US Department of Justice (DOJ) has sued TerrAscend, a New Jersey cannabis multistate company (TSX : TSND) for $8.3m and interest. It is the first time that the DOJ appears to have attempted to recover 280E taxes refunds.
The complaint, filed 18 May in US District Court in New Jersey by the Justice Department’s Tax Litigation Branch, alleges that TerrAscend received an ‘erroneous’ refund in June 2024 after filing an amended 2020 tax return claiming $64.2m in deductions it was not entitled to under Internal Revenue Code Section 280E.
In its complaint, the government stated TerrAscend ‘was not entitled to take deductions for any amount incurred in carrying on its trade or business during tax year 2020.’
‘Meaningful upside’
On May 7, eleven days before the complaint was filed, Executive Chairman Jason Wild told investors that rescheduling had ‘resulted in the elimination of the 280E tax burden’ and described anticipated retroactive relief as ‘meaningful upside not reflected in valuations.’
TerrAscend, Q1 2026, results showed that TerrAscend generated $3.4m from its continuing operations, before taxes. This was the 15th straight quarter with positive cash flows, and the provision for taxes amounted to $10.25m. This resulted in a net loss of $6.8m.
According to the results of the company, it carries an uncertain tax position liability of $138.8m. This is up from $128,8m in 2025.
TerrAscend, on the other hand, has saved $138.8m for unresolved tax liabilities. The figure alone grew $10m during the first three month of 2018. The amount the company will ultimately be liable for depends on Treasury guidelines that have been promised, but are yet to arrive.
TerrAscend had $39 million in cash on 31 March 2026 compared to a $236.5 million market cap.
The claim of the government
TerrAscend’s original 2020 tax return was filed in October 2021. The company claimed no business deductions as per 280E. In April 2024 as large multistate operators challenged the provision, TerrAscend filed an amended form claiming $64.2m of deductions. It received $8.3m back from the IRS by June 2024.
The complaint notes the refund was not reviewed by the IRS’s Joint Committee on Taxation as required, and that TerrAscend has ‘not voluntarily returned the erroneous refund.’
IRS’s position was clear. A June 2024 bulletin, issued the same month TerrAscend received its refund, stated that operators filing amended returns to claim 280E relief were ‘not entitled to a refund or payment’ and that ‘the IRS is taking steps to address these claims.’
In a filing to the Tax Court on March 6, 2026, this agency reiterated its position. New Mexico Top Organics v. CommissionerThe first court case that tested these arguments, arguing the DEA’s rescheduling decision and not HHS, as well as the operators logic, would lead to an absurd outcome.
Industry-wide exposure is as MEDCAN24 TerrAscend has not been mentioned. Trulieve faces a tax risk of $445.2m for its potential 280E challenges, $412.6m being directly related to them. Verano’s balance sheet shows $378.3m. Cresco reported $171.5m of uncertain tax positions liabilities by year’s end 2025. This is up from the $122.5m that it had at its previous year. Curaleaf disclosed an uncertain tax situation but did not quantify it. Total disputed amount for publicly listed multistate operators has been $1.6billion.
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Treasury’s answer to the question
The April rescheduling ordered ended the 280E denial for medical practitioners licensed by state. Todd Blanche, the Acting Attorney General of the United States, encouraged Treasury Secretary Steven Mnuchin to reconsider retrospective relief. Treasury indicated that they intend to take action. TerrAscend brings into sharp focus a question which guidance still hasn’t answered: will the government distinguish between operators that withheld payments under 280E in anticipation for rescheduling versus those that received refunds they now consider illegal?
TerrAscend’s complaint brings to light a new dimension, one that Deb Tharp of the BoC identified immediately following the rescheduling.
Tharp warns operators to beware of 280E tax relief. Tharp was a former NuggMD Head of Legal and Policy Research and a cannabis expert.
They must submit detailed tax returns that acknowledge they run a cannabis medical business to claim this deduction.
“If an IRS or DEA audit reveals their ‘medical’ program is actually a ‘recreational mill’ (sham certifications, no follow-up), they lose the Schedule III protection — meaning they’ve just handed the government a signed confession of trafficking Schedule I drug (since they failed the medical test). The feds may add to that insult by adding tax fraud.”
As Tharp concluded: “The ‘Wild West’ of medical recommendations is over. He’s here, the federal sheriff. And he uses your data in order to track you.
US Department of Justice filed a federal suit seeking to recover $8.3m, plus interest, from New Jersey-based cannabis operator TerrAscend TSX: TSND. This appears to be the very first instance of a government attempting as proactively to recover 280E refunds by a marijuana company.
