The Rescheduling Optimism Is Real. The Final Rule Isn't.
Every cannabis deal I've worked on in the past year has had the same conversation somewhere in it: what happens when 280E goes away? And I get it. Trump signed the executive order in December 2025 directing the DOJ to fast-track rescheduling to Schedule III. The industry has been waiting for this moment for years. The optimism is warranted.
But optimism is not a tax strategy. And right now, buyers are letting it function as one.
The DEA has not published a final rescheduling rule. The IRS has explicitly told operators that refund claims filed in anticipation of rescheduling are not valid. Cannabis is still Schedule I under federal law, and 280E is still fully in effect — today, this quarter, for every licensed operator in the country.
What 280E Actually Does to a Deal
280E blocks cannabis businesses from deducting ordinary operating expenses on their federal returns. Rent, payroll, marketing — none of it. The only lever is cost of goods sold. Which means a dispensary doing $5 million in revenue with $2 million in COGS is paying federal taxes on $3 million — not on actual net profit.
Where the Underwriting Goes Wrong
The mistake I'm seeing is buyers pulling post-280E cash flow projections — normalized earnings that assume the tax burden disappears — and then pricing the acquisition on those numbers. The logic is that rescheduling is coming, so why not model for it?
Because if the final rule slips to late 2026, or 2027, the buyer is holding an asset priced on economics that don't exist yet. Every month that passes before rescheduling lands is a month of 280E exposure they didn't price.
How to Structure Around It
I've closed deals in this exact environment — a $4.5M office and cannabis retail license in Riverside County, a $1.25M pre-operational retail license in Costa Mesa, a $1M retail and delivery license also in Riverside County. None of them were structured as if 280E was already solved.
The right approach is to underwrite on today's tax reality and build rescheduling upside into the deal structure rather than into the headline price. Specifically:
- An earnout tied to a rescheduling effective date — seller participates in the upside once the final rule lands, not before.
- A seller carry that converts on favorable terms once 280E relief materializes within a defined window.
- A hold-back that adjusts if rescheduling takes effect before a specified date — gives the buyer downside protection and the seller a path to full value.
Those structures let the buyer participate in the upside without front-loading risk they can't control. They also give sellers a credible path to capturing the full value of their business — just on a timeline tied to actual events, not projected ones.
The Bottom Line
Rescheduling will probably happen. The executive order, the political alignment, and the administrative momentum all point in that direction. But probably and eventually don't change your Q2 tax bill.
Until the DEA publishes a final rule and it takes effect, every cannabis deal in the country is being done under 280E. Price it that way. Structure it that way. And if the buyer wants to bet on the timing, put that bet in the earnout — not in the purchase price.