A new congressional report reveals the brutal tax burden crushing legal marijuana companies while the White House and Justice Department stay silent on rescheduling.
WASHINGTON – President Donald Trump signed an executive order on December 18 that told Attorney General Pamela Bondi to speed up moving cannabis from Schedule I to Schedule III. Almost two months later, cannabis businesses still wait for any sign of progress while they bleed money under a federal tax rule that treats them like drug traffickers.
Section 280E Hits Harder Than Any Street Dealer
The Internal Revenue Code Section 280E blocks state-legal marijuana companies from deducting normal business expenses. They pay taxes on gross income, not profit. Most American businesses deduct rent, salaries, and utilities. Cannabis companies cannot.
Effective tax rates for many licensed operators now top 70 percent, far higher than almost any other industry in the country.
A dispensary owner in California told reporters last year that he paid more in federal taxes than he kept for himself. The new Congressional Research Service report released February 6 confirms that reality still stands.
Eighth Amendment Question Gains Steam
Lawyers for cannabis companies now argue that Section 280E amounts to an excessive fine banned by the Eighth Amendment. The CRS report calls this “a matter of debate” but lays out the core arguments on both sides.
Courts have split. The Tenth Circuit rejected the claim in 2022. Companies in other regions keep fighting. The Supreme Court has not taken up the issue yet.
Trump Order Promised Fast Action
The December 18 executive order carried strong language. It directed Bondi to “expedite” the rescheduling process and report back within weeks. No public update has come from the Justice Department or the White House.
As of day 59, cannabis remains Schedule I alongside heroin and LSD, with “no currently accepted medical use and a high potential for abuse” under federal law.
Industry leaders express growing frustration. “We celebrated the order in December,” said the head of a multistate operator. “Now we just watch another month of crushing tax bills roll in.”
What Schedule III Would Actually Change
Rescheduling to Schedule III would end Section 280E overnight. Companies could deduct ordinary expenses like every other business. Analysts estimate the move would save the industry hundreds of millions of dollars each year.
| Current Schedule I | Proposed Schedule III |
|---|---|
| No medical use recognized | Accepted medical use |
| High abuse potential | Moderate to low abuse potential |
| Section 280E applies | Section 280E gone |
| Effective tax rates 60-80% | Normal corporate rates |
State governments already collected more than $20 billion in cannabis taxes since 2014. Federal relief remains the missing piece for operators to grow, hire, and compete fairly.
Silence From the Top
Attorney General Bondi has made no public statements about the rescheduling timeline. The Drug Enforcement Administration, which handles the final rule, also stays quiet.
White House press secretaries dodge questions on the topic. One industry lobbyist called the lack of movement “deafening.”
Legal cannabis now supports more than 440,000 full-time jobs across the country. Every week of delay costs those workers and business owners real money.
The fight over Section 280E and rescheduling shows the strange gap between state reality and federal law. Thirty-eight states plus Washington, D.C., allow medical marijuana. Twenty-four states plus D.C. permit adult recreational use. Yet the federal government still classifies cannabis as more dangerous than fentanyl or cocaine.
Until the schedule changes or Congress acts, licensed businesses keep writing massive checks to the IRS while illegal dealers pay nothing.
That harsh truth hangs over an industry that patients, veterans, and millions of everyday Americans rely on every single day. The President ordered change 59 days ago. The cannabis world is still waiting.
Maria Garcia is an award-winning author who excels in creating engaging cannabis-centric articles that captivate audiences. Her versatile writing style allows her to cover a wide range of topics within the cannabis space, from advocacy and social justice to product reviews and lifestyle features. Maria’s dedication to promoting education and awareness about cannabis shines through in her thoughtfully curated content that resonates with both seasoned enthusiasts and newcomers alike.
