State excise taxes still bite. But the federal picture is finally moving in the right direction, and that is worth planning around.
So where does that leave you? If your books were built for a world where medical and adult-use were treated the same, that world is gone.
The hearing is over. The planning window is wide open. What you do with it is the part that counts. Talk to High Rock Accounting today to explore the most advantageous options for your cannabis business.
About the Author
Melissa Diaz, CPA leads the cannabis vertical at High Rock Accounting, where she and her team help operators navigate 280E, entity structuring, and fractional CFO strategy in one of the most complex regulatory environments in business. Cannabis is complicated. 280E is worse. You don’t have to figure it out alone.
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