Trulieve Receives $113 Million Back from IRS in 280E Tax Refunds
In October 2023, Trulieve took a stance against unfair marijuana taxation by challenging the IRS to return taxes it had paid under IRS 280E, an unfair, outdated law that imposes excessive taxes upon marijuana operators, while banning dispensaries from taking standardized deductions. And according to the latest news, this bold move has paid off: recently, Trulieve announced that it had received a $113 million tax refund from the IRS in return for payments under 280E, coming just shy of the $143 million it requested when the Florida-based dispensary chain made headlines with the return request earlier this fall.
Trulieve continues to seek retribution at a state level as well, and has requested $31 million in state tax refunds.
According to their fourth-quarter earnings report, Trulieve has received $62 million in tax refunds for the quarter ending on December 31 of last year, as well as “on erection notice in the amount of 1.2 million.” Of the “$113 million in refunds to date” that Trulieve has been granted, $50.3 million were received in January 2024.
Trulieve leaders did not specify whether either the rejected or successful refunds came from federal or state governments, but the success is promising nonetheless for operators in an industry that has been beleaguered by 280E taxation for far too long.
While making Thursday’s announcement, Trulieve executives commented as to whether this tax refund strategy may prove applicable to, or successful for, other cannabis operators, though the extent of these remarks was limited, with CEO Kim Rivers stating that she couldn’t “reveal more details” about what she called a “trade secret.” Ultimately, however, Trulieve stated that the tax refund strategy in question was “in a large part specific to our position and organization.” Rivers qualified this statement with the disclaimer that “We are not going to be sharing that information publicly, given the fact that it could be in a litigation posture, though she noted that “that information would become available if and when we actually get to a court filing.”
According to Wes Getman, Trulieve’s Chief Financial Officer, the company is still gathering the funds necessary to account for its tax liabilities in the face of what has, for so many marijuana operators, become an uncertain future due to unfair taxation under IRS 280E:
“Until this process reaches a final resolution, we anticipate the uncertain tax position will increase over time,” Getman said. “We will continue to make timely payments as an ordinary corporate taxpayer.”
According to the information released on Thursday, Trulieve continued to face a $180.4 million balance in “uncertain tax position liabilities” as of December 31st. And the vast majority of that balance is related to IRS 280E taxation, which accounts for $152.1 million of the $180 million total.
Experts Advise Marijuana Operators to Conduct Their Own Legal Reviews: “We may never know” the Details Behind Trulieve’s Successful Return
Though Trulieve’s success in standing up to 280E taxation is certainly exciting, and may have positive implications for the future of the industry at large, cannabis tax attorney Rachel Gilette, a partner at Denver’s Holland & Hart Law Firm, has cautioned other dispensaries to conduct their own, independent legal reviews before attempting to follow in the IRS’ footsteps and file for 280E refunds.
“While we do know that the IRS processed the refund claim, we don’t really know much more than that,” explained Gilette. “We don’t know, most importantly, Trulieve’s legal basis for their successful claims,” she continued. “There could be a lot of different reasons why the refund claim was made, and why it was processed by the IRS,” including the possibility that Trulieve might have been “too conservative” during a given tax year, and later realized that they had overpaid beyond what was due according to IRS 280E.
Gilette, however, remains hopeful that the gesture points to a fairer tax future for cannabis operators at large. “That said, they could have a really strong legal argument that maybe the IRS doesn’t want to take on right now,” or an argument that the IRS sees as legally legitimate (that has, as Gilete puts it, some “legal teeth.”) Still, even if the IRS does grant the entire refund Trulieve has requested, We may never know what Trulieve’s legal basis was for the successful claim.
Trulieve Earnings Report Shows Quarterly Revenue Increase of 4% Uptick Over Past Two Quarter, Following Slight Decrease from 2022
According to the earnings report, Trulieve’s revenue from this most recent quarter showed an increase of 4% from the previous quarter, in which the MSO claimed another 4% increase from the quarter prior. This upward trend comes after Trulieve reported a 4% decrease last year from the fourth quarter of 2022.
This brings Trulieve’s net loss for the 2023 to $527 million of the company’s $1.13 billion 4 year revenue, which had decreased by a total of 7% since 2022. Once adjusted, this annual net loss came out to $70 million, after the exclusion of “non-recurring charges, asset and goodwill impairments, disposals and discontinued operations.”
