Beyond Rescheduling: Who Keeps the “$1.6 Billion” in 280E Relief — the U.S. Treasury or Large Operators?

On June 29, 2026 the Drug Enforcement Administration convenes an expedited hearing, set to “conclude not later than July 15, 2026,” on whether the rest of marijuana follows state-licensed medical cannabis into Schedule III (91 FR 22777). The hearing controls scheduling — and with it whether California’s overwhelmingly recreational market ever escapes Section 280E. But scheduling alone does not set the tax outcome. What determines how far 280E relief actually reaches, and for which years, is a different document: the still unpublished Treasury and IRS guidance promised on April 23, 2026, which carries no hearing date and no docket. On the question that matters most to large operators — whether relief reaches back before 2026 — the IRS’s consistent public signal has been negative. The stakes of that guidance are already largely a matter of public record.

What the April Order Did, and What It Did Not

On April 22, 2026, Acting Attorney General Todd Blanche signed a final order, effective April 28, placing in Schedule III “(i) those FDA-approved drug products that contain Δ9-THC falling within the CSA’s definition of marijuana… and (ii) marijuana subject to a state medical marijuana license” (91 FR 22714). Everything else — adult-use product, the plant in bulk, synthesized cannabinoids — stayed in Schedule I. Clause (i) does little real work: the FDA-approved cannabinoid drugs already sit outside Schedule I, since Epidiolex was descheduled in 2020 (Practical Neurology) and Marinol and Syndros contain long-scheduled synthetic dronabinol (Dronabinol). The operative provision is clause (ii) — state-licensed medical marijuana moves to Schedule III while adult-use product remains in Schedule I.

The tax consequence rides on that line. Section 280E disallows ordinary business deductions only for a trade or business “trafficking in controlled substances… in a schedule I or II.” The order says as much: holders of state medical marijuana licenses “will no longer be subject to the deduction disallowance imposed by Section 280E” (91 FR 22714). Relief follows the schedule, not a permit. The order conditions the right to handle the substance on DEA registration, makes that registration subordinate to the state license, and provides that if the state license lapses “the DEA registration is automatically suspended” — but the 280E note is keyed to the schedule move and the state license, not to registration. That distinction matters, and I will return to it.

The order did one more thing, in a single sentence: the Administrator “encourages the Secretary of the Treasury to consider providing retrospective relief from Section 280E liability for taxable years in which a state licensee operated under a state medical marijuana license” (91 FR 22714). Those two verbs — encourages, consider — define the limit of what the order does on prior years. The Attorney General does not set tax policy; he flagged the question and handed it to the only agency that can answer it. The order disclaims any tax determination: “Nothing in this rule constitutes a determination regarding federal tax liability.”

What Treasury Said the Same Day — and Why It Does Not Point to Retroactivity

Concurrently with the order, the IRS previewed guidance, and the preview is narrow and revealing. In an April 23 statement the agency said the forthcoming guidance “would cover expense apportionment” and “would include transition rules for dual-operation businesses,” and — the operative limit — that those transition rules “would apply for a business’ full tax year that includes the effective date of the DOJ’s rescheduling order” (Thomson Reuters Checkpoint).

For a calendar-year operator, that is January 1, 2026. Offered the chance to embrace the Attorney General’s invitation to reach backward, the IRS instead drew its transition rule forward from the start of the current tax year. It said nothing — not one word — about prior years, retroactive claims, or refunds for 2019 through 2025.

So the honest statement of the law today is this. From the 2026 tax year, a qualifying California medical operator has a real, statute-grounded basis to stop applying 280E to its medical operations. For every year before that, there is no relief — only an unanswered “consider,” an agency that has previewed a rule starting in 2026, and a separate body of IRS pronouncements actively hostile to backward-looking claims. Anyone telling California operators that Schedule III unlocks refunds for past years is describing a document Treasury has not published and has, by its only public signal, pointed away from issuing.

The Magnitude Hiding in the Unpublished Guidance

The prior-year question is the most valuable line in the order because the industry has already quantified, in its own filings, exactly what 280E cost it — and operators bet real money that relief would reach back. The figures are public and large.

Start with Trulieve. In October 2023 it announced amended federal returns “claiming a refund of $143 million from taxes paid which the Company believes it does not owe,” for “the years 2019, 2020, and 2021” (Trulieve). It later reported receiving roughly $113 million of the $143 million federally, plus $31 million in corresponding state claims (HBK CPAs, Cannabis Business Times). That claim is one company’s estimate of three years of 280E overpayment — for a single operator, the value of exactly the retrospective relief the April order merely “encourages” Treasury to consider.

TerrAscend put a smaller but now more consequential number on the same question. In a March 2024 8-K it disclosed it had “changed its tax position to challenge its tax liability under… Section 280E,” reclassifying “$59.2 million of tax liabilities… to an uncertain tax position,” and would file amended returns for 2020 through 2022 expecting “approximately $26 million of federal and state refunds” (TerrAscend 8-K). The 2020 return produced an $8.3 million refund in June 2024 — now the subject of the first known clawback suit. On May 18, 2026 the Justice Department sued to recover it, alleging TerrAscend “was not entitled to take deductions” for 2020 and “has not voluntarily returned the erroneous refund” (Business of Cannabis). TerrAscend’s books now carry $138.8 million in uncertain tax positions (Business of Cannabis).

