Breaking: US Health Officials Recommend Rescheduling Cannabis to Schedule III
The US Department of Health and Human Services (HHS) has recommended that cannabis be moved from a Schedule I to Schedule III substance under federal law.
What does this mean?
Schedule I substances are categorized as drugs with high levels of abuse potential and no medical value, while Schedule III substances are considered to have ‘moderate to low potential for physical and psychological dependence,’ as well as currently allowed for medical use in the US. The decision to reschedule now goes to the DEA, which has the final authority to schedule or reschedule a drug under the Controlled Substances Act.
If rescheduled per the recommendation from HHS, cannabis would be significantly easier to access for medicinal and pharmaceutical research purposes and allow for tax break opportunities that cannabis businesses cannot currently access.
Why the Schedule III Change Would Have Huge Tax Relief Implications
In 1981, a man in Minneapolis won a lawsuit against the IRS to write off $100,000 in business expenses on his 1974 tax return related to his illicit sales of amphetamines, cocaine, and marijuana.
Congress responded in 1982 by passing tax code 280e, which banned businesses that trafficked Schedule I or Schedule II substances from taking business expenses besides the cost of goods sold.
Because the federal government still considers cannabis a Schedule I substance, tax code 280e remains applicable to legitimate cannabis businesses. A white paper from the National Cannabis Industry Association notes a 40% difference in tax rate between cannabis and non-cannabis businesses that make the same gross revenue.
Moving cannabis into the Schedule III classification would be a massive tax relief to the US cannabis industry, allowing for more cannabis businesses to grow and expand.
What Rescheduling Cannabis Would Not Do
While rescheduling cannabis to a classification that allows cannabis businesses to process taxes like a typical US business, rescheduling it will not affect its standing as a federally illegal substance. The legal status and regulation of cannabis will remain at the states' discretion. FDIC-insured banks will still be unable to legally work with cannabis operations, which means cannabis still faces significant hurdles with doing everyday things like payment processing, payroll, and incoming cash.
Why Now Is a Great Time to Invest in Cannabis
Rescheduling cannabis to Schedule III will still result in much higher net profits and the undoubted expansion of the industry. This recommendation from the US Department of Health and Human Services is a significant step forward for cannabis in the US.
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