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The ground just shifted — April 2026 rescheduling
State-licensed medical cannabis moved to Schedule III and is no longer subject to §280E. Adult-use stays Schedule I and fully 280E-bound. As a dual-license operator you now run two tax regimes at once — and may claim retroactive refunds on prior medical years. This desk is built for exactly that transition.
Revenue · YTD
$8.4M
40% medical · 60% adult-use
Effective tax rate · today
58%
adult-use opex still trapped by 280E
Recoverable · go-forward
$262K/yr
COGS + structure, on current law
Retroactive refund
$873K
3 open medical years · protective posture · CPA-gated
The 280E burden
What 280E still traps
Only COGS is deductible on adult-use; every operating dollar above the line is taxed
The April 2026 medical relief already cut the bill. COGS maximization and CHAMP entity structuring recover most of the rest on adult-use under current law — and a full rescheduling (the June 29 hearing) would bring you to a normal ~28% rate. Open the §280E engine to model your path.
Revenue by regime
Monthly revenue · trailing
Licensed entities
| Entity | Function | Regime | Revenue | 280E? |
|---|
This workstation organizes a cannabis operator's entities, cost accounting, and documentation. It is not a law firm or accounting firm and does not provide tax or legal advice; advice is provided only by licensed professionals under separate engagement. Federal cannabis law is changing rapidly: as of April 2026 state-licensed medical marijuana is Schedule III (outside §280E) while adult-use remains Schedule I (within §280E), Treasury/IRS guidance is forthcoming, a broader rescheduling hearing began June 29, 2026, and a stay challenge to the April order is pending in the D.C. Circuit (DOJ opposition filed July 2, 2026) — outcomes are uncertain and may change these results. COGS allocation, CHAMP entity separation, and refund-claim positions are fact-specific, require genuine economic substance, and must be reviewed by a licensed CPA and/or tax attorney. All figures illustrative.
Licenses & entities
Plant-touching vs non-plant-touching — and which carry the 280E burden after rescheduling
| Entity | Type | License | State | Regime | DEA reg. | 280E status |
|---|
Plant-touching
Cultivation, manufacturing, and dispensary entities. Medical activity is now Schedule III (deductible); adult-use remains 280E-trapped.
Non-plant-touching
Management, real estate, and IP/branding entities — never subject to 280E. The defensible home for shifted functions (CHAMP).
DEA registration
Medical entities register via the standard Schedule III pathway — the expedited 60-day window closed June 26, 2026. Registration status is tracked in the calendar.
§280E engine
The defining cannabis tax problem, modeled live — split your medical and adult-use activity and watch the effective rate move across every scenario
Your operation
$
$
Tax & scenario
What's deductible vs trapped
trapped
medical
COGS
280E-trapped expense$0
Gross profit (taxed under 280E)$4.0M
Deductible operating expense$1.0M
Trapped (non-deductible) expense$1.6M
What this scenario means
Show the math · statute & gates
Formula (E1 · calc280)
Gates. The blended rate is user-set — verified against entity elections. Allocating shared opex by revenue share m is a modeling proxy; the documented reasonable method is selected and signed by the CPA. Modeled range — gated for CPA review.
COGS = R·c GP = R − COGS
deductible D = { legacy: 0 · current: X·m · rescheduled: X }
trapped T = X − D taxable = GP − D tax = taxable·r
effective rate = tax ÷ (GP − X)
Basis. IRC §280E disallows deductions and credits for Schedule I/II trafficking; COGS survives as an exclusion from gross income (S. Rep. 97-494; CHAMP, 128 T.C. 173). “Current” = the DOJ Final Order effective 2026-04-28 — state-licensed medical to Schedule III, adult-use stays Schedule I. The regime split renders from the as-of-dated config above; the full-taxable-year transition treatment is pending Treasury guidance.
Gates. The blended rate is user-set — verified against entity elections. Allocating shared opex by revenue share m is a modeling proxy; the documented reasonable method is selected and signed by the CPA. Modeled range — gated for CPA review.
COGS optimizer
On adult-use, only COGS is deductible — so the game is legitimately capitalizing every defensible cost into inventory under §471
Your mix
$
Cultivators and manufacturers can absorb far more indirect cost into COGS than a pure retailer, whose deductible cost is essentially invoice price plus freight. Full-absorption inventory costing under §471 is the lever — and it must be a real, documented method, not a year-end reclassification.
