Lawmakers Press IRS for Cannabis Tax Clarity After Rescheduling

State-licensed medical cannabis businesses stand to claim deductions they’ve never had under federal law — standard write-offs for rent, payroll, and cost of goods that every other business takes for granted. The Justice Department’s rescheduling order this spring opened that door. What operators still lack is a tax rulebook explaining how to claim that relief.

Seven House Democrats are pressing the IRS to produce one. Led by Reps. Steven Horsford (D-NV) and Steve Cohen (D-TN), the group sent a letter on May 28, 2026, to Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano, urging “prompt guidance” on how federal tax rules now apply to cannabis businesses following rescheduling. Also signing: Reps. Betty McCollum (D-MN), Eleanor Holmes Norton (D-DC), Rashida Tlaib (D-MI), Jared Huffman (D-CA), and Jesús García (D-IL).

The backdrop is Acting Attorney General Todd Blanche’s April 23, 2026 rescheduling order, which placed state-licensed medical marijuana products in Schedule III, implementing President Trump’s December 2025 executive order on expanding cannabis research. That shift matters for taxes because the federal deduction ban — the provision that has blocked cannabis companies from writing off standard business costs for decades — no longer applies to businesses operating under a qualifying state medical license. Treasury and the IRS confirmed the same day they would issue formal guidance and that the change was expected to have “significant positive tax consequences” for the medical cannabis industry. More than five weeks on, that guidance still hasn’t been issued.

What the Guidance Needs to Resolve

The lawmakers’ letter identifies two business structures the IRS needs to address explicitly.

The first is the single-license operator: a business that holds one state-issued cannabis license covering both medical and adult-use sales under the same authorization. The second is the multi-license operator: a company that holds separate state licenses for each. In either case, the tax question is unsettled because adult-use products remain in Schedule I — the deduction ban still applies in full to that side of the business. How a mixed-activity operator separates expenses between the qualifying medical side and the still-restricted recreational side is a question Treasury and the IRS have acknowledged they will address, but haven’t yet explained.

California’s cannabis regulator didn’t wait for federal clarity. The Department of Cannabis Control issued emergency rules allowing licensees to split their licenses along medical and adult-use lines — creating a state-level mechanism for exactly the apportionment problem the federal guidance needs to resolve. Whether the IRS will accept California’s license splits as a clean dividing line for tax purposes is among the questions the agencies have yet to answer.

Timing is a separate issue. Treasury and the IRS have indicated that rescheduling will generally be considered to apply starting with the full tax year that includes the order’s effective date — meaning, for most businesses, the entire 2026 tax year. Blanche’s order also encouraged the Treasury to consider retroactive relief for prior years in which a business operated under a state medical license. Whether that recommendation becomes formal IRS policy is still open.

“The absence of clear and timely guidance for the cannabis industry will leave taxpayers uncertain as to how they can benefit from the tax code — whether it is the treatment of ordinary and necessary business deductions or accessing of tax credits,” the lawmakers wrote, citing the National Taxpayer Advocate’s position that proactive guidance is an obligation of good tax administration.

The letter also asks the agencies to work with the Small Business Administration to ensure the guidance reaches businesses across the industry, not only large operators with dedicated tax counsel.

Adult-Use Businesses Still Waiting

Medical operators aren’t the only segment affected. Recreational cannabis businesses and operators that straddle both markets have no access to the relief that took effect in April 2026. Adult-use marijuana remains in Schedule I, and the federal deduction ban applies to those operations in full.

That situation runs through a new DEA administrative hearing scheduled to begin June 29, 2026, where the full reclassification of marijuana from Schedule I to Schedule III will be considered. The DOJ withdrew and reset the hearing proceedings that began under the prior administration, setting new deadlines aimed at moving more quickly to a final rule.

Legal challenges add another variable. Three Republican state attorneys general have filed suit seeking to block the rescheduling — litigation that could affect whether the medical-side relief already in place remains in effect while the courts weigh in.

Without formal IRS guidance, the financial opening the rescheduling created is real in law but largely inaccessible in practice — and that gap is what the lawmakers’ letter is designed to close.