The federal government has taken a meaningful first step on cannabis rescheduling, but it is important not to overread what has happened. On April 23, 2026, the Department of Justice (DOJ) announced an order that immediately places two categories in Schedule III: FDA-approved products containing marijuana and marijuana products regulated by a qualifying state medical marijuana license. At the same time, DOJ and Drug Enforcement Administration (DEA) launched a new administrative hearing process, beginning June 29, 2026, to consider the broader rescheduling of marijuana from Schedule I to Schedule III, with the hearing scheduled to conclude no later than July 15, 2026.
For cannabis operators, the obvious question is whether this means Internal Revenue Code (IRC) Section 280E is finally gone. Not yet. The immediate relief is limited. The current federal action is focused on FDA-approved products and businesses operating under a qualifying state medical marijuana license. Furthermore, whether retroactive IRC 280E relief will be available to qualifying operators remains undecided.
The broader industry-wide rescheduling process is still underway, and the hearing notice makes clear that the June–July process is what will address the broader proposed move into Schedule III.
Why IRC 280E Still Matters for Most Cannabis Businesses
IRC Section 280E disallows deductions and credits for businesses trafficking in Schedule I or II controlled substances. That is why rescheduling matters so much from a tax perspective. If cannabis is no longer treated as a Schedule I substance for a particular business or product, the IRC 280E limitation may no longer apply in the same way. But the current change is not industry-wide. For now, IRC 280E should still be assumed to apply to most cannabis businesses unless they clearly fall within the limited categories the DOJ has already addressed.
It is essential to understand this is phase one, and more may be coming, but this is not a blanket repeal of IRC 280E for the entire cannabis industry. Businesses that are adult-use only, or that are not clearly operating under a qualifying state medical marijuana license, should not assume immediate federal tax relief based on this announcement alone.
Is Retroactive IRC 280E Relief Available?
Currently, the answer is no, but the Trump administration has indicated a willingness to at least explore the option. The rescheduling order, signed by acting Attorney General Todd Blanche, “encourages” the treasury secretary “to consider providing retrospective relief from Section 280E liability for taxable years in which a state licensee operated under a state medical marijuana license.”
If retroactive relief is offered, the process for accessing that relief may involve filing amended returns, requesting a refund, or another process yet to be determined.
What Cannabis Businesses Should Do Now
1. Do Not Assume Immediate Relief
For most businesses, the right working assumption is that IRC 280E still applies for now. This is especially true for adult-use operators and mixed operators whose activities are not cleanly separated. Jumping to aggressive tax positions too early could create risk that is difficult to unwind later.
2. Review Your Licensing and Entity Structure
Businesses should identify which legal entities, licenses, and revenue streams may fall under a qualifying state medical marijuana license. If the current federal relief is limited by license type or business activity, clear mapping becomes important.
3. Separate Medical and Non-Medical Activity
Operators with both medical and adult-use operations should review whether their books and records clearly distinguish between the two. If broader tax relief is tied first to medical activity, documentation and expense allocation may become even more important.
4. Model the Tax Impact Before Changing Positions
This is a good time to model what federal taxable income could look like if IRC280E relief becomes available for part or all of the business. That analysis can help management plan cash flow, estimate tax savings, and evaluate whether any restructuring or cleanup should happen now.
5. Be Prepared, But Be Patient
The best advice for most clients is not to rush. It is to prepare. Get organized, preserve documentation, and be ready for the next round of guidance.
Our Recommendation for Clients
This is encouraging news, and it is the strongest federal signal yet that the tax burden created by IRC 280E may eventually ease. But it is not fully implemented, and it does not yet apply across the board. For now, IRC 280E will still apply to most cannabis businesses. The smart move is to stay disciplined, avoid overreaching, and use this period to prepare for what may come next.
The Aura Advisors team will continue monitoring DOJ, DEA, and related tax developments closely. As the broader rescheduling process unfolds, the planning opportunities may become clearer. Until then, businesses should treat this as an important first phase, not the end of the story.
If you need help determining whether the order affects your operation, please reach out to our team.
For more reading:
- The Financial Implications of Cannabis Rescheduling: What Operators Should Know
- Cannabis Business Tax Compliance: Avoiding 280E Pitfalls at Year-End
- Important Tax Filing Deadlines for 2026
Aura Advisors is a boutique tax consulting and compliance firm working with start-ups, emerging growth companies, and affluent individuals. Making it safer for good people and good companies to continue to do good things.