In the world of leveraged finance, operating without the ability to deduct SG&A expenses from taxes is a total nonstarter. But for US cannabis companies — particularly those on the adult-use recreational side — such a move currently remains out of reach.
This, however, could soon change following a series of expedited hearings on the broader rescheduling of cannabis to a Schedule III drug, which would put it in the same group as Tylenol with codeine and testosterone. Formal administrative hearings held by the Department of Justice and Drug Enforcement Administration kicked off on 29 June and concluded on 15 July, potentially paving the way for a final rule that would dismantle the industry’s heaviest tax burden and free up savings for cannabis companies.
More importantly, for cannabis companies with upcoming debt maturities, the ability to deduct these expenses could boost their credit profile and position them for interest rate savings when they refinance.
Joint relief
As it stands, only state-licensed medical cannabis has received a federal reclassification to Schedule III. This was a result of a historic final order issued on 23 April by acting Attorney-General Todd Blanche, which comes on the back of President Donald Trump’s December...
