Marijuana multistate operator Trulieve Cannabis Corp. revealed that it has received $113 million worth of tax refunds as it challenges what it owes under Section 280E of the IRS code.
Florida-based Trulieve made waves in the U.S. marijuana industry when it announced the plan to seek $143 million worth of federal tax refunds in October 2023.
OG Article: here
View our Fair Use Policy: here
Trulieve also is seeking $31 million in state tax refunds.
In a fourth-quarter earnings report released Thursday, Trulieve said it has:
Received $62 million worth of tax refunds during the quarter ended Dec. 31.
Received “a total of $113 million in refunds to date,” including $50.3 million received in January 2024.
Received “one rejection notice in the amount of $1.2 million.”
Trulieve did not specify whether the successful or rejected refunds came from the federal government or state governments.
During a Thursday earnings call, Trulieve executives were asked whether the company’s tax refund strategy is applicable to other cannabis operators.
Trulieve CEO Kim Rivers said she couldn’t reveal more details about what she called a “trade secret” but added that the company considers the tax refund strategy to be “in large part specific to our position and our organization.”
“We are not going to be sharing that information publicly, given the fact that it could be in a litigation posture,” Rivers said.
“That information would become available if and when we actually get to a court filing.”
Trulieve Chief Financial Officer Wes Getman said the company is still accruing money to pay its tax liabilities in the face of uncertainty.
“Until this process reaches a final resolution, we anticipate the uncertain tax position will increase over time,” Getman said in prepared remarks.
“We will continue to make timely payments as an ordinary corporate taxpayer.”
Trulieve’s balance sheet shows $180.4 million in “uncertain tax position liabilities” as of Dec. 31.
Most of that uncertain tax liability ($152.1 million) relates to Trulieve’s position on 280E tax refunds, according to a regulatory filing.
‘We may never know what Trulieve’s legal basis was’
Although Trulieve’s success on the 280E front is exciting news for the heavily taxed U.S. marijuana industry, cannabis business and tax attorney Rachel Gillette cautioned that other marijuana operators should do their own legal analyses before trying to duplicate the MSO’s tax refunds.
“While we do know that the (IRS) processed the refund claim, we don’t really know much more than that,” Gillette, a partner at Denver-based law firm Holland & Hart, told MJBizDaily in a phone interview.
“We don’t know, most importantly, Trulieve’s legal basis for their successful claims.
“There could be a lot of different reasons why the refund claim was made, and why it was processed by the IRS.”
For example, Gillette pointed out that Trulieve might even have been “too conservative in how they approached 280E in previous years.”
“That said, they could have a really strong legal argument that maybe the IRS doesn’t want to take on right now or thinks has some legal teeth,” she added.
Gillette said Trulieve might eventually take the IRS to court as it pursues further 280E tax refunds.
But if the tax authority does process all of Trulieve’s refund claims, she observed, “We may never know what Trulieve’s legal basis was for the successful claim.”
Gillette noted that Trulieve could still face an IRS audit.
Although Trulieve “received the money, the IRS could still claw it back,” she wrote in additional comments emailed to MJBizDaily.
“So, the claims are ‘successful’ only to the extent that the IRS doesn’t audit them and find they were not entitled to the refunds,” Gillette added.
“The IRS can audit returns for up to three years and, in certain cases, can go back even further.
“This is why Trulieve still keeps reserves, at least until the statute tolls.”
Quarterly revenue up 4% sequentially
Trulieve reported a $33 million net loss for its fourth quarter.
Quarterly revenue was $287 million, a 4% increase from the previous quarter and a 4% decrease from the fourth quarter of 2022.
Trulieve’s net loss for its full 2023 fiscal year was $527 million.
On an adjusted basis – excluding “non-recurring charges, asset and goodwill impairments, disposals and discontinued operations” – the annual net loss was $70 million.
Full-year revenue was $1.13 billion, down 7% from 2022.
Trulieve redeemed $130 million worth of senior debt during its fourth quarter and closed $25 million in financing.
The company reported $208 million in cash at the close of 2023.
Awaiting Florida ballot ruling
By year-end, CEO Rivers said, Trulieve expects “greater clarity on two of the biggest events for our industry: rescheduling and Florida adult-use (marijuana legalization).”
Florida voters could potentially approve adult-use marijuana in a ballot measure in November, although the matter is currently before the state Supreme Court.
“Given our cash position and outsized market share in Florida, we are best positioned to realize the tremendous potential upside,” Rivers said in prepared remarks.
Tallahassee-headquartered Trulieve maintains a major presence in its home state, with Rivers saying the company operates 21% of all cannabis stores in Florida.
Trulieve said 32% of its stores were outside Florida as of the end of the fourth quarter.
During 2023, Rivers said, Trulieve “added 17 new locations in Arizona, Florida, Georgia, Ohio, Pennsylvania and West Virginia, and launched recreational sales in Connecticut and Maryland.”
Trulieve reported 193 total U.S. retail locations to date, with retail sales accounting for 96% of the company’s 2023 revenue.
Comments