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Tax Implications of Reclassifying Cannabis From a Schedule I to a Schedule III Drug

A live 90-minute premium CLE/CPE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford CPE+ Pass. Click for more information.
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Tuesday, July 30, 2024 (in 12 days)

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

This CLE/CPE webinar will provide tax professionals guidance on key tax implications of rescheduling cannabis from a Schedule I to a Schedule III drug. The panel will discuss the recent move by the Department of Justice to reclassify cannabis as a less harmful Schedule III drug under the Controlled Substances Act, its impact on federal and state-level taxation, Section 280E, and tax planning methods and reporting requirements for cannabis businesses under current tax law.

Description

The sale and distribution of cannabis for recreational or medical use has become a powerful economic engine with 39 states and the District of Columbia having some form of legalization of the substance. However, the taxation of regulated marijuana businesses can result in hefty tax assessments and penalties under current tax law. Recently, the Department of Justice moved forward with the process of rescheduling cannabis from a Schedule I to a Schedule III drug under the Controlled Substances Act, which significantly impacts the taxation of the cannabis industry.

Cannabis businesses are accounting for and reporting the results of their operations with gross receipts, cost of goods sold (COGS), and other deductions just like other for-profit businesses. However, as long as marijuana remains a Schedule I controlled substance under federal law, these businesses must navigate the pitfalls of complex federal and state tax rules.

Currently, under Section 280E, marijuana businesses cannot deduct rent, wages, and other expenses unless it is for COGS, resulting in a substantially higher tax rate than other businesses on their income. This dilemma has been the subject of recent tax court cases and appeals. Tax counsel and advisers with current or potential clients engaged in any aspect of the cannabis industry must understand the impact of rescheduling cannabis to Schedule III, key tax savings opportunities, and planning techniques to minimize income taxes.

Listen as our panel discusses federal and select state tax rules impacting the cannabis industry, the process to reclassify cannabis as a less harmful Schedule III drug under the Controlled Substances Act, its impact on federal and state-level taxation, Section 280E, and tax planning methods and reporting requirements for cannabis business under current tax law.

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Outline

  1. Tax issues in operating a cannabis business under current tax law
  2. Section 280E: impact of rescheduling cannabis to Schedule III
  3. Impact on financing and raising capital
  4. Tax planning techniques to minimize tax liability under current tax law
  5. Impact of rescheduling cannabis to Schedule III on cannabis tax planning

Benefits

The panel will discuss these and other key issues:

  • Application of current tax rules to the cannabis industry and key planning techniques
  • Current effect of Section 280E and deduction of the COGS
  • What are the business and tax implications of rescheduling cannabis to Schedule III?
  • What's the process for cannabis to be rescheduled to Schedule III?
  • How would rescheduling affect state tax returns?
  • What happens to past taxes owed under current tax law?
  • What happens to pending court cases challenging the constitutionality of Section 280E?
  • What steps can cannabis businesses take in preparation for the new rules taking effect?

Faculty

Galyan, Ani
Ani Galyan, Esq, CPA, LL.M

Certified Tax Specialist
Galyan Law

Ms. Galyan is an attorney admitted to practice in California and is a Certified Tax Specialist.  She is...  |  Read More

Kalinski, Jonathan
Jonathan Kalinski

Principal
Hochman Salkin Toscher Perez

Mr. Kalinski specializes in both civil and criminal tax controversies as well as sensitive tax matters including...  |  Read More

Toscher, Steven
Steven (Steve) Toscher

Managing Principal
Hochman Salkin Toscher Perez

Mr. Toscher has been representing clients for more than 35 years before the Internal Revenue Service, the Tax Divisions...  |  Read More

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You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. CPE credit is not available on recordings. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

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