Reclassifiable into COGS
by cost categoryThese are defensible reclassifications only — production labor, indirect overhead, utilities and rent attributable to cultivation/manufacturing space, depreciation on production equipment. Selling, general, and dispensary-floor costs stay trapped on adult-use. The CPA signs the method.
Structure optimizer
CHAMP v. Commissioner — a separate non-plant-touching trade or business deducts normally. Shift legitimate functions out of the 280E entity
Adult-use opex to reallocate
$
$
$
Shift into deductible entities
How it holds up
CHAMP established that an operator can run a separate trade or business that isn't trafficking — management, real estate, IP — whose expenses fully deduct. The discipline is real substance: a real management company doing real work, a real lease at an arm's-length rent, real IP that's genuinely owned and licensed. Shift the function, document it, and price it defensibly — don't just relabel invoices. The IRS scrutinizes inter-entity fees in this industry hard, which is exactly why the paper matters.
Retroactive refund
Relief for prior medical years is encouraged, not committed — model the exposure and track each year’s statute date
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Protective claims are time-sensitive
A federal refund claim generally must be filed within 3 years of the return (or 2 years of payment). Open years close on a rolling basis — a protective claim preserves the right while Treasury guidance is finalized.
Prior medical operations
$
Claim by year
This estimates the federal tax overpaid because medical operating expenses were disallowed under 280E in years now arguably outside its reach. It is not a determination that the refund is owed — Treasury guidance is still forthcoming and the position is novel. File protective claims to hold the open years while your CPA and counsel build the substantive case.
Structure map
Plant-touching vs not — and now medical vs adult-use. Each split is a tax line and a liability wall
Adult-use · 280E
Medical · Sch III
Non-plant · deductible
Red = 280E-trapped adult-use · teal = medical (now deductible) · green = non-plant-touching deductible entities
Separate the regimes
Medical and adult-use now live under different tax law. Separate entities and books make the deductible side clean and the trapped side contained.
CHAMP the overhead
Management, real estate, and IP entities sit outside 280E entirely — the defensible home for functions shifted off the adult-use entity.
Wall off the cash
A cash-heavy, banking-starved business is a target. Isolating entities protects the enterprise from any single license action or claim.
Cash & capital ledger
Cash-intensive by necessity — every inter-entity move priced, papered, and 8300-tracked
Inter-entity fees · annual
$1.20M
mgmt + rent + royalty
Cash transactions > $10K
142
Form 8300 tracked
Unpapered movements
3
flagged — draft agreements
| Flow | Type | Amount | Basis | Paper |
|---|
Document vault
Licenses, the cost-accounting method memo, and inter-entity agreements — the paper 280E positions live or die on
Licenses & tax method
Structure & agreements
Audit-defense file
280E is among the most litigated areas in tax — here is what's ready if the IRS knocks
Cost accounting & COGS
Structure & substance
Compliance calendar
Cannabis runs on deadlines — license renewals, track-and-trace, excise tax, and the windows that just opened
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Two clocks running right now
D.C. Circuit stay ruling — DOJ filed its opposition July 2; the medical relief carries litigation risk until the court rules. Protective refund claims — each open year’s statute date is tracked; posture is a CPA/attorney call. Both are tracked below.
Cultivate — document to defensible position
Drop in your POS export, seed-to-sale data, and invoices. Cultivate classifies every cost — COGS, medical-deductible, or adult-use-trapped — cites the source, and routes a position to your CPA
1
Ingest
POS, METRC & invoices, normalized
✓
2
Extract
Every cost line, with a citation
✓
3
Classify
COGS / medical / adult-use-trapped
✓
4
Draft
Positions, claims & documents
✓
5
CPA gate
Nothing ships without sign-off
✓
Classified costs
each line cites its sourceRecommended positions
Cultivate is decision-support software. It organizes documents and drafts options; it does not provide tax or legal advice or determine your tax positions. Cost classifications, COGS methods, CHAMP allocations, and refund claims are drafts a licensed CPA and/or tax attorney must review against source documents and approve before filing. Cannabis tax law is unsettled and changing; positions taken in reliance on pending rescheduling or forthcoming Treasury guidance carry risk. Sample data shown for demonstration.
This workstation organizes a cannabis operator’s entities, cost accounting, and documentation. It is not a law or accounting firm and does not provide tax or legal advice; every cost classification, COGS method, CHAMP allocation, regime split, and refund posture is reviewed and ratified by a licensed CPA and/or tax attorney before it becomes a position. Federal cannabis law is moving and outcomes are uncertain. Demo desk · all figures illustrative.