IRS Names 280E Guidance a Priority — But No Deadline Yet

October 5, 2026

Photo by FIN via Unsplash.

Treasury and the IRS dropped their 2026-2027 Priority Guidance Plan on September 29, 2026, and for the first time ever, "Guidance under §280E" made the list. If you've spent any time around cannabis accounting, you know that's not a small thing. Section 280E is the tax code provision that has quietly bled cannabis operators dry for over a decade, forcing them to pay federal taxes on gross profit rather than net income because they're technically trafficking in a controlled substance.

Getting a spot on this annual list is the clearest signal yet that federal agencies are actually working on something here, rather than just fielding angry letters and hoping the issue goes away. But before anyone starts rewriting their five-year financial projections, it's worth being honest about what this document does and doesn't promise. Inclusion on a priority list is an acknowledgment that an issue exists and deserves attention. It is not a rule, not a timeline, and not a guarantee that whatever eventually gets published will look anything like what the industry is hoping for.

What the Priority Guidance Plan Actually Says

Photo by Adrian34 via Pixabay.

The Priority Guidance Plan is an annual document Treasury and the IRS put out to map their regulatory workload for the coming federal fiscal year, which this time around runs from October 1, 2026 through September 30, 2027. It's essentially a to-do list that tells practitioners and the public which rules, notices, and revenue procedures the agencies intend to work on, grouped by subject area. This year's edition contains 121 separate guidance projects spanning everything from partnership taxation to digital assets, and the §280E entry sits in a catch-all section labeled 'Other Priorities' rather than getting its own dedicated category.

What's notable is how thin the actual entry is. There's no draft regulation attached, no list of which specific business expenses might become deductible, and nothing addressing whether cannabis companies could amend prior-year returns to claw back taxes already paid under the old rules. It's essentially a one-line placeholder confirming the topic made the cut.

Treasury and the IRS include standard language every year noting that listed projects 'will be the focus of our efforts during the plan year,' but that phrasing is intentionally non-binding. Agencies routinely carry items over from one year's plan to the next without ever finalizing them, and there's no statutory clock forcing action by a specific date. What this entry really does is formalize, in writing, work that insiders say began informally back in April 2026, shortly after the rescheduling decision that kicked off this whole conversation.

How Rescheduling Triggered the Tax Question

None of this exists in a vacuum. The reason §280E guidance suddenly became plausible traces back to April 22, 2026, when the Justice Department and DEA, acting under Acting Attorney General Todd Blanche, issued a final order moving certain marijuana products from Schedule I to Schedule III of the Controlled Substances Act. That's a meaningfully narrower move than full descheduling, and the details matter a lot for tax purposes. The order covers state-licensed medical marijuana and any FDA-approved marijuana products, but adult-use, recreational marijuana remains classified as Schedule I.

Here's why that distinction is the whole ballgame for accountants: 280E denies ordinary business deductions to any trade or business trafficking in a substance listed under Schedule I or Schedule II. Schedule III products fall outside that prohibition entirely. So moving medical marijuana to Schedule III is, in theory, exactly the kind of change that could unlock standard deductions like payroll, rent, and marketing expenses for the businesses that touch it.

The day after the DEA order, on April 23, 2026, Treasury and the IRS publicly announced they planned to address the tax consequences of rescheduling. That was five months before any guidance actually materialized in the priority plan, and nothing concrete has followed since. In the meantime, the real complication is sitting with operators who run mixed medical and adult-use businesses under one roof, which describes most multi-state operators. They're now facing genuinely difficult allocation questions about how to separate revenue, costs, and deductions between a Schedule III product line and a Schedule I one, with no formal guidance yet on how that split should work.

Congress Is Split on What Comes Next

Photo by Ramaz Bluashvili via Pexels.

Congress hasn't exactly presented a united front while the agencies work through this. In May 2026, a group of congressional Democrats sent a letter to Treasury Secretary Scott Bessent and IRS Commissioner Frank Bisignano pushing for what they called prompt guidance, arguing that cannabis businesses have waited long enough for clarity following the rescheduling decision.

That request didn't sit well with everyone on Capitol Hill. In June 2026, Senator James Lankford of Oklahoma and Representative Jodey Arrington of Texas fired back with their own letter, describing themselves as concerned and, in their words, troubled that marijuana businesses might end up getting federal tax relief at all. Their objection isn't really about the guidance process itself. It's about the underlying policy question of whether cannabis operators should ever get standard business deductions, regardless of how DEA chooses to classify the plant.

