By Daniel Sabet · Cannabis CFO & Financial Advisor, GreenGrowth CPAs · 280E, Tax Strategy & Growth Planning · Los Angeles, CA | Published June 2026 | Cannabis Tax & Regulatory
On June 29, 2026, the DEA begins a hearing that could reshape the financial structure of every adult-use cannabis business in the country. Here is what has already happened and what has not. In April, the Department of Justice and DEA issued a final order moving FDA-approved marijuana products and state-licensed medical marijuana from Schedule I to Schedule III. That part is done. Adult-use cannabis, the segment where most of our clients operate, remains Schedule I. IRC Section 280E still applies to adult-use operators exactly as it did last year. The June 29 hearing is where the DEA takes up the broader question: should marijuana as a whole, including adult-use, move to Schedule III. The hearing runs from June 29, recesses for the July 4 holiday, reconvenes July 6, and concludes no later than July 15. A hearing concluding is not the same as a final rule, and any resulting rule is likely to face legal challenges. The planning conversation needs to start now.
QUICK ANSWER
The June 29, 2026 DEA hearing addresses whether adult-use cannabis should move from Schedule I to Schedule III, which would end 280E's application to those businesses. The hearing concludes no later than July 15, but a concluded hearing does not guarantee a final rule by that date, and any rule is likely to face legal challenges. Adult-use operators should model three scenarios now: no change, partial movement, and full rescheduling, so they are prepared for any outcome rather than reacting to one.
The June 29 DEA Hearing: At a Glance
- What already happened: In April 2026, DOJ and DEA moved FDA-approved marijuana products and state-licensed medical marijuana from Schedule I to Schedule III, effective April 28, 2026.
- What has not changed: Adult-use cannabis remains Schedule I. 280E continues to apply to adult-use operators today.
- What the June 29 hearing addresses: Whether marijuana as a whole, including adult-use, should move to Schedule III. The hearing runs June 29 through no later than July 15, with a recess from July 3 to July 6.
- Key constraint: A concluded hearing is not a final rule. The timeline to an actual rule change, if one comes, is separate and likely longer, and any rule will likely face legal challenges.
- The financial stakes: If adult-use cannabis exits Schedule I, 280E stops applying. Operators would deduct their full operating expense base instead of only COGS, a major shift in effective tax rate.
- GreenGrowth's role: We build three-scenario financial models for adult-use operators so you know your cash position under no change, partial movement, and full rescheduling. Book a CFO Discovery Call →
What Is the June 29 DEA Hearing on Cannabis Rescheduling?
The June 29 hearing is an expedited administrative proceeding before a DEA administrative law judge. It begins at the DEA Hearing Facility in Arlington, Virginia. According to the Federal Register notice, the hearing recesses on July 3 and reconvenes on July 6, then concludes no later than July 15, 2026.
This hearing replaces an earlier rescheduling proceeding that DOJ and DEA terminated. The new hearing is expedited under a December 2025 executive order directing the Attorney General to complete the rescheduling rulemaking process as quickly as federal law allows. The hearing will consider whether marijuana more broadly, beyond the narrow medical category already addressed in April, should move from Schedule I to Schedule III.
What Already Changed in April 2026
Before the June 29 hearing even begins, a separate order already took effect. On April 28, 2026, FDA-approved marijuana drug products and marijuana subject to a qualifying state medical marijuana license moved to Schedule III. This was a narrow action. It did not touch adult-use cannabis. Any marijuana that is not part of an FDA-approved product and not covered by a state medical license, which describes most of the adult-use market, remains Schedule I. 280E continues to apply to those businesses without change.
What Happens If Adult-Use Cannabis Moves to Schedule III?
IRC Section 280E disallows ordinary business deductions for businesses trafficking in Schedule I or Schedule II controlled substances. Schedule III substances fall outside that definition. If adult-use cannabis moves to Schedule III, 280E would stop applying to those businesses.
The practical effect is significant. Today, a dispensary can only deduct cost of goods sold. Rent on the retail floor, marketing, most salaries, and general administrative costs are not deductible federally. If 280E no longer applies, all of those become deductible ordinary business expenses, the same as for any other retailer. For a typical dispensary, this changes the effective federal tax rate dramatically, often by double digits as a percentage of revenue.
