It appears a second multistate operator has figured out a formula to escape the federal tax burden of 280E.
After Florida-based Trulieve Cannabis Corp. (CSE: TRUL) (OTCQX: TCNNF) last month revealed that it found a way to negate the 280E provision in the federal tax code, saving the company $113 million in taxes after it filed several years’ worth of amended returns, many in the cannabis trade were left scratching their heads as to how the company cracked the longstanding legal puzzle.
The 280E provision bars those who traffic in Schedule I and Schedule II controlled substances from claiming standard business tax deductions, effectively driving up the corporate tax rate for the entire U.S. marijuana industry.
But now, New York-based Ascend Wellness Holdings (CSE: AAWH.U) (OTCQX: AAWH) appears to be attempting a similar play. The company’s leadership expressed confidence during its quarterly earnings call Tuesday that it would not only work, but that the expected refunds would cover the company’s entire tax bill for 2023.
“We filed 2020, 2021, and 2022 amended federal tax returns. We plan to file 2023 federal return as a normal corporate taxpayer, excluding 280E. As a result of these amendments, we expect these refunds to cover our 2023 federal tax obligations,” CFO Mark Cassebaum said during the call.
Though Cassebaum didn’t put a specific number on how much in tax returns the company was now expecting, the company reported income tax expense for 2023 of $33.4 million.
“Those expected refunds from those returns will cover our 2023 tax obligation and then a little bit. And on a go forward basis, we are paying our 2024 estimated federal non-280E taxes each quarter,” Ascend CEO John Hartmann added.
Trulieve leadership was tight-lipped about how it handled the Internal Revenue Service into granting such an enormous refund, and Ascend executives didn’t share anything beyond the news of the amended filings. But the two companies have likely lit a fire underneath other cannabis tax attorneys who will be eager to learn what strategies the pair employed, given that many cannabis companies businesses owe millions to the federal government under 280E.
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