Politics
Federal Marijuana Rescheduling ‘Does Not Appear To Apply’ To Washington Businesses, State Officials Say
Marijuana regulators in Washington say that the Trump administration’s move to reschedule cannabis on the federal level “does not appear to apply” to businesses in the state.
The U.S. Department of Justice in April issued an order that immediately reclassified state-licensed medical cannabis, as well as marijuana products approved by the Food and Drug Administration (FDA) from Schedule I of the Controlled Substances Act (CSA) to Schedule III. A hearing scheduled for later this month will consider more comprehensively moving marijuana to Schedule III.
“Washington does not license medical cannabis producers, processors, or retailers,” the state Liquor and Cannabis Board (LCB) said in guidance published on Tuesday. “Instead, Washington has a single recreational market and within that market producers/processors may manufacture [Department of Health]-compliant products, and certain retailers may sell DOH-compliant products to all adult patients and designated providers.”
“Because of this, Washington’s cannabis licensees do not appear to qualify as ‘state medical marijuana licensee[s]’ and therefore may not be eligible to register under the Final Rule,” the agency said, referring to a Drug Enforcement Administration (DEA) registration process for state-legal marijuana businesses to take advantage of federal benefits that come with the reform.
That said, LCB is “not taking a position to prevent licensees from applying for federal registration if they choose,” the guidance continues. “If any licensee does apply for federal registration, we would be interested in learning about their experience and any federal determination.”
Nonetheless, “based on our analysis, federal rescheduling in its current form does not appear to apply to Washington’s cannabis licensees due to the statutory framework predominately regulating recreational cannabis,” LCB said.
The agency did stress, however, that while it has consulted with the Cannabis Regulators Association, National Governors Association and industry stakeholders, its current view does not represent the formal opinion of Washington and “may not be our final interpretation as information is evolving and the determination may not rest with the state.”
“We expect additional guidance from involved federal agencies, new or updated federal agency processes, and/or other federal proceedings,” it said, citing the upcoming administrative hearing and ongoing litigation challenging cannabis rescheduling.
“The LCB recognizes there are many cannabis producers, processors, and retailers that actively engage in the production and sales of medical cannabis in Washington. These businesses may or may not have an opportunity to use the 280e tax deduction and additionally register with the DEA for a schedule III permit. The determination of the applicability of 280e and qualification for DEA schedule III permits is with the federal government and not with the state of Washington. It is possible that the state of Washington will ultimately not have any input into the determination as to whether its licensees meet the criteria for ‘state medical marijuana licensees,’ as DOJ may make that determination unilaterally. DOJ has the authority to reasonably interpret the meaning of the Final Rule, and a determination that Washington cannabis licensees do qualify as ‘state medical marijuana licensee[s].'”
The U.S. Department of the Treasury and Internal Revenue Service (IRS) said they plan to issue new tax guidance for the marijuana industry following rescheduling. The reform will benefit state-licensed marijuana businesses by allowing them to take federal tax deductions they’re currently barred from under an IRS code known as 280E that doesn’t apply to Schedule III substances.
In California, regulators recently adopted emergency rules changes for the state’s marijuana licensing process that are intended to make it easier for businesses to qualify for benefits in line with the Trump administration’s recent move to federally reschedule medical cannabis.
