After the spring announcement that the U.S. Drug Enforcement Administration (DEA) was to ease restrictions on marijuana, implications of the decision began sprouting among accounting and finance practitioners.
Marijuana will remain a controlled substance, but the reclassification will shift the accounting and financial landscape. There are complex interactions with industry dynamics, taxation policies, and legislative efforts — a change in one affects another — and accounting and finance professionals will need a keen understanding of the whole picture.
The U.S. cannabis industry is in continual flux, and the potential reclassification of marijuana is just one of the many pertinent topics that will be explored at the upcoming AICPA® & CIMA® Cannabis Industry Conference.
“Nowhere else will you hear from accounting and legal experts on topics that are relevant to such a nascent industry as it relates to the accounting profession,” said Mitzi Keating, CPA, founder and partner at Cannabis Advisory Services and the conference’s co-chair. “The conference is unique in the fact that it reflects the industry — ever-changing, ever-challenging, and always fascinating.”
Outcomes and opportunities after rescheduling
If you have cannabis-industry clients, you’re already navigating uneven and conflicting state and federal laws around marijuana, on top of compliance with Internal Revenue Code Section 280E.
Should cannabis be rescheduled to a Schedule III substance, state-legal cannabis businesses will have to change how they pay federal income taxes, and your clients will likely need assistance understanding the new tax structure. And Section 280E would no longer apply.
In addition to changes in taxation policies, the rescheduling could shift investment trends, mergers and acquisitions, and capital deployment strategies. And it’s unknown to what extent the federal reclassification will change federal regulations — you may still need to maneuver the patchwork of state legalization.
Scott Greiper, president at Viridian Capital Advisors, along with industry experts Rachel Gillette, J.D., partner at Holland & Hart, and Aaron Smith, co-founder and CEO of the National Cannabis Industry Association, will be addressing how practitioners can navigate the potential impacts of cannabis rescheduling in their conference keynote address.
The rescheduling could also be a catalyst in an already rapidly expanding industry — before the news of the rescheduling, the U.S. cannabis market was projected to grow to $50.7 billion by 2028, according to cannabis researcher Brightfield Group. This presents additional opportunities for you to onboard and advise new-to-the-industry clients, including how forensic accountants can apply their expertise.
Proposed shift acknowledges medical uses
Marijuana was classified as a Schedule I substance under the Controlled Substances Act of 1970, when it was considered to have no medical uses and a high potential for abuse. Nearly 55 years later, public perception has changed, and research has shown that medical cannabis can be useful in treatments for chronic pain, epilepsy, anxiety, cancer, glaucoma, and more.
The proposed shift to classify marijuana as a Schedule III substance acknowledges the plant’s medical uses and that it has less potentiality for abuse compared to more dangerous drugs. Other Schedule III drugs include ketamine and anabolic steroids, and this move does not federally legalize recreational cannabis use.
Despite its original Schedule I classification, 13 states and the District of Columbia have legalized marijuana, and several more states could follow suit after the 2024 November election.
Once the public comment period closes on July 22, there will be a review by an administrative judge, and the DEA will publish a final rule. Thirty days after the rule’s posting, the rescheduling will take effect.
Prepare for all scenarios and outcomes
While the rescheduling and final rule have not yet taken effect, it’s important to prepare now for how you and your clients can navigate potential outcomes of the DEA’s final rule. The rescheduling will likely affect tax reform, banking access, and regulatory frameworks.
“The AICPA supports practitioners in this emerging industry by assembling the premier thought leaders into a comprehensive, interactive conference,” said Kathryn Maxson-Landis, CPA, director at Citrin Cooperman® and the conference’s co-chair. “With many federal and state changes in the works for 2024, this conference is where you get the most up-to-date information possible from the professionals that are guiding the industry forward on solid, sensible accounting and legal footing.”
The AICPA & CIMA Cannabis Industry Conference (Aug. 12–14) is the place for accounting and finance professionals to connect with industry experts and emerging trends in the rapidly expanding cannabis industry. Learn more about virtual and in-person options. The three-day conference kicks off on Monday, Aug. 12, at Gaylord Rockies Resort & Convention Center in Aurora, Colorado.