Does Trump’s Cannabis Executive Order End 280E Taxes?

What This Page Covers

• What the executive order actually did
• What an executive order cannot legally do
• The federal process required to reschedule marijuana
• When 280E would stop applying (and when it would not)
• What Schedule III could mean for adult-use dispensaries
• Risks operators are not thinking about

What the Executive Order Actually Did

On December 18, 2025, President Trump signed an executive order directing the Attorney General to move forward with rescheduling marijuana from Schedule I to Schedule III under the Controlled Substances Act.

An executive order can instruct federal agencies to act.

It cannot directly rewrite federal statutes or instantly change drug scheduling.

Marijuana does not become Schedule III until the federal rulemaking process is completed and a final rule becomes effective.

What an Executive Order Cannot Do

An executive order:

• Cannot rewrite the Controlled Substances Act
• Cannot directly amend Internal Revenue Code §280E
• Cannot bypass formal federal rulemaking
• Cannot legalize adult-use cannabis federally

Only Congress or a completed DEA rulemaking process can change marijuana’s schedule under federal law.

Until that process is finished, marijuana remains Schedule I.

The Actual Federal Process to Reschedule Marijuana

Rescheduling requires a formal administrative process under federal law:

1. Scientific and medical review by the Department of Health and Human Services (HHS)
2. DEA notice-and-comment rulemaking
3. Public comment period
4. Possible hearings
5. Publication of a final rule
6. Effective date of that final rule

Nothing changes legally until a final rule is published and becomes effective.

Headlines do not change the tax code.

When Would 280E Actually Stop Applying?

Internal Revenue Code §280E applies to businesses trafficking in Schedule I or II controlled substances.

If marijuana is officially moved to Schedule III through final rulemaking, 280E would no longer apply to marijuana because the statute is limited to Schedule I and II substances.

Key point:

280E does not disappear because of an executive order.

280E changes only if:

• Marijuana is officially rescheduled
• The final rule takes effect

Until then, cannabis businesses must continue filing under 280E.

What Schedule III Would Mean in Practice

Schedule III substances are still federally controlled drugs.

They are not “legalized.”

Schedule III classification recognizes accepted medical use and lowers some regulatory barriers compared to Schedule I.

However, this does not automatically make state adult-use dispensaries federally compliant.

What NY Adult-Use Retailers May Not Be Thinking About

1. Adult-Use Sales Would Still Not Be Federally Legal

Rescheduling to Schedule III does not automatically authorize:

• Recreational cannabis sales under federal law
• Interstate commerce
• Removal of all federal criminal exposure

Federal legality and scheduling are not the same thing.

2. Medical Framework Pressure

Schedule III drugs typically operate within federal prescription and DEA registration frameworks.

Marijuana is not automatically transformed into an FDA-approved drug product.

Rescheduling does not automatically convert dispensaries into pharmacies.

However, federal recognition of medical use may increase long-term pressure toward tighter federal standards.

3. Banking Does Not Instantly Normalize

Rescheduling may reduce institutional risk perception.

But banks still evaluate:

• Ownership transparency
• Financial controls
• Source of funds
• Deposit consistency

Rescheduling does not remove monitoring.

4. Bankruptcy Is Still Complicated

Federal bankruptcy is governed by federal law.

Courts have historically struggled with marijuana-related businesses due to federal illegality.

Rescheduling alone may not eliminate bankruptcy uncertainty for THC retailers.

What NY Dispensary Owners Should Do Now

• Continue filing taxes under 280E unless a final rule becomes effective
• Do not change tax treatment based on headlines
• Model both scenarios: 280E remains vs 280E ends
• Maintain clean accounting and documentation
• Avoid assuming federal legalization has occurred

Build your financial systems based on current law, not anticipated changes.

Go Here Next

• What Is IRS 280E and How Does It Work?
• What Happens if a Cannabis Dispensary Doesn't Pay Payroll Taxes?
• Cannabis Banking Rules
• What Would the SAFE Banking Act Change?

Source Material

• Executive Order: Increasing Medical Marijuana and Cannabidiol Research (December 18, 2025)
• Controlled Substances Act
• Internal Revenue Code §280E
• Congressional Research Service: Legal Consequences of Rescheduling Marijuana
• DEA rulemaking procedures under the CSA