Marijuana rescheduling would be ‘life-changing event’ for Cannabis companies
The rescheduling of marijuana from a Schedule I to Schedule III drug in the United States would be transformative for the cannabis sector, CEOs of leading cannabis companies believe.
Last week, the Department of Health and Human Services (HHS) made a recommendation to the Drug Enforcement Administration (DEA) to re-classify marijuana as a lower-risk drug.
While the DEA is yet to make a final decision on the recommendation, having initiated a review of the drug, the possibility of rescheduling has been welcomed by cannabis sector leaders and investors alike.
The removal of Section 280E of the Internal Revenue Code, a tax code that applies to Schedule I and Schedule II substances barring companies using these substances from deducting standard business expenses in their federal tax filings, for cannabis companies would be a “life-changing event” according to Larry Scheffler, CEO of Las Vegas-based cannabis retailer Planet 13 Holdings Inc (CSE:PLTH, OTCQX:PLNHF).
“It’s such a drastic penalty of 20% to 21% tax with 280E in place, which for many non-cannabis companies, it’s really what a company lives on; they are making a profit margin of 20% to 25%,” Scheffler said, as reported by Cannabis Business Times.
“It will literally be life-saving for many cannabis companies that are on life support … from their lips to God’s ears, we’ve been waiting for this a long time.”
The CEO of multi-state operator Curaleaf Hldgs Inc. (CSE:CURA, OTCQX:CURLF) Matt Darin also pointed to the removal of the “draconian” 280E for cannabis companies as significant, noting that for some it results in an effective tax rate of 70%, “higher than any other industry in America.”
“This is a historic moment for the industry and for cannabis reform… from a financial standpoint [and] research,” he told BNN Bloomberg in an interview.
Verano Holdings Corp (CSE:VRNO, OTCQX:VRNOF) CEO George Archos told Benzinga that the HHS recommendation to the DEA was “a big positive step forward for all of us” and “could mean big things for the entire industry.”
“I think you would see a healthier cannabis industry a year from now,” Cresco Labs Inc. (CSE:CL, OTCQX:CRLBF) CEO Charlie Bachtell said, per a Politico report.
The rescheduling of marijuana will also create opportunities for medical marijuana research and will signal to the criminal justice system that marijuana use should not be a high priority for law enforcement, Ayr Wellness Inc. (CSE:AYR.A, OTCQX:AYRWF) CEO David Goubert told Forbes.