The complaint, filed 18 May in US District Court in New Jersey by the Justice Department’s Tax Litigation Branch, alleges that TerrAscend received an ‘erroneous’ refund in June 2024 after filing an amended 2020 tax return claiming $64.2m in deductions it was not entitled to under Internal Revenue Code Section 280E.
In its complaint, the government stated TerrAscend ‘was not entitled to take deductions for any amount incurred in carrying on its trade or business during tax year 2020.’
‘Meaningful upside’
On May 7, eleven days before the complaint was filed, Executive Chairman Jason Wild told investors that rescheduling had ‘resulted in the elimination of the 280E tax burden’ and described anticipated retroactive relief as ‘meaningful upside not reflected in valuations.’
TerrAscend’s results from Q1 2026 reveal that TerrAscend generated $3.4m before taxes in revenue, the 15th straight quarter with positive cash flows. The provision for taxes was $10.25m. This resulted in a net loss of $6.8m.
The results of the company show that the liability of uncertain tax positions is $138.8m. This was $128.8m by the end of the year 2025.
TerrAscend, on the other hand, has set aside $138.8m to cover tax debts it believes are unresolved. The figure alone grew by 10m dollars in the first 3 months of 2018. The amount the company will ultimately be liable for depends on Treasury guidelines that have been promised, but are yet to arrive.
TerrAscend had $39m cash on hand at the end of March 2026. The company’s market cap was $236.5m.
The claim of the government
TerrAscend’s original 2020 tax return was filed in October 2021. The company claimed no business deductions as required by 280E. In April 2024 as large multistate operators challenged the provision, TerrAscend filed an amended form claiming $64.2m of deductions. It received $8.3m back from the IRS by June 2024.
The complaint notes the refund was not reviewed by the IRS’s Joint Committee on Taxation as required, and that TerrAscend has ‘not voluntarily returned the erroneous refund.’
IRS made it clear what its position was. A June 2024 bulletin, issued the same month TerrAscend received its refund, stated that operators filing amended returns to claim 280E relief were ‘not entitled to a refund or payment’ and that ‘the IRS is taking steps to address these claims.’
In a filing to the Tax Court on March 6, 2026, this agency reiterated its position. New Mexico Top Organics v. CommissionerThe first court case that tested these arguments, arguing the DEA’s rescheduling decision and not HHS, as well as the operators logic, would result in an absurd outcome.
Industry-wide exposure is as MEDCAN24 TerrAscend has not been mentioned. Trulieve faces a tax risk of $445.2m for its potential 280E challenges, which includes $412.6m specifically tied to them. Verano’s balance sheet shows $378.3m. Cresco reported $171.5m of uncertain tax positions liabilities by year’s end 2025. This is up from the $122.5m that it had at its previous year. Curaleaf disclosed an uncertain tax situation but did not quantify it. Total disputed amount for publicly listed multistate operators has been $1.6billion.
READ MORE…
Treasury’s answer to the question
In April, the rescheduling of order eliminated the 280E exclusion for all state licensed medical operators. Todd Blanche, the Acting Attorney General of the United States, encouraged Treasury Secretary Steven Mnuchin to reconsider retrospective relief. Treasury indicated that they intend to take action. TerrAscend brings into sharp focus a question which guidance still hasn’t answered: will the government distinguish between operators that withheld payments under 280E in anticipation for rescheduling versus those who spent the refunds they now consider illegal?
TerrAscend’s complaint brings to light a new dimension, one that Deb Tharp of the BoC identified immediately following the rescheduling.
Tharp is a cannabis analyst and former head of Legal and Policy Research for NuggMD. He warned operators who rush to claim the 280E exemption from paying taxes that they are in a trap.
For the tax deduction to be claimed, a detailed return must be filed acknowledging that they run a medical marijuana business.
“If an IRS or DEA audit reveals their ‘medical’ program is actually a ‘recreational mill’ (sham certifications, no follow-up), they lose the Schedule III protection — meaning they’ve just handed the government a signed confession of trafficking Schedule I drug (since they failed the medical test). “And the federal government will then add tax fraud to further insult the injury.
As Tharp concluded: “The ‘Wild West’ of medical recommendations is over. Federal sheriff in town and using your data to track you.
Cannabis Law Resources in Poland
Browse essential legal pages on cannabis sales and cultivation in Poland. You can use these resources to learn about the requirements for certification, permissions and compliance.
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Polish News Registration and Interests of Cannabis Businesses
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Permissions for Cannabis Sales in Poland
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Authorization for Importing or Manufacturing Medical Products
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Permission for Manufacturing or Importing Medical Products
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Certificate of Good Manufacturing Practices (GMP)
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Registration of Medical Products in Poland