The IRS Is Financing America’s Cannabis Industry: What Happens When It Collects?

Fifteen publicly traded cannabis operators carried $2.82 billion in disputed federal taxes at the end of June. The figure has circulated as a measure of risk, but it also shows how much of the industry’s working capital effectively comes from the IRS.

The impact becomes clearer when looking at cash flow. In 2025, the twelve operators that file US GAAP statements with the SEC generated $905 million of operating cash flow. About $685 million of it was income tax they had recorded as an expense but had not paid. Once they paid that tax, their combined operating cash flow fell to roughly $220 million. Green Thumb Industries alone accounts for most of what remains; the other eleven generated about $52 million between them.

In effect, the industry has been running on a credit line drawn on the Treasury, which the Treasury never approved. That arrangement has become increasingly consequential as the legal and political dispute over whether cannabis should carry the Section 280E burden appears to be entering its final stages.

The deferred payments most cannabis companies elected to enter into while the dispute is ongoing make sense when measured against the punishment that the IRS will bring upon those who decided not to pay 280E and deduct ordinary business expenses as most businesses do.

The rate beats anything private lenders offer, the collateral is nil, and although the fine (a one-off 20%) outweighs several years of the interest saved, the move is rational if the dispute drags on long enough or ends in relief. And, there’s a slight chance that at the end of the line the companies might even get some relief from the Treasury, as encouraged by the DOJ’s April rescheduling order. 

But in order to take a closer look, this column works through what that loan costs, what it bought, and what happens to each borrower if it is called.

What the documents say

Section 280E denies ordinary business deductions to any company trafficking in Schedule I or II substances, as Treasury’s April statement summarizes it. A dispensary therefore pays income tax on gross profit, with rent, payroll and marketing counting for nothing. Counting from 2018, when its tally begins, Whitney Economics puts the industry’s excess 280E payments at $15 billion.

From late 2023, the largest multistate operators stopped accepting that situation and started filing returns that deducted ordinary expenses anyway, arguing that 280E does not reach state-licensed businesses. Going a step further, Curaleaf filed refund claims for 2020 and 2022 and has reported as a non-280E taxpayer since 2023, according to its August filing. Trulieve did the same, amended its returns back to 2019, claimed $143 million, and collected $113 million. Since the IRS pays first and objects after, a June 2024 bulletin declared such refund claims invalid.

We know how much big cannabis companies should be paying because the tax return and the audited financial statements differ. The return says the tax is not owed, so the company pays the smaller figure. The financial statements say it probably is; that’s why it’s called a tax liability. Under ASC 740, a company may recognize a tax benefit only if the position is more likely than not to survive examination. More than 40 operators have challenged 280E in Tax Court, and all have lost. No auditor will accept the theory, so each company books the full 280E tax as an expense and records the unpaid part as an “uncertain tax position.”

The money lives in the gap between those two documents. The IRS cannot collect on a disputed return until it audits, proposes an adjustment, and works the case through Appeals or the courts, which takes years. Meanwhile, the cash stays in the business, but obviously it does not sit in a segregated reserve. It pays for inventory, payroll, debts, interest like any other dollar and helps insert liquidity into the daily dynamics. 

Although there’s some confusion regarding how the $2.82 billion affects the reporting by BigC, the full 280E tax runs through the income statement, so reported net income already describes a company that pays. Trulieve earned $91.5 million before tax in 2025 and recorded $208.1 million of income tax expense, an effective rate of 227%, for a net loss of $122.2 million, per its 10-K. Green Thumb’s rate was 56%. The twelve SEC filers expensed $789.7 million of income tax in 2025 and paid $169.7 million in cash.

Forced payment would leave most reported earnings where they stand. Three items would move, though.

Penalties would hit first. Section 6662 adds 20% to an underpayment caused by negligence or a substantial understatement. The IRS has already proposed $38.1 million of penalties against Trulieve subsidiaries, which Trulieve contests and has not booked, according to its second-quarter 10-Q. A full 20% on Trulieve’s $564.5 million of 280E principal at December would come to $112.9 million, more than its 2025 pre-tax income. Secondly, interest would move earnings in the opposite direction. A third item is this year’s crop of reserve releases.

