AICPA Calls for IRS Guidance on Cannabis Tax Policy Amid Potential Rescheduling

LOS ANGELES- The American Institute of Certified Public Accountants (AICPA) is calling on the IRS and Treasury Department to provide updated guidance on tax policy for cannabis businesses in light of a potential rescheduling of cannabis to a Schedule III substance. This change would relieve these businesses from the restrictions of Section 280E of the tax code, which currently prevents them from taking standard business deductions. If rescheduled, cannabis businesses could deduct ordinary expenses, significantly lowering their effective tax rates, which are currently among the highest for U.S. industries.

The AICPA recommends that any deductions be allowed for the full tax year in which the rescheduling takes effect to prevent mid-year accounting complexities. Additionally, they have requested clear guidance on transitional tax issues, such as handling prior non-deductible expenses and accounting method adjustments, as well as the establishment of a voluntary disclosure program for companies that may have misapplied Section 280E in the past. Given the recent Supreme Court decision affecting the IRS’s interpretative authority, the AICPA emphasizes that clear federal guidance is essential for ensuring compliance as the industry undergoes this significant shift​