Accountants Group Urges IRS And Treasury To Update Marijuana Tax Guidance Ahead Of Federal Rescheduling

A national association of accountants is asking the Treasury Department and Internal Revenue Service (IRS) to issue updated guidance on federal tax policy for marijuana businesses as the administration’s rescheduling proposal moves through the process.

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The American Institute of Certified Public Accountants (AICPA) has urged the Treasury Department and IRS to update tax guidelines for marijuana businesses as federal rescheduling of cannabis moves forward. AICPA is seeking clarity on IRS code 280E, which currently prohibits marijuana companies from taking federal tax deductions while cannabis remains a Schedule I drug. With rescheduling to Schedule III potentially on the horizon, AICPA is advocating for guidance on how businesses should handle deductions and accounting if rescheduling occurs mid-year.

In a letter to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel, AICPA emphasized the need for clear rules, particularly to avoid confusion and compliance challenges. They requested that businesses be allowed to claim deductions for the full tax year if rescheduling happens at any point during the year, to ensure fairness and consistency. The organization also called for guidance on transitioning away from 280E, including treatment of prior expenditures and accounting changes.

AICPA further recommended that federal agencies issue guidance ensuring that all state-licensed cannabis businesses are treated equally under federal tax laws, regardless of differences in state regulations. Additionally, the group proposed a voluntary disclosure program for companies that claimed deductions prematurely, allowing them to correct any discrepancies without penalty.

The issue has gained urgency as IRS continues to enforce 280E and seeks to recoup deductions claimed before rescheduling is finalized. AICPA's recommendations come as the cannabis industry awaits the potential reclassification of marijuana, which could allow businesses to access the same tax benefits as other industries.