Curaleaf reported $82.3 million of first-half net income on a $54.9 million pre-tax loss, after releasing $94.5 million of its reserve against the April rescheduling order (10-Q).

Without the release, the half would close about $12 million in the red. A $26.7 million rescheduling benefit did similar work in Cresco’s second-quarter financial statement.

Where the cash came from

The deferral shows on the cash flow statement, not on profits. Each year, the increase in the uncertain tax liability is added back to net income as a non-cash charge. Subtracting the tax principal inside that add-back, net of the interest accrued on it, rebuilds operating cash flow as it would have looked with the tax paid.

Company 2025 annual reports and SEC XBRL data. Deferred tax = the 2025 increase in each uncertain tax liability less interest and penalties accrued on it; Vireo counts current-year positions only, excluding acquired balances; Cresco and iAnthus do not disclose the interest, so their figures are upper bounds.

The deferral equals 76% of the twelve companies’ 2025 operating cash flow, and 91% once Green Thumb is set aside. Curaleaf’s $137.7 million shrinks to $7.7 million. Verano, Jushi, Vireo, iAnthus and Planet 13 turn negative.

Trulieve stays positive at $95.3 million, and its year shows what the deferral can finance. During 2025, it retired $368 million of notes due in 2026 and issued $140 million of new private placement notes (10-K). Over the same year, it deferred $177.5 million of tax. The filing never connects the two, but the arithmetic points to the IRS as the silent co-lender on that refinancing.

What the float costs

Money withheld from the IRS carries interest, compounded daily. The corporate underpayment rate has stood at 7% throughout 2026, rising to 9% for large corporate underpayments once a deficiency notice has been outstanding for 30 days (IRS). The filings show the meter running at roughly those rates. Trulieve’s accrued interest rose from $29.6 million to $75.3 million during 2025, about 9% on an average principal near $504 million (10-K). Verano recorded $37.2 million of interest and penalties on an average balance near $324 million (10-K).

Private money costs more. In February, Curaleaf issued $500 million of senior secured notes at 11.5% (10-Q). Trulieve’s 2030 private placement pays 10.5% (10-Q). Cresco’s senior secured term loan, Jushi’s 2026 term loan, TerrAscend’s FG secured loan and Vireo’s credit facility pay between 12% and 12.75% in cash (Cresco, Jushi, TerrAscend, Vireo).

If each deferred dollar displaced a dollar of that debt, the six companies, with $1.78 billion of uncertain tax liabilities between them, save $45 million to $81 million a year. The range depends on whether the 7% or the 9% rate applies, and it amounts to 2.5% to 4.5% of the balance. For Trulieve, the spread is worth $9 million to $21 million a year. A single 20% penalty on its principal would consume five to twelve years of it.

The yield, then, is thin, and a company deferring tax for the spread alone would be making a losing trade. The value lies in access. Private lenders charge these companies double-digit coupons, demand collateral, and write covenants. The IRS extends a comparable sum at 7% to 9%, unsecured and covenant-free, until it gets around to assessing. Firms in that position behave as though an outside authority will absorb the shortfall, which is the textbook definition of a soft budget constraint. The rescheduling order’s invitation to Treasury to consider retroactive relief keeps the expectation alive.

What happens if the loan is called

If the IRS prevails, the uncertain liabilities become assessed debt. The balance sheet barely changes, since the liability already sits there. The cash position, the leverage, and the order of creditors all do.

Company	Uncertain tax liability, Jun 2026 ($M)	Cash, Jun 2026 ($M)	Annual payment, 5 years at 9% ($M)	2025 operating cash flow, tax paid ($M)
Green Thumb	203.5	283.6	52.3	168.3
Trulieve	598.2	325.4	153.8	95.3
Curaleaf	468.5	94.6	120.4	7.7
Verano	400.7	85.2	103.0	-17.6
Ascend Wellness	214.5	67.0	55.1	2.7
Cresco Labs	194.7	32.9	50.1	23.9
Jushi	193.9	33.3	49.9	-5.3
TerrAscend	152.5	42.0	39.2	6.7
iAnthus	76.7	8.3	19.7	-7.1

Green Thumb could pay its entire balance from cash and keep $80 million. Every other large operator falls short: by $273 million at Trulieve, $374 million at Curaleaf and $316 million at Verano. Spread over five years at 9%, Curaleaf’s bill would run about $120 million a year against $7.7 million of operating cash flow after tax. Verano, Ascend, Jushi and TerrAscend face the same arithmetic from an even weaker base, and a 20% penalty would raise each payment by a fifth.

