Five weeks after the IRS and Treasury Department announced plans to issue guidance on Section 280E tax relief for state-licensed medical cannabis businesses, seven House Democrats are publicly pushing the agencies to act. In a May 28 letter to IRS CEO Frank Bisignano and Treasury Secretary Scott Bessent, the lawmakers - led by Reps. Steven Horsford of Nevada and Steve Cohen of Tennessee - called for prompt, unambiguous guidance and asked the agencies to coordinate with the Small Business Administration and other federal partners to ensure the information reaches the businesses that need it.
Why the Urgency, and Why Now
The clock on 280E relief started ticking in earnest on April 22, when Acting Attorney General Todd Blanche signed an order to immediately reschedule state-licensed medical cannabis from Schedule I to Schedule III under the Controlled Substances Act. That rescheduling matters enormously for licensed cannabis operators because Section 280E of the Internal Revenue Code prohibits businesses that "traffic" in Schedule I or II controlled substances from deducting ordinary and necessary business expenses - payroll, rent, utilities, insurance, marketing - that any conventional retailer or manufacturer can write off without question.
The day after Blanche's order, Treasury and the IRS confirmed that guidance was forthcoming. That announcement also included a notable signal: the agencies said they expected to clarify how, for businesses with multiple activities, 280E would apply only to the portion of a business tied to Schedule I or II trafficking - not to state-licensed medical cannabis operations newly sitting under Schedule III. For most operators, that means apportioning costs. What percentage of the monthly rent is attributable to the medical cannabis side of the business? How do you allocate payroll when a cultivation worker handles both medical and adult-use plants under the same roof? Those are not rhetorical questions - they're live accounting problems that dispensaries and their CPAs are trying to resolve right now, without formal IRS direction.
The Dual-License Problem Is Real and Complicated
The lawmakers' letter specifically identifies two scenarios that require guidance - and both reflect the operational reality of how many cannabis licenses are actually structured in the states that have legalized both medical and adult-use cannabis.
- A single dispensary license that permits the sale of both adult-use and medical cannabis from one storefront
- Separate state-issued licenses for adult-use and medical operations - sometimes held by the same company under the same roof, sometimes across different locations
Here's the catch: the federal tax treatment of these two structures isn't identical, and the distinction matters. A vertically integrated multi-state operator running separate license types across cultivation, manufacturing, and retail - each with distinct SKUs, inventory tracking obligations, and cost allocations - faces a more layered apportionment challenge than a single-license dispensary that sells primarily medical cannabis. Without clear IRS guidance, tax professionals are making judgment calls that could expose their clients to disputes, penalties, or disallowed deductions later. The lawmakers put it plainly in their letter: absent guidance, taxpayers remain uncertain whether they can access ordinary business deductions or even specific tax credits.
Retroactive Relief and the Statute of Limitations Window
Blanche's April order included a recommendation directed at Treasury Secretary Bessent - that the agency "consider providing retrospective relief from Section 280E liability" for taxable years in which a state licensee operated under a valid medical cannabis license. Treasury hasn't committed to that. But the question of retroactive relief is not merely a policy debate; it carries a hard deadline for individual businesses.
Under standard IRS refund procedures, a business must file a refund claim within three years of when the return was filed, or two years from the date the tax was paid - whichever period expires later. Miss that window without having filed a protective claim, and the refund opportunity is gone, regardless of what guidance eventually says. For cannabis operators who've been absorbing inflated effective tax rates under 280E for years, that statute of limitations is a live operational risk, not an abstract legal footnote. Operators and their tax counsel should already be reviewing prior-year returns with this in mind, and confirming whether protective claims are warranted before any applicable deadlines pass.
Treasury and the IRS also indicated that any forthcoming guidance would include a transition rule allowing medical cannabis businesses to take permissible ordinary deductions for at least the full taxable year covered by Blanche's Schedule III order - a meaningful concession, even if it falls short of the broader retroactive relief some in the industry have sought.
What Operators Should Be Doing While They Wait
For dispensary owners and operators, the honest answer to "what do we do now" is: don't wait for federal guidance to begin the internal work. The apportionment framework that Treasury has signaled - separating Schedule III medical activity from adult-use operations for deduction purposes - will require documentation. That means reviewing how point-of-sale data is currently segmented by transaction type, ensuring that seed-to-sale tracking records cleanly distinguish medical cannabis inventory from adult-use inventory, and auditing how shared overhead costs (facilities, utilities, shared staff) are currently allocated in the books.
None of that work is wasted if guidance comes out differently than expected. If anything, it puts operators in a defensible position. A dispensary that can demonstrate a reasonable, documented methodology for cost apportionment - even before official IRS direction - is in a meaningfully better compliance posture than one that waited and improvised.
The lawmakers also pushed Treasury and the IRS to seek input from state cannabis regulators and industry participants before finalizing guidance - a request that, if taken seriously, could produce rules that actually reflect how licensed cannabis businesses are structured in practice. Whether the agencies move at a pace that matches the business urgency remains to be seen. But the letter from seven House members signals that congressional patience on this particular point is not unlimited.
