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D.C. Download: How will reclassifying marijuana affect Nevada?

The federal move to stop treating cannabis on par with heroin is expected to make the tax structure more favorable to the state-legal marijuana industry.
Gabby Birenbaum
Gabby Birenbaum

If you lit up (figuratively or literally) at the news that the Drug Enforcement Administration (DEA) is moving to reclassify marijuana to a less-strict tier, this newsletter is for you.

If you’re in Nevada, feel free to spark up and learn about what comes next for the cannabis industry and users alike from this new policy.

The News of the Week: Cannabis reclassifying

For years, advocates have called upon presidential administrations to reclassify marijuana or deschedule it entirely from the DEA’s list of controlled substances. 

On Wednesday, the Biden administration took the furthest step towards legalizing weed since it was first criminalized, announcing it would reclassify marijuana from its current status as a Schedule I drug, on par with heroin and ecstasy, to Schedule III, which includes drugs such as ketamine and anabolic steroids that are allowed for medical use.

The move is both historic and a half step. Its greatest impact will likely be on the tax burden for cannabis businesses, which can now take tax write-offs not afforded to “illegal” businesses, and on the scientific community, which now has the proper authority to study its medicinal benefits at the federal level.

For Nevadans, nothing will be immediately different. The DEA decision comes after President Joe Biden ordered a review of the department’s marijuana policy in late 2022; the proposal must now undergo public comment and then ultimately rule finalization, which is expected to take months.

But if the rule goes through, Nevada’s burgeoning cannabis industry could see a significant financial barrier reduced.

The Nevada Angle

The biggest change reclassification would bring to Nevada would be the elimination of Section 280E burdens to the cannabis industry.

Section 280E is a segment of the tax code that prohibits companies from claiming standard business deductions and credits if they are engaged in activity that is considered illegal at the federal level, even if, like in Nevada, cannabis is legal in the state. That law can result in tax rates of more than 70 percent for marijuana businesses, creating a massive barrier to entry and earning a profit.

Clark County Commission Chairman Tick Segerblom, a longtime cannabis advocate who has the distinct honor of having toked on the White House roof, said the 280E burden has significantly handicapped the cannabis industry in Nevada. 

“It’s just so hard to make money when you can't deduct your expenses,” he said in an interview.

Layke Martin, the executive director of the Nevada Cannabis Association, said there is still a long road between proposing a rule and finalizing it, including potential legal challenges. But she expects reclassification to eventually raise these businesses’ bottom lines.

“In the long term, hopefully, the elimination of this incredibly burdensome federal tax code application to state-licensed businesses will help the industry, which is currently struggling both in Nevada and nationwide,” Martin said in an interview.

Segerblom also said he hopes reclassification can bring Las Vegas one step closer to becoming the “Amsterdam of the West,” as he likes to dream of — smoking weed in Las Vegas’ iconic hotels and casinos.

On the Strip, the smell of marijuana outside can be as omnipresent as neon lights or blackjack tables, even though consumption outside a designated lounge or private residence is illegal. Segerblom believes reclassification — while not enough to push properties to host dispensaries or start selling joints — might convince hotels to start earmarking rooms for weed smokers the way that they do for people who want to smoke cigarettes in their hotel rooms. 

“Hotels maybe can't sell yet, but there's no reason they couldn't have a room or multiple rooms where guests are allowed to go smoke,” he said, adding that he had already discussed the idea with hotel operators.

Martin said that as long as marijuana remains scheduled, even at a lower level, she does not expect cannabis and gaming will mix. And both Martin and Segerblom said congressional action is still needed on banking, so that cannabis companies can have access to traditional banks and financial tools and customers can use major credit cards at dispensaries. 

A proposal to do just that is being considered in the Senate this year, with the support of both of Nevada’s senators. 

But they agreed that the reclassification, while short of the ultimate goal of descheduling, is significant. 

“We have millions of adults who are using cannabis to treat ailments, instead of other types of prescription drugs,” Martin said. “And so for the government to recognize that, finally, is a big step in the right direction.”

The Impact

The Biden administration and supportive Democrats hope that reclassification has electoral as well as practical impact. Several of Nevada’s Democratic delegation members praised the decision publicly.

Weed policy also has the distinction of appealing to younger voters — or so the Biden campaign hopes, particularly as polling shows these voters objecting to Biden’s handling of the Israel-Gaza war.

While we didn’t talk about the politics of it, Sen. Jacky Rosen (D-NV) told me in a brief interview that she was “pleased” with the Biden administration’s decision on the issue.

“Nevada has been successfully regulating cannabis since 2017,” she said. “It’s time federal regulations catch up. We’ve got a lot more work to do, but this is certainly a step in the right direction.”

Around the Capitol

🧑‍⚕️ACA for DACA Immigrants with Deferred Action for Childhood Arrivals (DACA) status are now eligible for health insurance through the Affordable Care Act due to a new Biden administration rule published Friday.

The administration expects 100,000 DACA recipients to claim coverage under the new rule, a significant development for an underinsured population.

DACA recipients in Nevada can apply for coverage on the federal or state marketplace starting in November.

👮CCM hops on FAA amendment-palooza — With the bill authorizing the Federal Aviation Administration to do its work expiring May 10, senators have hopped on the reauthorization bill as an opportunity to add their highest legislative priorities to a rare measure they believe can win 60 votes.

Because it is one of the only bills that virtually must pass, senators will file bills — often wholly unrelated — as amendments to try and ensure they catch a ride on a train they know is leaving the station.

Cortez Masto joined the fray Thursday, filing an amendment to attach her Combating Illicit Xylazine Act to the bill. Her legislation would schedule the tranquilizer and provide new resources to law enforcement to go after xylazine trafficking.

👫They’ve got a friend in John — Both Nevada senators put out legislation this week with Sen. John Cornyn (R-TX), one of two Senate Johns vying to replace Sen. Mitch McConnell (R-KY) as party leader after the election.

Cortez Masto partnered with Cornyn on a bill to fund job training programs for English language learner teachers. Meanwhile, Rosen and the Texan have a bill to lower prescription drug costs for Medicare recipients by adjusting the formula by which coinsurance payments are determined.

As Democrats, they won’t get a vote in who the next Republican leader is. But maybe their choice of bipartisan partner is doing the talking.

🏥Senators press for VA hospital in Reno After successfully pushing for the president to include funding for a new Veterans Affairs hospital in Reno in his last budget, both Nevada senators have now signed onto a bill to authorize its construction. 

Rosen and Cortez Masto signed onto a bill from Sens. Jon Tester (D-MT) and Jerry Moran (R-KS) to authorize the construction of 11 VA projects across nine states and territories. The bill needs to be passed in order for work to begin in Reno.

What I’m Reading

The Los Angeles Times: Nuclear waste storage at Yucca Mountain could roil Nevada U.S. Senate race

The 2022 audio recording heard around the state is injecting a new line of attack for Democrats against Sam Brown.

The Nevada Independent: GOP discord over House leadership tanks Amodei’s pro-mining bill, at least for now

The call is coming from inside the House.

Punchbowl News: The House members who want their colleagues out of Congress

Rep. Steven Horsford (D-NV) is using his power as Congressional Black Caucus chair to try to ensure Detroit has a Black representative in the next Congress.

Notable and Quotable

“There are two diverse cultures here. And one just hates mining.”

— Rep. Mark Amodei, on the opposition to his mining bill

Vote of the Week

H.Res.1112Denouncing the Biden administration’s immigration policies

This is another messaging bill — resolutions, by definition, just express the sense of the chamber — designed to divide Democrats and create an electoral talking point. And it did just that!



LEE: Yes



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