OAKLAND, CA and TORONTO, Oct. 21, 2019 /CNW/ - PRESS RELEASE - Harborside Inc. has announced that the U.S. Tax Court has issued a final decision under Tax Court Rule 155 on the income tax deficiency for Patients Mutual Assistance Collective Corporation (PMACC), the company's 100-percent owned subsidiary and owner of the iconic Harborside Oakland cannabis dispensary. The U.S. Tax Court has ruled that PMACC owes an aggregate tax deficiency of approximately $11 million for the fiscal years 2007 through 2012. This amount is consistent with the company's one-time provision for its estimated tax obligation for PMACC, expensed in its financial results for the three-month period ended June 30, 2019. All dollar amounts in this press release are expressed in U.S. dollars.
"The Tax Court's final computation of our tax obligation in PMACC's long-standing 280E case is a good outcome for Harborside shareholders. By challenging the IRS's overly aggressive interpretation of the tax law as it applies to cannabis businesses operating legally under state law, we have succeeded in reducing Harborside's liability from the $36 million originally sought by the IRS to approximately $11 million–a $25 million reduction. The reduction includes $6 million in penalties that the court previously ruled we did not need to pay because of the unclear state of the law, and because Harborside acted in good faith," said Harborside CEO Andrew Berman. "This ruling is also an important one for the cannabis industry in that, through this litigation, the court recognized there are legitimate deductions that legal cannabis companies can take in cost of goods sold. Harborside still intends to appeal the Tax Court's ruling with regard to aspects of the decision as it pertains to the calculation of cost of goods sold, and has already retained appellate tax counsel."
Steve DeAngelo, Harborside's co-founder and Chairman Emeritus, also commented, "Harborside's policy towards the federal government has always been to exhaust all reasonable available legal options to pursue justice. That policy has been validated by the Tax Court's downward adjustment of PMACC's liability. This outcome has strengthened our already strong resolve to continue pursuing justice by appealing the decision, with the goal of modifying or reducing 280E liability for Harborside, and in the future, eliminating it for every other state legal cannabis business in the United States. The issues at stake are of importance to the entire cannabis industry."
The company has 90 days within which to file an appeal with the United States Court of Appeals for the Ninth Circuit.
The U.S. Tax Court has not yet issued a final ruling on the tax deficiency for San Jose Wellness. The company estimates that the deficiencies in tax and penalties asserted by the IRS, not including interest calculations, are approximately $4.4 million. As of June 30, 2019, the company recorded a one-time provision of $4.4 million in relation to the tax rulings on SJW.