Across publicly traded multistate operators, the disputed 280E amount “has reached $1.6 billion” (Business of Cannabis) — the bet the public operators placed on the proposition that rescheduling would let them recover prior-year tax. That sum is not spread across the field; GreenWave Advisors attributes the bulk of it to the eight largest MSOs — a handful among the 36,665 cannabis licenses active nationwide at the end of 2025 (CRB Monitor), well under one percent of the field. Whitney Economics estimates the entire legal industry paid about $2.24 billion in excess 280E taxes in 2025 alone, and roughly $15 billion since 2018 (Whitney Economics). That $1.6 billion is roughly a tenth of the industry’s entire post-2018 excess 280E burden. The guidance decides who keeps it — the U.S. Treasury or the fraction of 1% of the cannabis industry that has the scale and resources to claim it.

Notice who carries those numbers. Because 280E taxes gross profit, not net income, the burden scales with the size of the operation, and so does the prior-year claim that burden creates. As of March 31, 2026 Trulieve carried $696.4 million in net uncertain tax position liabilities, of which $655.6 million — including $80.2 million in accrued interest — was tied to its 280E challenge (Trulieve 10-Q). That is the accumulated stake behind the refund Trulieve actually filed for. Retroactivity is therefore a nine-figure question for the largest MSOs and a six-figure question for the typical independent: the same guidance reaches both, but the headline recoveries land with the operators that had the most disallowed. The prior-year amounts already on the table sort cleanly by size:

Operator tier	Prior-year 280E at stake	What it represents
All public MSOs (field total)	“$1.6 billion” (Business of Cannabis)	Aggregate disputed 280E balance across public operators’ books
— Trulieve (one MSO)	$143M filed (Trulieve)	Refund claimed for 2019–2021 (~$1.71B net revenue those years, Trulieve) — yet Trulieve now declines to book the position for those pre-2026 years (10-Q)
— TerrAscend (one MSO)	~$26M estimated (TerrAscend 8-K)	Refunds sought for 2020–2022 (~$574M net revenue those years, TerrAscend 10-K); $8.3M received, now clawed back
Independent operators (in the $15B burden, not the $1.6B disputed balance)	—	Illustrative — not public, no disclosed claim
— Median dispensary	~$800K potential	Three amendable years at ~$268K/yr (Headset)
— Small dispensary	~$410K potential	Three amendable years at ~$136,500/yr (CannaBIZ Collects)

The top row is where the $1.6 billion lives: the disputed balance for the public field as a whole, with Trulieve and TerrAscend two of the names inside it, not a sum of it. The independent tiers below the break are not part of that figure — no small-operator claim is publicly reported — but they show the same slope. The public operators’ columns are amounts already filed or estimated in SEC documents; the dispensary figures apply the three-year amendment window the statute allows to each tier’s annual 280E drag. What an operator could reclaim for past years rises and falls with its size, from the publicly-traded field’s $1.6 billion down to a single store’s low six figures.

The IRS Has Never Signaled Endorsement of Retroactivity

The forward question is easy: once medical product sits in Schedule III, the 280E text no longer reaches it, and 2026-forward relief follows. Retroactive relief is different in kind — not a harder reading of the statute but an outcome operators have wanted and the IRS has never signaled it would allow (IRS, IR-2024-177), holding that line for two years.

In its own June 28, 2024 release the IRS stated that operators filing amended returns to claim 280E relief are “not entitled to a refund or payment” and that “these claims are not valid” (IRS, IR-2024-177). It reinforced that on March 6, 2026 in a Tax Court filing in New Mexico Top Organics v. Commissioner, contending the operators’ logic “would produce an absurd result” (Business of Cannabis). Every backward claim depends on treating cannabis as not-Schedule-I for a year it was, and the order’s effective date is April 28, 2026, with the transition rule reaching no further back than the start of the 2026 tax year. The TerrAscend clawback converts that paper position into a collection action with interest. Even the seven House Democrats who wrote Treasury on May 28 urging prompt guidance flagged the three-year statutory window limiting operators’ ability to amend at all (Thomson Reuters Checkpoint).

The most telling confirmation comes from the largest claimant’s books. Trulieve, which uplisted to the NYSE in June 2026 after deconsolidating its adult-use operations to present as a pure-play medical operator, drew exactly that line. In its Q1 2026 10-Q it recorded no uncertain tax position for medical activities under a threshold “specific to the 2026 taxable year,” while concluding the same position “does not yet meet the recognition threshold required by ASC 740 for tax years prior to 2026” — so no part of its $655.6 million 280E liability for earlier years was released (Trulieve 10-Q). It accepts relief from 2026 forward and declines to book it for the years behind. The same filing discloses that in September 2025 the IRS proposed additional tax, interest, and roughly $38.1 million in penalties against several Trulieve subsidiaries (Trulieve 10-Q). When the operator with the largest prior-year claim treats pre-2026 relief as unbooked and contested, smaller operators weighing an amended return will take notice.

