More cannabis companies are boarding the 280E avoidance train.
After multistate operators Trulieve Cannabis Corp. (CSE: TRUL) (OTCQX: TCNNF) and Ascend Wellness Holdings (CSE: AAWH.U) (OTCQX: AAWH) announced to shareholders that they had filed amended tax returns for multiple years, with both expecting multimillion-dollar refunds as a result, more of their peers have come forward to say they’re either doing the same or are considering it.
“We are actively assessing our tax position and evaluating options for our current and past tax filings. This has the potential to have a material impact on our already strong cash performance we expect in 2024,” Dennis Olis, CFO of Chicago-based Cresco Labs (CSE: CL) (OTCQX: CRLBF) (FSE: 6CQ), said during that company’s earnings call on Wednesday.
The very next day, Dennis Logan, CFO of Nevada-based Planet 13 Holdings (CSE: PLTH) (OTCQX: PLNH), said during his company’s earnings call that “We are also evaluating the recent tax position taken by one of the larger MSOs in order to determine what, if any, IRS refund Planet 13 may be eligible for.”
TerrAscend Corp. (TSX: TSND) (OTCQX: TSNDF) also confirmed on Thursday during the company’s earnings call that it would be submitting amended federal tax returns to the IRS for 2020, 2021, and 2022, just as Trulieve and Ascend had done.
The company expects “to receive approximately $26 million of federal and state refunds” for just 2020 and 2021, TerrAscend’s CFO, Keith Stauffer, said.
“We plan to make payments as an ordinary taxpayer going forward without 280E,” Stauffer added, echoing a theme made plain by both Trulieve and Ascend this month.
The change in the companies’ tax strategy, according to both Stauffer and Ascend CEO John Hartmann, is tied to an ongoing federal lawsuit challenging the federal ban on marijuana. TerrAscend is one of several cannabis company plaintiffs in the case, alongside Ascend, Verano Holdings, Green Thumb Industries, and others.
“We believe we have a strong basis based on the legal interpretation to receive that money,” Stauffer said of the expected refund.
However, it may not be as clear cut as the executives hope. Some cannabis tax attorneys have publicly expressed skepticism that the strategy will ultimately work.
But if the Drug Enforcement Administration agrees to reclassify marijuana to Schedule III from Schedule I, as many observers expect, that will negate 280E’s affect on the U.S. cannabis trade anyway, meaning the MSOs could be simply getting a jump on tax refunds that could be coming to them eventually anyway.
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