Two Republican lawmakers fired off a pointed letter to Treasury Secretary Scott Bessent on Wednesday, saying they are “troubled” that marijuana companies could soon walk away with billions in tax breaks. That prospect was opened by the Trump administration’s own historic decision to partially reschedule cannabis under federal law.
Sen. James Lankford of Oklahoma and Rep. Jodey Arrington of Texas want clear answers by June 29, and the clock is already ticking.
The Federal Tax Burden That Has Crushed Cannabis Businesses for Years
Section 280E of the Internal Revenue Code has been a financial nightmare for cannabis companies since 1982. The law blocks businesses selling Schedule I or II controlled substances from deducting ordinary operating expenses from their taxable income.
The result has been effective federal tax rates as high as 70 percent for cannabis operators. That is a number almost no other legal business in America comes close to facing.
Rent, payroll, marketing, and utilities are all nondeductible under 280E. Businesses can only deduct the direct cost of goods sold. For some of the largest cannabis companies in the country, this has meant paying over $100 million in federal taxes per year beyond what they would owe in any other industry.
In April 2026, Acting Attorney General Todd Blanche signed a final order moving state-licensed medical marijuana from Schedule I to Schedule III of the Controlled Substances Act. That single move lifted the 280E tax barrier for qualifying medical cannabis businesses. Recreational marijuana, however, still remains in Schedule I for now, subject to a forthcoming federal hearing process.
Why These GOP Lawmakers Are Raising Red Flags
Lankford serves on the Senate Finance Committee, and Arrington chairs the House Budget Committee. This is not their first move against cannabis tax relief. They previously introduced legislation called the No Deductions for Marijuana Businesses Act, a bill designed to keep 280E penalties locked in place even if cannabis was rescheduled.
Their new letter to Bessent calls the tax implications of rescheduling a serious concern for federal revenue and public safety. They are particularly troubled by the idea of retroactive tax relief stretching back into prior years before the rescheduling took effect.
The lawmakers zeroed in on state licensing as an unreliable safeguard. Oklahoma became their central example. At the height of its medical marijuana program, Oklahoma had 9,178 licensed marijuana growing operations. Many of those operations were later found to have violated the law, including by funneling cannabis to the black market and engaging in money laundering and human trafficking.
Lankford also told Bessent directly at a Senate Finance Committee hearing that Oklahoma had seen an influx of Chinese nationals who allegedly set up illegal marijuana grow operations and shipped cannabis across the country. “It was a tragic thing to be able to watch what happened,” he said.
Their letter to the Treasury Secretary included a list of tough questions that demand answers:
- How many prior tax years is Treasury considering for retroactive marijuana tax relief?
- How will Treasury ensure businesses seeking relief have not violated any laws, including those related to black market diversion and money laundering?
- What is the estimated reduction in federal revenue from granting cannabis businesses access to ordinary business deductions?
- What statutory authority permits giving tax benefits to businesses that sold a federally illegal product?
- What would the impact be on annual federal deficits and the national debt?
Billions of Dollars Hang on the Retroactive Relief Question
The most explosive issue in this debate is not what happens going forward. It is what happens going backward.
Blanche’s rescheduling order “encouraged” Bessent to consider providing retroactive relief from 280E for past tax years in which operators held valid state medical marijuana licenses. That language was not a mandate. But it swung a door wide open that has the cannabis industry watching every move Treasury makes.
The industry paid an estimated $15 billion in 280E taxes since 2018, and publicly traded marijuana multistate operators currently owe a combined $1.6 billion in disputed 280E taxes. That is not a number Congress is going to ignore.
Here is what the financial stakes look like across the industry:
| Metric | Estimated Figure |
|---|---|
| Total 280E taxes paid by the industry since 2018 | $15 billion |
| Combined 280E taxes owed by publicly traded cannabis companies | $1.6 billion |
| Potential annual industry-wide savings if 280E is fully removed | $2+ billion |
| Effective federal tax rate cannabis businesses faced under 280E | Up to 70% |
The IRS and Treasury announced in April that formal guidance was coming. As of today, that guidance has still not been released. The agencies did confirm that an initial transition rule will likely apply 280E relief to the full 2026 tax year for qualifying medical cannabis businesses. Whether that relief stretches back before 2026 remains entirely unsettled.
Congress Is Divided as the Industry Waits for Answers
While Lankford and Arrington are pumping the brakes hard, Democrats in Congress have been pushing in the exact opposite direction. A group of House Democrats, led by Reps. Steven Horsford of Nevada and Steve Cohen of Tennessee, wrote to Bessent and IRS CEO Frank Bisignano last week demanding “prompt guidance” for cannabis businesses.
Their concern is straightforward. Without clear guidance, taxpayers do not know what deductions they can legally claim. Both Republican and Democratic lawmakers, though for very different reasons, are pointing at the same problem: Treasury has promised clarity but has not delivered it.
The cannabis industry is not standing still while Washington argues. Major multistate operators have already filed applications through a new DEA registration portal that opened in April, with companies like Trulieve submitting applications for over 200 dispensaries the day after the rescheduling rule published. The 60-day application window runs until approximately June 27, 2026, and the race is on.
A pivotal DEA administrative hearing is set to begin June 29, 2026, and must conclude no later than July 15. That hearing will determine whether broader rescheduling should extend to recreational marijuana as well. If it does, the 280E question will expand enormously, touching the entire cannabis industry and potentially unlocking billions more in annual tax savings.
What started as a landmark federal drug policy decision has turned into one of the most complex tax battles Washington has seen in years. Billions of dollars in past and future tax obligations are on the line. Small cannabis operators, social equity licensees, and large multistate companies are all waiting on the same answer from a Treasury Department that has gone quiet. Lankford and Arrington may not be able to stop the relief, but they are making sure the Treasury Secretary hears every objection before he acts. The June 29 deadline is fast approaching, and for an industry that has carried an extraordinary tax burden for decades, the outcome could not matter more. What do you think? Should marijuana businesses get the same tax treatment as every other American business? Share your thoughts in the comments below.
