Marijuana Moment: GOP Lawmakers Are ‘Troubled’ About Marijuana Businesses Getting Tax Relief Under Trump’s Rescheduling Move

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A pair of Republican lawmakers sent a letter to the Trump administration’s treasury secretary on Wednesday saying they are “concerned” and “troubled” that marijuana businesses will be eligible for tax relief now that cannabis is being partially rescheduled under federal law.

Moving marijuana from Schedule I of the Controlled Substances Act (CSA) to Schedule III will have “significant implications for the federal tax treatment of marijuana businesses,” Sen. James Lankford (R-OK) and Rep. Jodey Arrington (R-TX), who chairs the House Budget Committee, wrote in a letter to Treasury Secretary Scott Bessent.

That’s because an Internal Revenue Service code known as 280E, which has prevented them from taking ordinary tax deductions and credits that are available to most businesses, only applies to Schedule I and II substances.

“We have long been concerned about the potential fiscal and societal consequences of rescheduling,” the GOP lawmakers said, citing legislation that previously introduced called the No Deductions for Marijuana Businesses Act that would continue to prevent the cannabis industry from escaping the 280E penalty even under rescheduling.

Under an order issued by Acting Attorney General Todd Blanche last month, marijuana regulated by a state medical cannabis license immediately moved to Schedule III. Marijuana products such as those in state-legal recreational markets remain in Schedule I for now, however, subject to a hearing process set to begin next month to consider broader rescheduling of cannabis.

Lankford and Arrington said in the letter to the treasury secretary that they are “particularly troubled” by the notion that marijuana businesses could be eligible for retroactive relief that stretches back into past tax years prior to rescheduling.

“Many state-licensed marijuana operators participate in both medical and recreational markets, making it unclear how Treasury would distinguish business activities that qualify or do not qualify for federal tax treatment,” they said.

“The shortcomings of relying on inconsistent state licensure are already evident. For example, having a state license to grow or sell marijuana in Oklahoma does not mean that the business acts lawfully. At the height of its medical marijuana program, Oklahoma had 9,178 licensed marijuana growing operations. While law enforcement has worked diligently to close down many of these operations that violated the law, they were all at one point state licensed marijuana businesses. There are documented instances where licensed operations funneled marijuana to the black market and engaged in other crimes, like money laundering and human trafficking. Many of these operations have also been owned and operated by Chinese nationals who have exploited state marijuana laws to commit crimes.”

“Across the country, businesses follow a patchwork of laws to become a licensed marijuana business,” the lawmakers wrote in the new letter. Some may be more stringent than others, but it remains the case that state licensure alone does not guarantee legal compliance or justify eligibility for federal tax benefits.”

Lankford and Arrington asking Bessent to answer a series of questions about the issue by June 29th:

• Can you further clarify the definition of “retrospective tax relief” in this context? How many prior tax years is the Treasury Department planning to consider for tax relief for marijuana businesses?
• How will the Treasury Department ensure that marijuana businesses that are potential candidates for tax relief have not violated any law, including the diversion of marijuana to the black market, human trafficking, and money laundering?
• What is the estimated reduction in federal revenue associated with providing marijuana businesses access to ordinary business deductions and credits?
• How would providing retrospective tax relief to marijuana businesses help American families?
• What would be the impact on annual federal deficits and the national debt to give certain marijuana business owners a newly created retroactive tax benefit?
• What statutory authority permits the federal government to give business owners who sold or manufactured a product against federal law a tax benefit?

Separately on Wednesday, Lankford told Bessent at a Senate Finance Committee hearing that “in Oklahoma, we had a massive influx of Chinese illegal aliens that moved into our state and set up illegal grow operations for marijuana and started shipping it literally all over the country.”

“It was a tragic thing to be able to watch what happened,” he said.

In Oklahoma, we witnessed a massive influx of Chinese illegal aliens set up illegal marijuana grow operations and ship product all over the country. The human trafficking, labor trafficking, and sex trafficking that came with it was a tragedy. I look forward to working with… pic.twitter.com/8Z4eCM7SVr

— Sen. James Lankford (@SenatorLankford) June 3, 2026

Last week, a group of congressional Democrats sent a latter asking Bessent and Internal Revenue Service (IRS) Chief Executive Officer Frank Bisignano to issue “prompt guidance” on tax issues for marijuana businesses in light of the Trump administration’s move to federally reschedule cannabis.

“The absence of clear and timely guidance for the cannabis industry will leave taxpayers uncertain as to how they can benefit from the tax code—whether it is the treatment of ordinary and necessary business deductions or accessing of tax credits,” the lawmakers wrote.

The U.S. Department of the Treasury and IRS said in April that they plan to soon issue guidance on tax issues for marijuana businesses stemming from rescheduling, but that hasn’t yet happened.

In their announcement about forthcoming guidance, IRS and Treasury said they “expect DOJ’s action to have significant positive tax consequences for businesses in the medical marijuana industry.”

“Accordingly, rescheduling generally removes section 280E as a bar to claiming deductions and credits for businesses that as a result of the Final Order no longer traffic in Schedule I or II controlled substances under the CSA,” they said.

Because of the way the rescheduling action is being rolled out in phases, state-licensed marijuana companies that serve both the medical and recreational markets may only be able to immediately obtain tax relief for parts of their businesses.

“Guidance is expected to clarify the ways in which, for businesses with multiple activities, section 280E applies only to those activities related to trafficking in Schedule I or II controlled substances (e.g., by apportioning expenses),” the tax agency and Treasury Department said.

Blanche’s rescheduling order for DOJ said he “encourages” the treasury secretary “to consider providing retrospective relief from Section 280E liability for taxable years in which a state licensee operated under a state medical marijuana license.”

But the Treasury and IRS announcement said that, at least for an initial transition rule, “rescheduling generally will be considered to first apply for a business’s full taxable year that includes the effective date of the Final Order, for the business’s activities that do not involve Schedule I or II controlled substances as a result of the Final Order.”

The agencies did not specify when they expect to issue the forthcoming guidance.

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