The U.S. Department of the Treasury and IRS announced today via press release that they plan to issue new tax guidance following the Department of Justice’s final order moving certain forms of medical marijuana from Schedule I to Schedule III under federal law.

The guidance is expected to address one of the biggest financial consequences of rescheduling: relief from Section 280E, the federal tax provision that prevents businesses involved with Schedule I or II substances from taking standard deductions and credits.

DOJ’s final order, issued after President Donald Trump’s December executive order directing the attorney general to complete the rescheduling process, places marijuana contained in FDA-approved products or subject to a state medical marijuana license into Schedule III.

Treasury and the IRS said DOJ’s action is expected to have “significant positive tax consequences” for medical marijuana businesses. Because Section 280E applies to businesses trafficking in Schedule I or II substances, moving qualifying medical marijuana activity to Schedule III would generally remove 280E as a barrier to claiming deductions and credits for those activities.

The forthcoming guidance is expected to clarify how 280E applies to businesses with multiple activities, including companies that may have both Schedule III medical marijuana operations and activities that remain tied to Schedule I or II substances. Treasury said the guidance is expected to address expense apportionment in those situations.

The IRS is also expected to include a transition rule stating that, for 280E purposes, rescheduling will generally apply to the full taxable year that includes the effective date of DOJ’s final order, for business activities no longer involving Schedule I or II substances.