President Trump issued an Executive Order directing the Attorney General to take all necessary steps to complete the rulemaking process related to rescheduling cannabis from a Schedule I drug to a Schedule III drug under the Controlled Substances Act (CSA).
Rescheduling cannabis as a Schedule III drug is significant for taxpayers involved in the cannabis industry because under IRC §280E businesses trafficking in Schedule I or II drugs under the CSA cannot claim any business-related deductions or credits, except cost of goods sold.
It’s important to recognize that the Executive Order does not, in and of itself, reclassify cannabis as a Schedule III drug. The Attorney General’s office must issue regulations to complete the reclassification process, which likely wouldn’t happen until sometime during the 2026 calendar year.
Despite reclassification as a Schedule III drug, cannabis would remain illegal at the federal level, so it’s unlikely that the reclassification would open up more banking opportunities to cannabis businesses.
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