One of the points to take into account, especially for those involved in the business, is what they call “Cannabis Rescheduling”, which means that it has the possibility of becoming a Schedule III controlled substance as opposed to the current and stricter Schedule I, which includes drugs without medical use and with a high potential for abuse.
Last year, the U.S. Department of Health and Human Services (HHS), in response to a Biden administration investigation, recommended that cannabis be reclassified to Schedule III, great news for the industry and accountants because cannabis companies will no longer be subject to the tax provision of the tax code, which is IRC [Sec.] 280E.
It should be noted that the reclassification of cannabis to Schedule III does not resolve the conflict between state and federal law: it is not as if cannabis will be legalized at the federal level.
In addition, the SAFER Banking Act will allow cannabis companies to have more normal relationships with banks, and perhaps more entities will enter the industry.
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New and possible changes
This is a bill to decriminalize and declassify cannabis, and reinvest in people who have potentially been affected by drugs. It includes provisions to allow for expungement of criminal records and funding for certain community programs.
For those who have customers in the cannabis business, licensed businesses that are direct growers, manufacturers or sellers the substance, there are some potential changes that could occur.
Businesses are going to be able to take only ordinary and necessary business deductions like any other business, which is going to help them when it comes to their profitability.
On the other hand, with the Schedule III designation, states may think about regulating differently. Also, 280E may end up being replaced by another federal tax.