Marijuana business owners hoping to benefit from the Biden administration’s decision to reschedule the drug may be disappointed, according to experts.
The administration announced plans Thursday to move forward with a rule that would reclassify marijuana to Schedule III of Schedule I of the Controlled Substances Act (CSA).
Under the US tax code, no company dealing in a Schedule I or Schedule II substance is permitted to take any deductions or add any credits to your annual federal taxes. This will change when marijuana becomes a Schedule III drug.
Those in the marijuana space recognize that being able to deduct expenses from taxes will be helpful, with Washington, D.C.-based cannabis dispensary Green Theory calling the decision a “step in the right direction.”
But experts like Robert Mikos, the LaRoche Family Law Professor at Vanderbilt University, don’t expect an advantage for marijuana entrepreneurs.
“This will have some impact. I think the reason why the impact will not be as large as many people would predict is twofold,” Mikos said.
“One is that this drug will still be regulated under the Controlled Substances Act. And these regulations will be very difficult for companies currently operating in the sector to comply with,” he added.
The other issue Mikos sees is that marijuana is dually regulated under the Food Drug and Cosmetic Act, which prohibits all sales of unapproved drugs like marijuana, even when it is rescheduled to a less severe classification.
“It will not be approved by the [Food and Drug Administration] and this approval is still a long way off. So everything these companies do now, you know, all the sales they make will remain illegal. And for that reason, I believe they will still have difficulties obtaining banking services.”
Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws, criticized the rescheduling measure as not going far enough. But he said the question of how companies will benefit is unclear as the change in marijuana designation takes the country into “uncharted territory.”
“The reality is that none of us know, and most likely, these policies and regulations will continue to evolve after the fact,” Armentano said.
“We have never had a situation where a substance was moved from one CSA schedule to another before that substance went through a traditional FDA market approval process and had that substance approved.”
Although the patchwork of state laws legalizing marijuana has allowed for a strong industry to grow, cannabis companies face obstacles that others do not. Armentano cited the inability to access credit, as well as the exclusion of cannabis entrepreneurs from bankruptcy protections, as “problematic” issues that still need to be addressed.
“This is obviously a necessary protection, especially when we are talking about an industry as volatile as this. There is no access to small business loans right now,” he said. “I think the general theme would be: We want to see the marijuana industry, which currently employs more than 425,000 full-time workers, simply be treated the same way we treat other legal industries in this country.”
A reduced tax burden could help cannabis companies reduce the costs of doing business and pass those savings on to their customers, which in turn could result in higher traffic.
“We are pleased with the potential elimination of the 280E tax burden – the elimination of which we see as a way to create a fairer environment for small cannabis businesses to reinvest not only in their businesses, but also in surrounding communities, without the financial limitations of this tax ,” Green Theory said in a statement to The Hill.
“We believe more needs to be done in this space to continue to create fair opportunities for those who are negatively impacted by harsh drug laws, and we hope to see continued work from the administration in the future.”
Both Mikos and Armentano said that actions beyond the White House’s decision to reschedule will need to come from Congress.
“This is all Congress’s fault,” Mikos said. “If anyone wants to point the finger at anyone about why we have the strange federal marijuana policy we have today, that’s almost entirely the responsibility of Congress.”
Senate Majority Leader Chuck Schumer (DN.Y.) reintroduced legislation this month to remove marijuana from the CSA entirely.
“Reclassifying cannabis is a necessary and long-awaited step – but it is by no means the end of the story. It’s time for Congress to wake up to the times and do its part by passing the cannabis reform that most Americans have long called for. It’s past time for Congress to follow public opinion and follow the science,” said Schumer.
This story originally appeared on thehill.com read the full story
