The Internal Revenue Service (IRS) and U.S. Department of the Treasury have formally made guidance on Section 280E a federal priority for the coming year, a potentially consequential development for marijuana businesses navigating the tax effects of recent federal scheduling changes.
Treasury’s newly released 2026-2027 Priority Guidance Plan, dated September 29, lists “Guidance under §280E” as one of the agencies’ official projects under the plan’s “Other Priorities” section.
The designation means Treasury and the IRS intend to actively devote resources to the issue during the federal fiscal year running from October 1, 2026, through September 30, 2027.
The plan contains 121 guidance projects overall. Treasury and the IRS say projects included in the document “will be the focus of our efforts during the plan year,” although the agencies caution that inclusion does not establish a deadline for completion.
Section 280E of the federal tax code prohibits businesses from deducting or claiming credits for expenses incurred in a trade or business involving trafficking in Schedule I or Schedule II controlled substances.
The provision has for decades imposed unusually high effective federal tax rates on state-licensed marijuana businesses because they generally cannot deduct ordinary business expenses such as payroll, rent and advertising.
The new priority designation follows an April announcement from Treasury and the IRS saying they planned to issue guidance addressing the tax consequences of the federal government’s partial rescheduling of medical marijuana.
On April 22, the Department of Justice placed marijuana contained in Food and Drug Administration-approved products or subject to qualifying state medical marijuana licenses into Schedule III, along with certain marijuana extracts and naturally derived delta-9 THC products. Adult-use marijuana and other marijuana outside the scope of the order remain in Schedule I while a broader rescheduling proceeding continues.
Treasury said in April that the change was expected to have “significant positive tax consequences” for qualifying medical marijuana businesses because Section 280E applies specifically to Schedule I and II substances.
The forthcoming guidance is expected to address how Section 280E should be applied to businesses conducting multiple types of marijuana activity, including businesses operating both medical and adult-use operations. Treasury previously said this could involve rules for apportioning expenses between activities that remain subject to 280E and those that no longer do.
The agencies also said they expect to establish a transition rule generally treating the scheduling change as applying for the entirety of a business’s taxable year that includes the effective date of the federal order, at least for activities no longer involving Schedule I or II substances.
The inclusion of Section 280E in the new Priority Guidance Plan marks a further step beyond that April announcement. The issue was not listed in Treasury and the IRS’s initial 2025-2026 Priority Guidance Plan.
