Rhode Island Cannabis Industry Awaits Potential Rescheduling Impact Amid Federal Considerations
Implications of Rescheduling Cannabis: Rhode Island Businesses on the Edge of Change.
For the 10 years the Thomas C. Slater Compassion Center has operated, it, like other marijuana dispensaries, has confronted a significant economic challenge: the federal government considers cannabis on par with society’s most dangerous drugs.
Being classified as a “Schedule 1” substance – in the same category as heroin and LSD – has meant dispensaries are prohibited from taking ordinary business tax deductions. And most banks have been unwilling to do business with dispensaries, afraid they'll be charged with illicit drug activity.
But now the Justice Department is considering reclassifying marijuana as a “Schedule 3” drug, a category shared by less-dangerous drugs like Tylenol with codeine, although marijuana would remain illegal on the federal level.
How would rescheduling cannabis affect Rhode Island businesses?
A rescheduling would provide dispensaries federal tax relief and affirm to the wider public that the product they sell indeed has medicinal benefits, says Chris Reilly, a Slater spokesman.
“It’s a great development,” he said. “We've known for a while at the Slater center that patients have gotten a medical benefit from the use of cannabis for a whole host of conditions. Now with a move to Schedule 3, the government could allow for actual research to take place to affirm things we’ve known for a long time.”
And then there is the business component.
“Businesses in this space face an effective tax rate that could be 50% or more because you’re not able to take regular deductions that any other business can," Reilly said – deductions for such expenses as rent, utilities and employee salaries.
“When you move to Schedule 3, that goes away, so there’s a potential for relief for operators in this space all across the country.”
(Rhode Island marijuana businesses could see some tax relief under Gov. Dan McKee’s proposed budget. It would allow them to deduct ordinary business expenses for state tax purposes beginning next year, as some other states allow. The proposal is estimated to save those businesses in total about $825,000.)
How close is the change?
The proposal by the Justice Department, reported last week, would take months to finalize and include a period of public comment. But it follows a similar recommendation last August by the U.S. Department of Health and Human Services that marijuana be rescheduled.
More:Cannabis programs are growing in RI schools – but when it comes to internships there's a catch
President Biden asked both health and drug enforcement agencies last year to review their stand on marijuana.
The Justice Department's announcement was criticized by Smart Approaches to Marijuana, a national group opposed to cannabis legalization.
“The [Biden] administration's effort to push through this action in an election year could be perceived as a thinly veiled attempt to reverse polling trends with the principal targets of the pot industry, namely young people,” said Kevin Sabet, the group’s president, in a statement.
According to a Gallup poll taken last November, 70% of Americans now favor legalizing marijuana, up from 50% in 2013.
Thirty-eight states now have medical-marijuana programs, of which two dozen states, including Rhode Island, have also legalized the drug for recreational use.
Another benefit: More clinical studies on marijuana
Kim Ahern, chair of Rhode Island’s Cannabis Control Commission, said a rescheduling of marijuana would be a federal acknowledgement of what marijuana patients have known for years: it has some medicinal value.
Said Ahern: “If you talk to medical patients battling Parkinson's, or MS or even like the side effects of dealing with cancer drugs, this is welcomed news.”
Because marijuana has been federally listed an illicit Schedule 1 substance since 1970, U.S. medical institutions have shied away from clinical studies on the drug.
Reclassifying the drug to Schedule 3 could open doors to more needed research, said Ahern.
“One thing that I've found just in the limited time I’ve been here: so many different entities across the state would like to be engaging in some version of researching this.”
Ahern saw a cannabis presentation last fall by an educator at the University of Rhode Island, which offers a minor degree in the pharmacological aspects of cannabis.
“What I took away from it is just how far advanced other countries are in terms of their [cannabis] research, in particular around things that affect so many individuals, like chemotherapy drugs, chronic pain drugs, epilepsy, dementia, anxiety, cancer, glaucoma, MS.”
'A slow change in the right direction'
Magnus Thorsson and Michael Budziszek co-direct Johnson & Wales University’s cannabis-entrepreneur degree program. They said rescheduling marijuana has the potential to widen people’s acceptance of marijuana in general.
“People are going to be viewing it more openly as medicine,” said Thorsson. “People are going to be willing to look at it as a sleep aid, as a mental lift if you will and pain medication.”
But any rescheduling would not bring about any immediate change in the classroom, they said, such as adding internships at cannabis businesses – a practice local college have been leery of implementing for fear of jeopardizing federal funding.
Because marijuana would still be illegal even if rescheduled, said Budziszek, “it’s still illegal to talk about marijuana in the classroom, because again you are perpetuating an illegal industry. So, we are still navigating the legalese within the classroom."
But rescheduling marijuana, he said, would be “a slow change in the right direction.”