The industry is not of one mind, which is the point. In the same quarter, Curaleaf recognized a $98.7 million income tax benefit driven by “the release of $97.0 million of previously recorded tax reserves,” bringing its uncertain tax position to $439.2 million (Curaleaf, SEC). But it does not call the past settled, cautioning that “there can be no assurance that any retroactive application will be permitted,” with magnitude and timing dependent on “the scope of any related guidance issued by the Secretary of the Treasury, including with respect to retroactivity” (Curaleaf, SEC). The company taking the benefit now (Curaleaf) and the one declining to book it (Trulieve) say the same thing about the past: it is not resolved until Treasury writes the guidance.

What This Means for California Operators

California’s market is where this lands hardest, and not in the way the headlines suggest. The state moved fast on the operational side, adopting emergency regulations that let a licensee with a combined A- and M-designated license split it into an A-license and a new M-license (DCC-2026-03-E). The Department commits to reviewing each modification “no later than five (5) business days after receipt,” and the split positioned roughly 1,600 retailers and microbusinesses to pursue DEA registration before the federal priority window closed in late June (CRB Monitor). I have written about how the license modification works and what it does and does not buy you. That machinery is real and worth using, but it solves a registration problem, not a tax problem. California operators will consider this tax problem through a few different lenses.

First, for most California operators, 280E has not gone anywhere. The state is overwhelmingly adult-use, and adult-use product remains Schedule I. Until the June 29 hearing produces broad rescheduling that survives the D.C. Circuit litigation, where consolidated petitioners have moved to stay and vacate it (CannabisRegulations.ai), the recreational side of a California P&L pays 280E in full. The April order delivered relief only for the medical slice — and for a dual operator, the IRS has previewed but not issued the apportionment rules for splitting expenses between the taxed and untaxed sides of one business (Thomson Reuters Checkpoint).

Second, it is worth being careful about the registration-versus-schedule distinction. While some tax counsel advise that a DEA registration must be in hand before 280E stops applying, presented as the conservative posture rather than a confirmed requirement (Bryan Cave Q&A), the order’s text does not impose that condition. 280E turns on the schedule, and the order ties the tax note to the state medical license and the schedule move. Obtaining registration is a sensible hedge, but treating it as a settled prerequisite, and building a filing position around an assumed rule, carries its own risk.

Third, and most important for the prior-year temptation: the path that produced Trulieve’s $113 million and TerrAscend’s $8.3 million is the one the government is reversing, and that matters most in California, a market of independents. As of June 23, 2026 the Department of Cannabis Control reported 7,774 licenses statewide, 7,588 active (DCC). On the burden scale above, almost none sit at the top. The national MSOs that anchor it barely operate here: Curaleaf and Trulieve exited California in 2023, Cresco Labs and TerrAscend in 2025, citing price compression, high taxes, and an illicit market that still accounts for most sales (mg Magazine, Couch Lock’d). The state’s own large operators are private (STIIIZY) or traded over-the-counter (Glass House Brands, which only applied to uplist to the NYSE in June 2026), but the shape is the same barbell: a few large operators, thousands of independents.

Among the state’s 4,577 cultivation licenses, the largest group is “Small Outdoor” (DCC), and its roughly 1,600 retailers and microbusinesses (DCC, via CRB Monitor) sit in the median-and-below tiers of that chart, not among the nine-figure MSOs. The typical California licensee is a single-storefront retailer or small cultivator, and its potential prior-year recovery is modest — six figures, not nine. But the downside is the same one the MSOs face: the IRS has shown no public sign it will open pre-2026 years to anyone, and an operator that files an amended return anyway invites the audit, denial, and clawback-with-interest the government is already pursuing against TerrAscend. Same exposure, smaller payoff.

What I Am Watching

I am watching for the IRS guidance, and I will read it for three things in order: whether it confirms the 2026-forward effective date the transition-rule preview implied; whether and how it lets dual operators apportion expenses between Schedule III medical and Schedule I adult-use activity; and whether it says anything at all about prior years. The first two are where the real planning begins. The third is the $1.6 billion question, and until the agency answers it in writing, the prudent assumption is the one its own conduct supports: the past stays closed.

For the present, the available moves are narrow, and none is free of risk. A California operator with genuine medical activity can position it for 2026-forward relief through the A/M license modification the state has made available under DCC-2026-03-E and the DEA registration that follows. But for a dual operator whose adult-use side remains Schedule I, that registration is a federal filing that asks the firm to account for prior unregistered controlled-substance activity — not a step to take without counsel. Whatever the registration decision, segregating medical from adult-use revenue and expense against the apportionment rule to come is prudent on its own. An operator without medical activity gains nothing from the April order. And no operator should file amended prior-year returns chasing the Trulieve refund without noticing that Trulieve itself now declines to book that position for the years behind it, and that the same maneuver is the subject of the government’s first clawback suit (TerrAscend).

The hearing through July 15 is the event the industry can see. The guidance no one has published is the one that moves the money, and answers the “$1.6 Billion” question.