AAFCPAs would like to make cannabis clients aware that TerrAscend Corp., in its fourth-quarter earnings call, announced it would no longer be making tax payments under Section 280E of the Internal Revenue Code. The company’s Chief Financial Officer noted its...
AAFCPAs would like to make cannabis clients aware that TerrAscend Corp., in its fourth-quarter earnings call, announced it would no longer be making tax payments under Section 280E of the Internal Revenue Code. The company’s Chief Financial Officer noted its legal basis in doing so comes from a legal interpretation based on a similar position outlined in the Boies Schiller Flexner lawsuit against the U.S. Attorney General Merrick Garland, which claims the Controlled Substances Act unconstitutionally interferes with state legal cannabis markets.
Following this tax position, the company reclassified $59.2M in tax liabilities on its 2023 balance sheet as long-term liabilities. The company expects approximately $26M in federal and state refunds related to 2020 and 2021 resulting from this tax position and plans to file as an ordinary taxpayer going forward.
TerrAscend Corp. is one of several operators announcing plans to cease payments related to Section 280E. Ascend Wellness Holdings, based in New York, and Jushi Holdings, based in Boca Raton, have similar tax strategies. Trulieve Cannabis Corp., a Florida-based MSO, announced that it received $113M in tax refunds after amending past returns based on its own interpretation of its 280E obligation.
Cannabis operators interested in taking a similar tax position or filing protective claims for previous years may contact AAFCPAs to discuss feasibility and next steps.
If you have questions, please contact David Gravel, CPA, MPAc, Tax Director at 774.512.4008 or dgravel@aafcpa.com, David McManus, CPA, CGMA, Tax Partner & Cannabis Practice Leader at 774.512.4014 or dmcmanus@aafcpa.com—or your AAFCPAs Partner.
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