U.S. DOJ Marijuana Rescheduling Order Sparks Legal Challenge and Tax Relief

The U.S. Department of Justice issued an order on April 28 moving federally recognized medical cannabis from Schedule I to Schedule III of the Controlled Substances Act. The change eliminates the Section 280E tax penalty for qualifying medical‑cannabis operators, potentially saving the industry billions of dollars, allowing ordinary business expense deductions, and easing clinical research.

A coalition of a national drug‑testing association and several cannabis‑focused pharmaceutical firms – the National Drug and Alcohol Screening Association, MMJ International Holdings, MMJ BioPharma Cultivation and MMJ BioPharma Labs – filed a motion with the D.C. Circuit Court of Appeals seeking a stay of the order. They argue the Attorney General acted without the formal rulemaking process required by law, violating a 1977 D.C. Circuit precedent and international treaty obligations. The petitioners claim the order could harm drug‑testing programs, impose new compliance costs, and undermine investments in FDA‑approved cannabinoid medicines.

Cannabis attorney Thomas LaVigne explained that the Schedule III reclassification primarily provides tax relief for Michigan and other U.S. cannabis businesses, permits deductions for payroll, rent, utilities, marketing and professional services, and facilitates research, while not legalizing recreational use nationwide.