The Tax Test On Cannabis Rescheduling And 280E

Carolyn Schenck authored the article, "The Tax Test On Cannabis Rescheduling And 280E" published in Forbes on October 16, 2026. 

Federal marijuana rescheduling has barely taken effect, and the cannabis industry is already testing how far the change reaches. One of the earliest publicly reported attempts comes from Illinois, where Terra Herbal Health LLC (Terra Herbal), a medical and adult-use dispensary operator, filed a U.S. Tax Court petition in June 2026 seeking a refund and penalty relief. The IRS previously assessed nearly $1 million in deficiencies and more than $580,000 in penalties for 2019 and 2020, partly tied to Internal Revenue Code Section 280E.​

Terra Herbal’s challenge is notable not just for its size, but its timing. It is among the first publicly reported attempts to argue that rescheduling changes the application of Section 280E, potentially for prior tax years.​

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