Leverage would jump. Counted as debt, the tax raises total obligations by a factor of 1.4 to 1.8 at most of these companies. At Trulieve, where the tax liability is twice the $290 million of funded debt, the factor is about 3; at Planet 13 it is 4.7. Refinancing the tax with private credit would swap a 7% to 9% obligation for a 10.5% to 12.75% one.

Seniority would change last, and most dangerously. Once tax is assessed and payment demanded, the unpaid amount becomes a lien on all of the company’s property under Section 6321. Credit agreements commonly treat large liens as events of default, so assessment could set lenders and the IRS racing for the same assets. iAnthus already carries $39.6 million of federal tax liens, and Fluent reports substantial doubt about its ability to continue as a going concern, as reported by the Marijuana Herald.

Trulieve’s numbers overstate its problem. Its business is concentrated in Florida’s medical market, and in June it deconsolidated Harvest, which held its mixed medical and adult-use operations. In its first-quarter 10-Q, Trulieve described its adult-use activities as immaterial and recorded no new uncertain tax positions for the period. Its liability now grows mainly through interest, while operators with large adult-use footprints keep adding to theirs.

A creditor that cannot foreclose

The IRS usually collects through levy and sale, and here that tool is blunt. The assets that generate value are state licenses that generally cannot change hands without a regulator’s approval, and adult-use sales remain drug trafficking under federal law. A federal agency auctioning a trafficking enterprise to settle its tax bill is a scenario the government has shown no appetite to test. The realistic route runs through IRS Appeals and installment agreements, which leaves the state as a long-term lender to an industry it still classifies as criminal.

The record points toward payment for the years already filed. In March, the IRS told the Tax Court that 280E applies to any year when marijuana sat in Schedule I, as reported MJBizDaily. In May, the Justice Department sued TerrAscend to recover an $8.36 million refund on its 2020 return; its response to TerrAscend’s motion to dismiss is due November 19. Treasury’s April statement promised relief for medical activity across the whole of 2026 and said nothing about earlier years. As of September, Treasury had not even issued the guidance on splitting expenses between medical and adult-use sales.

Between 2023 and 2026, the largest operators turned a tax they regard as illegitimate into working capital, and their own auditors recorded the result as a liability the whole time. The economic substance of a loan already exists. What the courts and Treasury will settle is its price: the interest already accruing, a penalty that may or may not follow, and a principal that only a decision on retroactive relief could erase. 

But the best-case scenario is still quite a scam. After all, 280E is a wicked creature of federal prohibition and should not exist at all.

The relationship between federal tax policy, access to capital, and financial sustainability will remain central to the cannabis industry’s future. Join cannabis executives, investors, and policymakers at IgniteIt’s Capital & Policy Summit in Washington, D.C., on November 18, where industry leaders will discuss regulatory developments, capital allocation, financing strategies, and the decisions shaping the next phase of the U.S. cannabis market.

Editor’s Note: The original Marijuana Herald report documenting more than $2.8 billion in disputed federal tax liabilities among 15 publicly traded cannabis operators is available here. Balances are each company’s balance-sheet liability for uncertain tax positions at December 31, 2025 and June 30, 2026, taken from its second-quarter filing (Green Thumb, Verano, Ascend, iAnthus, Planet 13 and the filings linked above). The 2025 income, tax and cash flow figures come from the annual reports and the SEC’s XBRL data. Fluent, C21 Investments and Vext Science report outside the SEC’s US GAAP system; their figures come from the compilation The Marijuana Herald did.

The following figures are the author’s derivations, not company disclosures. Deferred tax principal is the 2025 increase in each liability less the interest and penalties accrued on it; Vireo’s excludes balances acquired with businesses, and Cresco’s and iAnthus’s are upper bounds because neither discloses the interest. The financing spread assumes each deferred dollar displaced a dollar of the company’s most recent straight debt. The five-year payment schedule is illustrative and does not reflect terms the IRS has offered. The links between Trulieve’s deferral and its note retirement, and the assessment of how the IRS would enforce against licensed operators, are the author’s reading of the record.