▶ Three Scenarios for Adult-Use Operators
| Scenario | 280E Status | Financial Impact |
|---|---|---|
| No Change | Continues to apply to adult-use | Operate exactly as today. No change to estimated payments or COGS planning. |
| Partial Movement | Some narrow category shifts, adult-use largely unaffected | Limited near-term change. Monitor for follow-on rulemaking that could affect adult-use later. |
| Full Rescheduling | 280E no longer applies to adult-use | Full operating expense base becomes deductible. Effective tax rate drops significantly. Estimated payments, entity structure, and cash flow planning all need to be revisited. |
These scenarios describe the tax framework under each outcome. They do not predict which outcome will occur or when. Effective dates for any rule change would follow standard rulemaking timelines and would likely involve a transition period.
💬 The Conversation Worth Having
Every cannabis operator I talk to this month asks the same question: when will 280E go away? The honest answer is that nobody knows, and anyone who tells you a specific date is guessing. What we can do is build the model now. If 280E disappears for adult-use tomorrow, do you know what your effective tax rate becomes? Do you know how your entity structure should change? Do you know what that means for the Q3 estimated payment you are about to make? Those are answerable questions today, regardless of what the DEA decides on July 15.
Want a three-scenario financial model built for your operation before July 15?
Book a Review →How Should Adult-Use Dispensaries Prepare Financially Before July 15?
Preparation here does not mean predicting the outcome. It means having the numbers ready for whichever outcome arrives, and not losing time after the fact figuring out what it means for your business.
Build Your Current-State Baseline
Start with your actual 2026 numbers under the current rules. What is your COGS as a percentage of revenue. What operating expenses are currently disallowed under 280E. What does that produce as your effective federal tax rate today. This baseline is the reference point for every scenario.
Model the Full Rescheduling Scenario
Take your current operating expenses that 280E disallows. Add those back as deductible expenses. Recalculate your effective tax rate. The difference between this number and your baseline is the size of the opportunity if full rescheduling happens. For most dispensaries, this is not a marginal change. It is often the difference between a federal effective rate well above 50% and one closer to a standard corporate rate.
Revisit Estimated Tax Payments Carefully
Do not change your Q3 estimated payment based on an assumption about the hearing outcome. The September 15 deadline operates under current law. Pay based on current law. If a rule change happens with retroactive features or a clear effective date, your CPA can help you adjust subsequent payments. Acting early on an assumption that does not materialize creates its own penalty exposure.
Review Entity Structure Under Each Scenario
Entity structure decisions made under 280E often look different once 280E is removed from the equation. An S-Corp election that made sense to minimize 280E exposure may not be the optimal structure once the full expense base is deductible. This is not a decision to make today, but it is a scenario worth having modeled so you can move quickly if the landscape changes. For more on how we approach this, see our 280E rescheduling resource center.
How Do You Model Cash Flow Scenarios for Different DEA Hearing Outcomes?
Cash flow modeling for this situation works best as a simple side-by-side comparison rather than a complex forecast. Build three columns: no change, partial movement, and full rescheduling. For each column, calculate quarterly tax liability, available cash after tax, and the impact on any planned capital expenditures or distributions.
The value of this exercise is not in predicting which column becomes real. It is in removing the scramble if and when one does. If full rescheduling becomes reality later in 2026, operators who already have the model built can move immediately on entity structure, distribution timing, and reinvestment decisions. Operators without the model spend weeks catching up. Our cannabis CFO services team builds this scenario model as part of mid-year planning for adult-use clients.
KEY TAKEAWAYS
- ›April 2026 already moved FDA-approved and state-licensed medical marijuana to Schedule III. Adult-use cannabis remains Schedule I, and 280E continues to apply to adult-use operators today.
- ›The June 29 DEA hearing addresses whether marijuana more broadly, including adult-use, should move to Schedule III. It runs through no later than July 15, with a recess from July 3 to July 6.
- ›A concluded hearing is not a final rule. There is no guaranteed outcome by July 15, and any resulting rule will likely face legal challenges before taking effect.
- ›If adult-use cannabis exits Schedule I, 280E stops applying. Operators would deduct their full operating expense base, not just COGS, a major shift in effective tax rate.
- ›Build a three-scenario model now: no change, partial movement, full rescheduling. This puts you in a position to act quickly regardless of outcome.