Lankford and Arrington have legislative backing for that position. They've both introduced versions of the No Deductions for Marijuana Businesses Act, tracked as S.471 in the Senate and H.R.1447 in the House, which would amend the tax code to keep 280E's restrictions in place for marijuana businesses no matter what schedule the substance ends up on. If that bill ever picked up real momentum, it would effectively override anything Treasury and the IRS cook up administratively.

That leaves cannabis operators in an uncomfortable spot, watching two separate tracks move simultaneously. Agency guidance could arrive and offer relief, only to get narrowed or wiped out by a statute written specifically to prevent exactly that outcome. Neither path is moving especially fast, which means the uncertainty itself has become the operating environment.

Why the Dollar Figures Are So Large

Under current Schedule I status, cannabis businesses face an effective tax rate of about 75% due to 280E restrictions, but reclassification to Schedule III would slash that rate to roughly 21% by allowing standard business deductions.

It's worth pausing on just how much money is actually riding on this. Under 280E as it's been applied for years, cannabis operators have routinely ended up with effective federal tax rates somewhere in the range of 70 to 80 percent, because they're barred from deducting ordinary costs like employee wages, rent, and advertising that every other business takes for granted. Compare that to the standard 21 percent federal corporate rate, and you start to understand why cannabis companies have been burning cash even while posting healthy revenue on paper.

If Schedule III relief actually materializes in usable form, the math could shift dramatically, pulling effective rates for qualifying businesses down toward that same 21 percent baseline other industries pay. One legal analysis circulating among cannabis tax professionals has put the potential industry-wide relief figure at roughly $1.6 billion, which gives some sense of scale even if the exact number is inherently speculative.

The stakes aren't just theoretical. Trulieve's own SEC filings show the company has not booked any uncertain tax positions for years prior to 2026, meaning it hasn't set aside reserves assuming the IRS will ultimately rule in its favor on old returns. The company is also fighting an IRS-proposed $38.1 million in penalties tied to its prior tax conduct under 280E. That single example captures why operators care so much about retroactivity specifically, not just how deductions get treated going forward. Guidance that only applies to future tax years does nothing for the liabilities companies are already carrying on their books from years when 280E clearly applied in full.

What Operators Should Do While They Wait

Photo by Vitaly Gariev via Unsplash.

Given all that uncertainty, the smart move for operators right now is patience paired with preparation, not premature celebration. Landing on the priority list doesn't create any legal deadline, and nothing stops Treasury from carrying this item into next year's plan without ever issuing a formal rule, which has happened with other topics in past years.

In the meantime, operators running both medical and adult-use lines should start keeping meticulous, separated records distinguishing Schedule III-eligible medical revenue and expenses from adult-use activity that remains Schedule I. If allocation rules do eventually emerge, companies with clean, well-documented separation will be in a far better position to apply them than those trying to reconstruct that split after the fact.

It's also worth watching closely for any signal on retroactivity. Trulieve's pending dispute over its $38.1 million in proposed penalties is a useful bellwether here. If guidance comes out silent on prior tax years, companies with similar open issues shouldn't assume relief is coming for returns already filed.

And don't lose sight of the fact that none of this touches state law. Licensing, operational rules, and compliance requirements are still set at the state level regardless of what DEA scheduling or IRS guidance eventually says, so confirm your local regulations before assuming anything changes operationally. Finally, keep an eye on Congress. If the No Deductions for Marijuana Businesses Act gains real traction, it could reshape or completely nullify whatever the IRS proposes, independent of the agency's own timeline.

Strip away the headlines and what actually happened here is modest: a federal agency put a topic on a to-do list. That's worth noting, and it's genuinely the strongest signal yet that something is moving on 280E relief. But it's a procedural step, not a policy outcome, and operators who start restructuring their finances or making hiring decisions based on this entry alone are getting ahead of the facts.

The real test is whether Treasury actually issues usable guidance before the plan year closes on September 30, 2027, and whether that guidance has the nerve to address past tax years rather than just drawing a line going forward. Companies like Trulieve, sitting on tens of millions in disputed penalties from prior conduct, need an answer on retroactivity specifically, not just a cleaner path for next year's return.

And even if Treasury delivers something solid, Congress hasn't finished arguing about this. Lankford and Arrington's bill is sitting right there as a reminder that lawmakers could still narrow or override whatever the IRS proposes. Until one of these tracks actually resolves, this remains a story about competing possibilities rather than a settled outcome, and the industry's tax bill for 2026 is going to get calculated under the old rules no matter how this plays out later.