TerrAscend Corp. Joins Other Operators Changing 280E Tax Position 

Posted on

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@nullaafcpa.com, David McManus, CPA, CGMA, Tax Partner & Cannabis Practice Leader at 774.512.4014 or dmcmanus@nullaafcpa.com—or your AAFCPAs Partner. 


About the Authors

David Gravel

David J. Gravel, CPA, MPAc

Dave is a leader in AAFCPAs’ cannabis practice. He provides tax and consulting solutions to multi-state operators, recreational and medical retailers, cultivators, product manufacturers, and investors. He has extensive experience advising cannabis operators and license applicants on optimal entity structure, maximizing deductions in accordance with IRC Section 280E, and multi-year tax planning to ensure preferred tax results, with a focus on preserving cash and maximizing lender/investor value. He also provides guidance on avoiding pitfalls associated with …
David McManus

David McManus, CPA, CGMA

Dave leads AAFCPAs’ national Cannabis Business Practice, and has been deeply immersed in understanding the complex financial and operational nuances of the industry since 2012. His subject matter expertise was sought by the U.S. Treasury and Senate Finance Committee for guidance on critical considerations regarding the 280E transition following DEA rescheduling news. As a key advisor through the AICPA, Dave and his cannabis team provides insights to shape regulatory guidance on this issue. He provides highly …