For years, 280E has been the biggest drain on cannabis cash flow: tax calculated as if half your expenses didn’t exist, paid with very real dollars.
In April 2026, that changed for medical operators. Here’s what moved, what didn’t, and what I’d do with your books now.
What happened
In late April 2026, the Department of Justice moved state-licensed medical cannabis (and FDA-approved cannabis drugs) from Schedule I to Schedule III. Adult-use stayed in Schedule I. The DEA proceeding to reschedule all cannabis was paused on September 29, 2026, with no date for a final rule.
Why it matters
280E blocks ordinary business deductions for Schedule I and II businesses. You could subtract cost of goods sold, but not wages, marketing, rent or admin. Schedule III isn’t covered by 280E, so medical operators get those deductions back for activity after the rule took effect. Less tax owed means more cash kept.
Who wins, who waits
- Medical operators: ordinary deductions are back, and your estimated payments may now be too high.
- Adult-use operators: 280E still applies. Nothing changed yet.
- Mixed operators: only the medical side moved. You’ll need to show which costs belong where.
What about past years?
The rule doesn’t reopen prior years or authorize refunds. Treasury has been encouraged to consider relief for earlier years, but nothing has been announced. Ask your tax adviser about protective claims, and don’t release tax reserves on a hunch.
What I’d do now
- Split your books. Set up medical, adult-use and shared cost centers (classes or locations in QuickBooks) and code every transaction that way starting now.
- Decide how shared costs get divided. Square footage, hours or sales mix. Document it and use it consistently.
- Re-run your cash forecast and estimated taxes before the January 15, 2027 payment.
- Mark the effective date. Keep transactions before and after the rule clearly separated in your books.
The CFO take
280E relief is real cash, but only for operators whose books can prove which dollars were medical. If your cost centers don’t exist yet, that’s the first project.
Want a second set of eyes? Get in touch. Cannabis books are my favorite kind of mess.
General information as of November 2026, not tax or legal advice. Rescheduling rules are still changing; talk with a qualified adviser before changing a tax position.
Sources: Foley Hoag; Uniqus; Morgan Lewis.
