Anonymous asked Mario Ceretto, 8/9/2016 5:45:17 AM
  • Unclassified

If marijuana is rescheduled, what happens to all the elaborate structures cannabis companies are using to comply with 280E?

Do the existing structures just blow up or is there any easy path to normalcy?

1 Answer, 0 Comments
8/9/2016 9:47:45 AM,
Mario Ceretto replied:

The impact of 280E is contingent upon which schedule cannabis is reclassified under.  If moved to Schedule II, 280E still applies while allowing FDA intervention and opens the door to big Pharma.  If reclassified under III or lower, 280E will not apply and therefore cannabis touching businesses will have more benefits such as access to banking (hopefully), attract investment, and retain earnings for long term growth.  Currently Outside investors are hesitant to invest in cannabis due to 280E therefore most investment dollars are going into holding companies (i.e. Real Estate) and/or ancillary businesses.  The complex structures and transactions driving revenue from the cannabis to the non-cannabis touching entities would be simplified.  In addition, the selection of business entity type would be more flexible in that flow-through entities (i.e partnerships) would not pass 'inflated income' to individual owners due to expenses disallowed under 280E.  Overall the elimination of 280E through rescheduling depends on which Schedule its classified.  If 280E was non-applicable, the barriers to entry in the cannabis industry would be largely reduced.