Treasury and the IRS just put guidance under Section 280E on their 2026 to 2027 Priority Guidance Plan, which means formal tax rules for cannabis businesses are coming within the year. This follows the federal move to reschedule marijuana and months of pressure from lawmakers on both sides. The signal is clear: the tax relief unlocked by rescheduling is real, and operators who prepare now will keep more of what they earn.
Why 280E Guidance Matters This Much
Section 280E has blocked cannabis businesses from taking ordinary deductions and credits available to every other industry, because it applies to Schedule I and II substances. Moving marijuana to Schedule III takes 280E off the table for qualifying businesses, which can be the difference between a profitable year and a brutal one. Formal guidance will spell out exactly how that works in practice, including how businesses that serve both medical and recreational markets apportion expenses between activities that still face 280E and activities that no longer do.
This is the other shoe dropping after the rescheduling fight I covered recently: the DEA judge paused the broader rescheduling case, but the tax machinery is moving anyway. Operators need to watch the court timeline and the tax timeline at the same time.
What the Priority List Actually Promises
The plan lists Guidance under Section 280E among 121 priority items for the fiscal year running October 1, 2026 through September 30, 2027. It does not set a deadline, so this is a commitment to act, not a delivery date. Still, it matters. The Priority Guidance Plan is how Treasury and the IRS tell the world where they are putting resources, and cannabis made the cut. Back in April, Treasury and the IRS said they expect rescheduling to have significant positive tax consequences for medical marijuana businesses, and that 280E would no longer bar deductions and credits for businesses no longer trafficking in Schedule I or II substances. This plan turns that statement into a work item.
How Operators Should Prepare
Do not wait for the guidance to land before getting your house in order. First, get your books segmented now: if you serve both medical and recreational markets, you will likely need to apportion expenses between the two, and clean records will make that far less painful. Second, talk to your tax counsel about the transition rule, which generally treats rescheduling as applying to the full taxable year that includes the effective date of the final order. Third, keep an eye on the retrospective relief question: the Attorney General encouraged Treasury to consider relief for past tax years, but nothing is decided. The operators who move first on clean accounting will capture the most value when the rules drop.
Frequently Asked Questions
- What is Section 280E? A part of the tax code that bars businesses trafficking in Schedule I or II controlled substances from claiming ordinary business deductions and credits. It has forced cannabis operators to pay tax on gross profit instead of net income.
- What did the IRS priority plan actually say? The 2026 to 2027 Priority Guidance Plan lists Guidance under Section 280E among 121 items Treasury and the IRS intend to address this fiscal year. It sets no deadline, but it makes cannabis tax clarity an official work item.
- Will the guidance help recreational businesses too? Not immediately across the board. State licensed medical marijuana moved to Schedule III first, while recreational products remain Schedule I pending the ongoing hearing process. Mixed businesses will likely need to apportion expenses.
- Can operators get retroactive 280E relief? Possibly, but it is not decided. The Attorney General encouraged Treasury to consider retrospective relief for years a licensee operated under a state medical license. For now, the announced transition rule applies rescheduling to the full taxable year that includes the effective date.
- What should operators do while waiting? Segment your books between medical and recreational activity, talk to tax counsel about the transition rule, and document everything. Clean records now mean faster savings later.