The average American’s attitude toward cannabis has shifted to a more favorable one over the years. Now, the federal government’s stance is reflecting that change, with plans to reclassify the plant from the most strictly controlled substance like heroin, to a less restrictive classification, alongside less dangerous drugs like Tylenol with codeine.
It matters because it’s the first time Drug Enforcement Administration and the Department of Health and Human Services have agreed that cannabis has potential medical benefits, and is less likely to have the potential for abuse. That could go a long way toward lowering the stakes on the stigma around the drug, has implications for cannabis research and opens up avenues of financial relief for cannabis businesses in New York.
Rescheduling pot won’t make it legal on the federal level. And it won’t be a game changer for New York cannabis businesses, since the state’s legal market is already open. But it will open the door to significant benefits for New York’s cannabis businesses, which have been operating under tighter rules and financial restrictions than most firms do.
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“It’s a positive step forward,” said Chris Alexander, executive director of the New York State Office of Cannabis Management.
But there is a lot of confusion about what rescheduling cannabis means – and what it doesn’t.
And though it’s too early to tell exactly what ripple effects rescheduling might have, here are some ways the rescheduling of cannabis could change things.
Cannabis consultant Anna DiNoto works the counter at Honey, a new licensed cannabis dispensary on Delaware Avenue in Kenmore.
How will it change business for New York State-licensed dispensaries? Rescheduling is expected to have a huge impact on people in the cannabis business, because it would free them from a dreaded section of the Internal Revenue Code called 280E. That section forbids businesses from deducting otherwise ordinary business expenses related to the trafficking of Schedule I or II substances – even if those substances are legal in the state where they do business, as they are in New York.
“Typically, being unable to actually deduct things like rent and utilities and other kinds of normal costs of running a business operation or running a retail operation, they’re subject to a tax rate that is significantly more substantial than any other industry that we deal with on a regular basis,” said Mitzi Keating, a CPA and partner at accounting firm Citrin Cooperman in a forum held by cannabis law firm Vicente LLP.
Getting cannabis out of the more restrictive Schedule I classification also would allow cannabis businesses to benefit from federal tax credits that are open to other businesses, such as the Research and Development Credit and the Work Opportunity Credit.
Cannabis businesses would also be able to take advantage of deductions, such as the Bonus Depreciation deduction, and other helpful measures like Accelerated Depreciation, Keating said – all ways to help businesses save money.
“It’s going to spur an investment in fixed assets, and [allow] our manufacturers and our cultivators to be able to actually look at their business through the lens of tax planning. [It] will certainly be a significant savings to these clients as they move forward in a world where they’re not subject to these onerous tax obligations,” she said.
Does this mean cannabis will be federally legalized for recreational use? Rescheduling cannabis alone won’t make it legal. After all, you can’t walk into stores and buy other Schedule III drugs like anabolic steroids or ketamine. Rescheduling keeps people who grow, buy and sell cannabis open to federal prosecution.
That has led many to say rescheduling doesn’t go far enough – and have called for cannabis to be descheduled altogether. Moving pot to Schedule III keeps New York State’s adult-use dispensaries operating outside federal law, even if federal drug enforcement has largely left states that have legalized cannabis alone.
“Reclassifying cannabis is a necessary and long overdue step – but it is not at all the end of the story. It’s time for Congress to wake up to the times and do its part by passing the cannabis reform that most Americans have long called for. It’s past time for Congress to catch up with public opinion and to catch up with the science,” Senate Majority Leader Chuck Schumer said on the Senate floor earlier this month.
Schumer took the opportunity to reintroduce the Cannabis Administration and Opportunity Act, which would decriminalize cannabis, shifting federal oversight of the drug from the DEA to a federal alcohol and tobacco tax and trade bureau. It also would expunge the records of people with low-level cannabis offenses. The bill has 18 sponsors.
“We cannot tolerate any longer the tragedy of a young person getting arrested because they have a small amount of marijuana in their pocket,” Schumer said. “For years, that’s all it took – getting caught with a little bit of marijuana – for you to get saddled with a serious criminal record that prevented you from getting a good job, buying a good home, getting ahead in life.”
How will it affect research? Drugs on Schedule I, like heroin, are considered to have no accepted medical value and are subject to the most restrictions. That classification has long hampered universities and scientists in their efforts to research the plant, making it difficult to access cannabis or get funding for studies, and making it difficult or impossible to study the beneficial or harmful effects of cannabis on the human body.
Rescheduling cannabis will change that, making studies possible that have been out of reach, according to researchers at the University at Buffalo.
Rescheduling would make rigorous, randomized controlled studies possible, said Rebecca Ashare, an associate professor of psychology at UB’s College of Arts and Sciences. Researchers also have had to rely on cannabis from the National Institute on Drug Abuse, which has much lower THC content than is typically available to the average user.
But rescheduling falls short of federal legalization, so there will still be some issues, said R. Lorraine Collins, director of UB’s Center for Cannabis and Cannabinoid Research. Experiments that require administering cannabis products to humans will be closely scrutinized, she said.
Has rescheduling already happened? Not yet, and it will likely take some time.
President Biden first called for a review of federal cannabis law in 2022. The same year, he issued a presidential proclamation that pardoned many federal and D.C. offenses for simple marijuana possession offenses, and urged state governors and local leaders to take similar measures.
The White House Office of Management and Budget still needs to sign off on the DEA’s proposal, recommended by the federal Health and Human Services department. Then there will be a public comment period.
“It’s going to take a while,” said Alexander at the OCM. “Everybody got all excited but it’s probably going to take like a year.”
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