Tax Analysts: “President Trump has signed an executive order intended to expedite the marijuana rescheduling effort, bringing cannabis businesses ever closer to being able to deduct their expenses.”

The executive order, signed December 18, directs the attorney general to act “in the most expeditious manner” to complete the rulemaking process related to the Justice Department’s proposed rule to move marijuana from Schedule I of the Controlled Substances Act to the less restrictive Schedule III.

Although the tax benefits of reclassification aren’t mentioned, the move is expected to result in big tax savings for cannabis businesses. That’s because they would no longer be subject to section 280E, which prohibits businesses trafficking in Schedule I substances from legally deducting their expenses.

Rescheduling was first proposed by the Drug Enforcement Administration in May 2024 under President Biden. The proposal received more than 40,000 public comments, with many of those expressing support for the change by highlighting the tax benefits of rescheduling.

Some commentators have also called for even greater retroactive tax relief for businesses that have been subject to the provision. Following the rescheduling proposal last year, the IRS said that some cannabis-related businesses had already filed amended returns seeking to claim refunds for prior tax years, and it warned against doing so.