- ›Continue paying Q3 estimated taxes under current law. Do not adjust based on an assumed hearing outcome. Adjust if and when a rule with a clear effective date is finalized.
Frequently Asked Questions
The June 29, 2026 DEA hearing is an expedited administrative law proceeding at the DEA Hearing Facility in Arlington, Virginia. It addresses whether marijuana more broadly, including adult-use cannabis, should move from Schedule I to Schedule III of the Controlled Substances Act. According to the Federal Register notice, the hearing begins June 29, recesses on July 3, reconvenes July 6, and concludes no later than July 15, 2026.
This hearing follows a separate April 2026 order that already moved FDA-approved marijuana products and state-licensed medical marijuana to Schedule III. The June 29 hearing takes up the broader question of whether the rest of the cannabis industry, primarily adult-use operations, should follow.
If adult-use cannabis moves to Schedule III, IRC Section 280E would stop applying to those businesses, because 280E only applies to Schedule I and Schedule II substances. Operators would be able to deduct their full ordinary and necessary business expenses, not just cost of goods sold.
For most dispensaries, this changes the effective federal tax rate substantially. Expenses like retail rent, marketing, most wages, and general administrative costs, which are currently non-deductible under 280E, would become deductible like any other retail business. The size of this shift depends on each operator's current COGS ratio and expense structure, which is why building a specific model for your business matters more than relying on industry averages.
Preparation means building a baseline of your current financial position under existing rules, then modeling a full rescheduling scenario where 280E no longer applies. Calculate your current effective tax rate, then recalculate it assuming your full operating expense base becomes deductible. This gives you a concrete picture of what is at stake.
It also means continuing to operate under current law for near-term decisions. Q3 estimated tax payments due September 15 should reflect current rules, not an assumed outcome. Entity structure changes should be modeled but not necessarily executed until a rule with a clear effective date exists. The goal before July 15 is readiness, not action based on speculation.
280E applies to businesses trafficking in Schedule I or Schedule II controlled substances. If adult-use cannabis moves to Schedule III as a result of the rulemaking that follows the June 29 hearing, 280E would no longer apply to those businesses by its own terms. This would not require a separate change to the tax code itself. The scheduling change alone removes the trigger for 280E's application.
It is important to note that a hearing concluding by July 15 does not mean a final rule exists by that date, and any final rule would likely include an effective date and could face legal challenges that delay implementation. The scheduling change, if it happens, is likely to follow its own timeline separate from the hearing's conclusion.
The most useful approach is a side-by-side comparison across three scenarios: no change, partial movement, and full rescheduling. For each scenario, calculate quarterly tax liability, post-tax cash available, and the impact on planned capital expenditures or owner distributions. Use your actual 2026 financials as the base case for all three columns.
This model is not about predicting which scenario becomes reality. It is about removing the lag between a regulatory change and your financial response. Operators with the model ready can move on entity structure, reinvestment, and distribution decisions immediately if the landscape shifts. Operators without it spend weeks rebuilding the analysis after the fact, time that often matters.
Right now, the highest-value action is building the three-scenario model described above using your current financials. This does not require waiting for any hearing outcome and gives you a reference point regardless of what happens. Continue operating and paying taxes under current law, including your Q3 estimated payment due September 15.
Beyond the model, review your entity structure documentation so you understand what would be involved in changing it if 280E no longer applies to your business. You do not need to make changes now, but knowing your starting point and the steps involved means you can move quickly later. GreenGrowth CPAs builds these scenario models as part of mid-year planning for adult-use cannabis clients across California, New York, New Jersey, Minnesota, and Delaware. To start, book a CFO Discovery Call.
Be Ready for Any Outcome, Not Just the Likely One
GreenGrowth CPAs builds three-scenario financial models for adult-use cannabis operators ahead of the June 29 DEA hearing. We model your current 280E position, your full-rescheduling position, and what entity and cash flow decisions look like under each. We work with operators across California, New York, New Jersey, Minnesota, and Delaware.
KEY NUMBERS
Know Your Numbers Before the Headlines Change.
Whatever the DEA decides, the operators who already have their numbers modeled will move first. Book a CFO Discovery Call and we will build your three-scenario model before the hearing concludes.
Book Your Free CFO Discovery Call →GreenGrowth CPAs · Cannabis Tax & Regulatory Team
