The Drug Enforcement Administration is “likely” to approve a recommendation from the Biden administration to reclassify marijuana under the nation’s drug laws, according to a report issued by congressional researchers this week. The report, which was released by the Congressional Research Service (CRS) on Wednesday, comes after a recommendation from the Department of Health and Human Services last month that calls for cannabis to be rescheduled under the federal Controlled Substances Act (CSA). If approved by the DEA, rescheduling marijuana would have sweeping implications for federal policy regarding cannabis, including effects on housing, immigration, gun rights, taxation of marijuana businesses and more.
On August 29, HHS Assistant Secretary for Health Rachel Levine wrote a letter to DEA head Anne Milgram recommending that cannabis be removed from Schedule I of the CSA. The recommendation comes after an executive order from President Joseph Biden in October 2022 directed the heads of the Department of Justice and HHS to review the classification of marijuana under federal law. Under the HHS recommendation, which was issued after a review of the available medical and scientific evidence, cannabis would be rescheduled under Schedule III of the CSA, a less restrictive classification than Schedule I that would ease research into cannabis.
The HHS recommendation to relax the federal restrictions on cannabis is not binding and must first be approved by the DEA, which has confirmed it is bound by the health agency’s scientific and medical findings, according to a report from Marijuana Moment. However, noting that the DEA followed an HHS recommendation to reschedule the synthetic THC drug Marinol in 1999, the CRS wrote that “if past is prologue it could be likely that DEA will reschedule marijuana according to HHS’s recommendation.”
The Effect Of Rescheduling Cannabis On Federal Policy
If the agency follows the recommendation to reschedule marijuana to Schedule III, cannabis would be classified alongside other drugs including ketamine, anabolic steroids, testosterone and products containing less than 90 milligrams of codeine per dose. Rescheduling cannabis would also remove some barriers faced by the regulated marijuana industry, according to congressional researchers.
“If marijuana is rescheduled to Schedule III, it would have broad implications for federal policy,” CRS wrote in the report. “Also, this move would have significant implications for state medical marijuana programs and users of medical marijuana, but fewer implications for state recreational marijuana programs and those who use marijuana recreationally.”
Passport: Explore the finest destinations and experiences around the world in the Forbes Passport newsletter.
In its analysis, the CRS summarized the scheduling review undertaken by the Biden administration and assessed the impact of rescheduling marijuana from Schedule I to Schedule III of the CSA. The report maintains that such a move would make it legal to “manufacture, distribute, dispense, and possess medical marijuana,” although Marijuana Moment reports that some have said that cannabis products would require approval from the Food and Drug Administration and manufacturers would need a license from the DEA.
The CRS report continues by reporting that state medical marijuana programs “may now be able to comply with the CSA, and will still be subject to CSA/DEA criminal and regulatory control, federal public health laws such as the Federal Food, Drug, and Cosmetic Act, and agricultural laws such as the Agricultural Marketing Act of 1946.”
“The scope of and demand for FDA oversight for medical marijuana and related products may grow considerably. In the short term, FDA may need to generate or update a substantial amount of technical information to clarify its regulatory approach to marijuana for relevant stakeholders,” the CRS report reads. “Given that marijuana is a complex substance containing various pharmaceutical components and is available to consumers in numerous formats, FDA may also need to consider long-term resource allocation to ensure that marijuana products consistently meet applicable regulatory standards.”
The CRS report also holds that rescheduling cannabis to Schedule III would allow medical marijuana patients to “purchase and possess firearms” and make them eligible for immigrant and non-immigrant visas. The analysis adds that patients “who use medical marijuana lawfully may contend with fewer barriers to federal employment and eligibility to serve in the military.” However, such rights would not be extended to recreational marijuana users.
Tax Implications Of Rescheduling Marijuana
Perhaps most importantly to the cannabis industry, rescheduling cannabis to Schedule III would allow marijuana businesses to take tax deductions for which they are currently ineligible. Under Section 280 E of the Internal Revenue Code, businesses “trafficking” in Schedule I or Schedule II substances are not allowed tax deductions such as rent, utilities, payroll and marketing expenses that are permitted for companies in other industries. As a result, cannabis enterprises operating legally under state law face tax burdens that threaten the viability of some businesses. With rescheduling, “marijuana producers and retailers would be able to deduct the costs of selling their product (e.g., payroll, rent, advertising) for the purposes of federal income tax filings,” according to the CRS report.
While the DEA is now tasked with deciding whether to approve the HHS recommendation, the law enforcement agency will not necessarily have the final say on the matter. The CRS report concludes by noting that Congress could “choose to address any number of issues related to the potential rescheduling of marijuana,” including by independently reclassifying cannabis in a different or new schedule.
“If the administrative scheduling process moves forward, Congress may consider whether to devote additional resources to FDA and the U.S. Department of Agriculture (USDA) to ensure the safety and quality of the many different products already available in many state markets,” the report adds.