Publicly traded cannabis companies are looking to their tax returns to save tens of million of dollars this year – and possibly recoup taxes paid in previous years.
Another spate of announcements from multistate operators that have begun amending their federal returns to varying degrees came out in recent investor calls. The moves are based on both the Biden administration’s recent cannabis rescheduling announcement and a pending legal case that could eventually bolster bottom lines.
Among the companies throwing their hat into the ring for this round – all of which are following the lead of Trulieve Cannabis Corp. (CSE: TRUL) (OTCQX: TCNNF) earlier this year – are:
- Planet 13 Holdings Inc. (CSE: PLTH) (OTCQX: PLNH)
- TerrAscend Corp. (TSND: CA)
- The Cannabist Co. Holdings Inc. (OTCQX: CBSTF)
And they’re all already considering how to put the extra cash to use.
“Last year, we paid over $10 million more in taxes under 280E regulations than we would have normally,” Planet 13 co-CEO Larry Scheffler said during the company’s May 9 earnings call. “That money could have been invested – reinvested in our business to further growth and profitability initiatives. The changes that are coming over the next few quarters and years, we fundamentally will fundamentally change Planet 13’s growth trajectory, profitability, and valuation.”
CFO Dennis Logan shared that the company has already filed “protecting claims for the past three years” that will allow Planet 13 to amend its prior year tax returns, similar to how Trulieve amended past returns to successfully obtain $113 million in tax refunds from the IRS so far.
“This will have a significant positive impact on our cash flow over the course of the year,” Logan told Planet 13 shareholders.
Leadership at The Cannabist Co. Holdings Inc. is also moving on a similar strategy, CFO Derek Watson said during the business’s earnings call.
“We’re in the process of pursuing potential tax return amendments and refund claims associated with 280E related to prior tax years and will provide further updates when they’re available,” Watson said, adding that if 280E were nullified, the business’s annual federal tax bill would go down by about $30 million.
In a parallel vein, TerrAscend Executive Chairman Jason Wild told his company shareholders on the same day during his earnings call that “based on legal interpretations, we changed our tax position as it relates to 280E applicability, and we expect refunds totaling approximately $26 million.”
TerrAscend is one of the supporters of a high-profile lawsuit that is challenging the constitutionality of the Controlled Substances Act, with oral arguments scheduled for May 22. If the plaintiffs ultimately win, it could result in federal legalization of marijuana, which is an even bigger legal step for the industry than the rescheduling process currently underway.
Wild added that if the Drug Enforcement Administration does move cannabis to Schedule III, it wouldn’t necessarily be retroactive in terms of forcing the IRS to return cannabis company tax payments made in prior years under 280E, which is what makes the lawsuit important.
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