Trulieve reported Feb. 29 that the multistate cannabis operator has received refunds in response to amended state and federal tax returns it filed last October, claiming it overpaid taxes filed under Section 280E of the Internal Revenue Code.
The results of the company’s pushback against 280E, which prohibits state-legal, plant-touching cannabis businesses from taking normal business deductions available to other companies, were noted in Trulieve’s Q4 2023 and year-end financial report.
The ninth of 11 bulleted items, Trulieve reported receiving $113 million in tax refunds to date, including $62 million received at the end of 2023.
Filed amended federal tax returns for 2019, 2020, and 2021 claiming $143 million of refunds, also filed corresponding amended state returns claiming $31 million of refunds. Received $62 million in refunds in the fourth quarter and a total of $113 million in refunds to date alongside one rejection notice in the amount of $1.2 million, the earnings results press release noted.
Wes Getman, Trulieve’s chief financial officer who joined the team this year, said during the Feb. 29 earnings call that “if the 280E burden is lifted, Trulieve could realize hundreds of millions of savings in the next few years.” Both Getman and Trulieve CEO Kim Rivers pointed out that if the Drug Enforcement Administration reclassifies cannabis as a Schedule III substance, removing it from the list of Schedule I drugs in the Controlled Substances Act, 280E also would no longer apply. As Rivers noted on the call, the DEA is currently reviewing the U.S. Department of Health and Human Services’ recommendation to reschedule cannabis, and a decision could be announced soon.
When asked on the social platform X, formerly known as Twitter, "Did you receive a tax refund related to 280e?" Rivers responded from her account, "Yes."
Yes
— Kim Rivers (@rivers_kim) February 29, 2024
“We also received correspondence denying one amended return amounting to $1.2 million. Due to the unknown final outcome of this tax position, at this time, we continue to accrue an uncertain tax position on our balance sheet,” Getman said during the call. “Until this process reaches its final resolution, we anticipate the uncertain tax position will increase over time. We will continue to make timely payments as an ordinary corporate taxpayer.”
When asked about the implications of Trulieve’s tax position—that 280E does not apply to the company—for the broader cannabis industry, Rivers said there was not much more detail she could share.
“Given the uncertain position of the claims as they sit today, we do view that as ‘trade secret’ and in large part specific to our position and our organization,” Rivers said during the call. “We are not going to be sharing that information publicly given the fact that it is in or could be in a litigation posture, and specifically that information would become available if and when we actually get to a court filing. So, that’s really all I’m able to say about it to date, but, you know, there’s going to be I would say a blend of industry and Trulieve-specific positioning in our position.”
In a conversation with Cannabis Business Times in November, Rivers said the tax strategy, though she could not share details of the rationale behind the claim the company does not owe 280E taxes, was “multifaceted.”
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“Again, ultimately, we feel like we've got a very strong case. We would love to have an industry-setting precedent that moves forward regardless of a 280E-dependent political finding, and that we can just stand again in an independent posture, but also want to make sure that we're covering all of our bases,” Rivers told CBT in November. “I think we have a real shot. We wouldn't have gone through the trouble to do all of this if we didn't feel like there was a legitimate claim to be made, which we certainly do.”
Getman also noted that although additional refunds from the amended returns are not guaranteed, the company is “not necessarily holding back the monies received as it relates to future investments and growth initiatives.”
“From an accounting standpoint, the rules are the rules, and these remain what’s called uncertain taxes just because of how the statutes are currently written,” Getman said. “So that’s why the refunds received will continue to be accrued on the balance sheet and will continue to add to the incremental nature of 280E in future periods until potentially a rescheduling happens.”
In November, Rivers said the company’s 2019, 2020 and 2021 amended federal tax returns were for standard, straightforward refund claims, and clarified that up until this point, Trulieve has been up to date on its tax payments.
“So, best case scenario, the IRS says, ‘Oh my gosh, thank you for bringing this to our attention. We agree with you. Here are checks, and we're going to start sending you money,’” Rivers told CBT in November. “Second scenario would be IRS says, ‘No, we disagree with you. We believe that you owe it.’ To which point we would then roll out our legal strategy and take it to court. At that point in time, when we file our case and our briefs, that is when all of the rationale that's been vetted with legal counsel, auditors, consultants, board will come to fruition, and everybody will be able to see exactly the specifics in terms of what is behind the claim.”
Trulieve has not yet responded to CBT’s requests for additional comments and more information. This story will continue to be updated as more information is available.
