MICHEL MARTIN, HOST:
For more on what the new classification of medical cannabis means for consumers and the industry, we've called someone who's also been following this issue closely. That's Gillian Schauer. She is executive director of the nonpartisan Cannabis Regulators Association. Good morning. Thanks so much for joining us.
GILLIAN SCHAUER: Thanks for having me, Michel.
MARTIN: So what immediate impact will this change have?
SCHAUER: Well, I think it's important to emphasize, first, that this order did not legalize marijuana across the country. As was mentioned, this only moves medical marijuana in the form of both FDA-approved medical marijuana drugs and state-licensed medical marijuana from Schedule I, which has been federally illegal, to Schedule III, which allows for medical use. So really, this move creates federal legality for medical marijuana products, but it's not full legalization.
The most affected parties are really going to be those businesses that manufacture, distribute and dispense state-licensed medical marijuana. There are over 40 states with regulated medical marijuana programs, and under the Schedule III designation, these businesses will be able to take certain tax deductions that they couldn't take when medical marijuana was Schedule I. Estimates are that this could move the effective tax rate or tax liability for medical marijuana businesses from 70 or 80% down to 20 or 30%. So it's a really big change for those medical marijuana businesses.
MARTIN: Is that right away? So let's - assuming that businesses like people - most people have filed their taxes, like, April 15, but businesses generally file estimated taxes. Does this mean that immediately they can start changing their - this will immediate - have an immediate impact on how they file their taxes in this next quarter, for example?
SCHAUER: So just last night, we got news from the U.S. Department of Treasury that they will be issuing guidance on this, and I expect that that guidance will give a lot more details about exactly how this will be implemented. I think it's important to note that the order also called on the U.S. Department of Treasury to assess whether or not this tax break could be retroactive for any businesses since the time that they got their medical marijuana license. So we could see this actually go back in time and allow people to deduct taxes from filings that have already happened.
MARTIN: So Ben was just telling us that the industry has been dominated by cash transactions because companies have had problems getting access to banking. Do you think that major banks will now open their doors?
SCHAUER: I certainly think this will change how folks think about the medical space, but again, a lot is going to depend on the guidance that we see come down from the U.S. Department of Treasury and guidance we see from FinCEN and other, you know, federal agencies that have been involved in this space, setting guidelines around banking.
MARTIN: So we've heard that the next step is a broader review of marijuana from the Justice Department that could include recreational uses. Say more about what that means. Like, what do you expect to happen in that review?
SCHAUER: So I think it's interesting to note that this is a very narrow rescheduling and just focuses on the medical side. So recreational marijuana is still federally illegal. Businesses that are manufacturing, distributing and selling won't get these tax breaks, and there will be a hearing process starting at the end of June to discuss rescheduling all these marijuana products that are not subject to state medical marijuana laws or FDA approvals.
You know, we've seen that process play out - or start to play out - back in 2024 and 2025. So it's unclear whether it will be expeditiously set or whether it will draw out over a number of months, but that will be the focus. I expect we may also see discussion about hemp. So the order does not impact hemp. And it should be noticed that - noted that the definition of hemp is set to become narrower in November, following language that was passed by Congress last year. So there will be folks trying to figure out where hemp will fit into this puzzle over the hearing process as well, I predict.
MARTIN: So does your association - you know, your association - by definition, it represents, you know, lots of different types of people. I mean, it represents the people who are regulators. Does the - does your association plan to take a position in this upcoming review? Like, what do you think sort of more broadly - is there a consensus of the direction that the regulators you represent want the government to go into?
SCHAUER: So we are a broad coalition of governments. We're an association that is just government folks, and no state has legalized marijuana in exactly the same way. So we are not likely to take a position. One of the things we will be emphasizing, though, is the need for research. And as was mentioned, moving marijuana to Schedule III for medical designation makes some aspects of research easier, but researchers still have trouble doing work with the products that are in their state marketplaces. And so that's a focus that, you know, we will have in trying to make sure that research is expanded.
MARTIN: And why is that important?
SCHAUER: We have been implementing policy that's far ahead of where the science is. So, you know, regulators often tell me, it's like we're flying the plane blind while building it without the parts. And research is a really key part of that equation. So we definitely need to get more research to help inform regulations and keep consumers safe.
MARTIN: That's Gillian Schauer. She's executive director of the Cannabis Regulators Association. Thank you so much for sharing these insights with us.
SCHAUER: Thanks for having me. Transcript provided by NPR, Copyright NPR.
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