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Home IRS Compliance & IRC §280E Advisory
Compliance is the foundation of success in the cannabis industry — and in 2026, the rules are moving faster than most CPA firms can track. Federal rescheduling has redrawn the §280E line, and many firms lack the staffing, bandwidth, and specialized knowledge to keep cannabis businesses compliant through the transition.
High Life Accounting was an early adopter of what is now the official AICPA cannabis education program, positioning us among the most experienced cannabis-focused accounting firms in the country.
On April 23, 2026, the DOJ issued a final order moving state-licensed medical marijuana — along with FDA-approved cannabis products — from Schedule I to Schedule III. Because §280E only reaches Schedule I and II substances, qualifying medical cannabis operations are no longer barred from ordinary business deductions, effective April 22, 2026.
What didn't change: all other marijuana, including every adult-use product, remains Schedule I — so §280E still fully applies to recreational operators. A DEA hearing beginning June 29, 2026 will consider whether the broader market follows medical into Schedule III.
Our affiliation with cannabis-specialized CPAs, EAs, and tax attorneys allows us to stay current with:
Federal and state regulatory changes Rescheduling and IRS implementation guidance IRS audit priorities §280E and Schedule III transition strategies
Internal Revenue Code §280E disallows standard business deductions for expenses related to the trafficking of Schedule I or II substances under the Controlled Substances Act.
Who it applies to now: As of April 22, 2026, state-licensed medical cannabis operations are out of §280E. Adult-use operations remain inside it — which still means paying tax on nearly double actual income unless costs are properly documented, allocated, and defended. Dual-license operators now straddle both regimes.
Regulatory note: IRS implementation guidance on the April 2026 rescheduling order is still developing, and a DEA hearing beginning June 29, 2026 will consider broader rescheduling. This page is general information, not tax advice. Talk to us before changing your tax position.