During the fourth quarter, Trulieve recovered $130 million in senior debts and closed $25 million in financing rounds, reporting a total of $208 million in cash by the close of 2023. This news sent Trulieve TCNNF stock higher.
MSO’s Hopeful for the Future with Rescheduling & Florida Recreational Bill on the Horizon
Various initiatives in-progress are set to impact the financial future of Trulieve and similar MSO’s nationwide: Rivers, Trulieve’s CEO, noted that by the end of 2024, the MSO hopes to see “greater clarity on two of the biggest events for our industry: rescheduling and Florida adult-use.”
Earlier this fall, the DEA announced that it would be reviewing a recommendation by the Department of Health to reclassify marijuana as a Schedule III substance, removing the excessive taxation and limitations associated with its current, Schedule I status that places cannabis alongside cocaine, heroin, and other drugs with “no recognized medical potential.” If the DEA approves moving marijuana to Schedule III, cannabis operators will no longer be subject to IRS 280E taxation, and will regain access to crucial banking services (such as Visa and Mastercard payments) and communication platforms that have cut ties with marijuana operators due to fear of legal scrutiny resulting from cannabis’ Schedule I status.
Meanwhile, Trulieve’s home state of Florida faces a particularly momentous year after securing a measure on the upcoming, 2024 ballot that will allow voters to voice their opinions on the legalization of adult-use, or recreational, marijuana throughout the state. Currently, marijuana is legal in Florida only for medical use, restricting customers who can shop at locations like Trulieve to those registered with the state’s medical marijuana program. If the push for an adult-use market in Florida is approved, already-major MSOs such as Trulieve are poised to experience skyrocketing sales once their dispensaries open to all adults aged 21 and older, while creating the potential for the opening of exclusively adult-use dispensaries, or combined dispensaries catering to both legal and recreational marijuana needs.
Though the ballot is currently awaiting action by the Supreme Court, Florida voters may have the chance to vote in favor of recreational legalization as soon as 2024, if all goes as planned. For Rivers, the outlook is cause for optimism: “Given our cash position and outsized market share in Florida, we are best positioned to realize the tremendous potential upside,” said the Trulieve CEO.
Trulieve, which has its headquarters in Tallahassee, remains a major presence and industry leader in the state: according to Rivers, Trulieve-owned stores currently account for over 21% of all cannabis businesses in Florida. However, Trulieve has since accomplished significant expansion, with 32% of stores in other states by the end of the fourth quarter.
Among other achievements, Trulieve’s accomplishments last year include the addition of 17 new locations in Arizona, Florida, Georgia, Ohio, Pennsylvania, and West Virginia. In addition, the company recently launched recreational sales in Connecticut and Maryland.
Today, Trulieve owns a total of 193 retail locations in the United States, with retail sales accounting for the overwhelming majority (96%) of its 2023 revenue.
Stop Unfair Taxation of Marijuana
Trulieve’s victory in claiming its tax refunds, as well as the potential rescheduling of marijuana and continued legalization efforts nationwide, create many reasons for optimism with regard to the industry’s future. Until the DEA and Congress take action, however, the cannabis community must make its voice heard to stop the excessive taxation and unfair discrimination that is threatening to cripple the industry if changes aren’t made. These changes include the rescheduling of marijuana and the passage of the SAFE Banking Act, which will protect financial institutions–such as credit card companies–from regulatory backlash as the result of working with cannabis companies.
If you are a cannabis consumer or have benefitted from the industry, it’s time to make your voice heard in bringing an end to the outdated laws and biases that have been plaguing our industry for years. Send an email to your US Senators today and demand action to protect the cannabis community and the patients who need it most.
Sources & Links:
- Unfair Taxation Of Regulated Marijuana Must End
- Trulieve $143mm Refund Claim Highlights US Treasury As The Kingpin Of Cannabis
- Florida Medical Marijuana Treatment Centers
- Trulieve Florida Dispensaries – Locations and Information
- Weed Giant Trulieve Beats Q4 Revenue Estimates, Reports Higher Net Loss For Full Year
- Trulieve Cannabis Corp. | TCNNF Stock Newswire
- What Would Rescheduling Mean For Cannabis?
- Mastercard Cuts Service To Cannabis Providers, Experts Say Visa Is Next
- Navigating The Maze: Florida’s Journey Towards Recreational Cannabis Legalization
- Florida’s Green Gold Rush: The Economic Impact Of Legalizing Recreational Marijuana
