The 280E Refund Question
— CPAs Can't Answer Yet, and Neither Can the IRS

Your cannabis clients keep asking about a 280E refund for prior years. The IRS has said nothing supporting one, and it's already suing to claw one back.

The $1.6 Billion Question Everyone's Asking

Since the DOJ's April 2026 order moved state-licensed medical cannabis into Schedule III, the industry has quantified exactly what years of Section 280E cost it, and started asking whether relief reaches backward. The stakes are public and large. Across publicly traded multi-state operators, disputed 280E liabilities have reached roughly $1.6 billion, according to reporting on company filings. Trulieve alone carried $696.4 million in net uncertain tax position liabilities as of March 31, 2026, with $655.6 million of that tied specifically to its 280E challenge. TerrAscend separately sought roughly $26 million in refunds for 2020 through 2022. Whitney Economics estimates the industry overpaid roughly $2.24 billion under 280E in 2025 alone, and about $15 billion since 2018. Your clients don't need MSO-scale operations to care about this. A three-year amendment window on a median dispensary's annual 280E drag is real money too.

What the IRS Has Actually Said

Here is what the IRS has actually committed to, and it is less than most clients assume. Treasury previewed forthcoming 280E guidance on April 23, 2026, the same day as the DOJ's order, saying it would cover expense apportionment for businesses with both Schedule III and Schedule I activity, and would include transition rules for dual-operation businesses. The preview specified that those transition rules would apply for a business's full tax year that includes the order's effective date, meaning January 1, 2026 forward for a calendar-year operator. That guidance still had not been formally published as of early August 2026. Nothing in the preview mentioned prior years, retroactive claims, or refunds for 2019 through 2025.

The order itself only said the Attorney General "encourages" Treasury to "consider" retrospective relief. Encourages and consider are not a rule, and the IRS's own conduct since points away from one. A June 2024 IRS release called amended-return claims for 280E relief "not valid," and the agency reinforced that position in a March 2026 Tax Court filing in New Mexico Top Organics v. Commissioner, calling the retroactive theory an "absurd result."

The Clawback That Should Change How You Advise

The clearest signal of where this is headed is not a press release. It is a lawsuit. TerrAscend received an $8.3 million federal refund in June 2024 after amending its returns to challenge its 280E liability. On May 18, 2026, the Department of Justice sued to get it back, arguing TerrAscend was never entitled to the deductions it claimed for 2020. TerrAscend's own books now carry $138.8 million in uncertain tax positions.

Trulieve, despite being the industry's largest prior-year claimant, has drawn its own line: its Q1 2026 filing books no tax benefit for years before 2026, concluding its position does not yet meet the recognition threshold for those earlier years. Curaleaf went the other direction, releasing $97 million of reserves and recognizing a benefit, while still cautioning in the same filing that there is "no assurance" retroactive application will be permitted. Three major operators, three different accounting postures, on the same open question.

What This Means for Your Clients This Quarter

• Don't let a client file an amended return for a pre-2026 year on the assumption rescheduling covers it. The IRS has said nothing supporting that reading, has argued against it in Tax Court, and is actively suing to claw back a refund already paid on that theory.
• Separate medical and adult-use activity in the books now, before the apportionment guidance arrives. Treasury has previewed that dual-operators will need to apportion expenses between the two, and clients who've already segregated the data won't be scrambling when the rule lands.
• Bring the insurance line item into this conversation, not just the tax one. A captive is one of the few cost levers a cannabis client can act on today without waiting on Treasury, the Tax Court, or anyone else to finish arguing.

Contact 3F Captive Services for a no-cost policy analysis to discuss where a captive fits into a cannabis client's broader risk and tax picture.

This post is for informational purposes only and does not constitute tax or legal advice. Section 280E treatment, rescheduling status, and IRS guidance are unsettled and subject to change. Consult qualified tax and legal advisors regarding a client's specific situation.

Sources

1. U.S. Department of the Treasury, “Treasury, IRS Announce Process for Tax Guidance,” press release, April 23, 2026.

2. Trulieve Cannabis Corp., Form 10-Q for the quarter ended March 31, 2026.

3. Curaleaf Holdings, Inc., SEC filing, quarter ended March 31, 2026.

4. TerrAscend Corp. disclosures; reporting on U.S. v. TerrAscend clawback suit, May 18, 2026.

5. Internal Revenue Service, IR-2024-177 (June 28, 2024); IRS brief in New Mexico Top Organics v. Commissioner, U.S. Tax Court, filed March 6, 2026.

6. Shay Aaron Gilmore, “Cannabis 280E Relief: Who Keeps the $1.6 Billion?”, June 29, 2026, aggregating public company disclosures and IRS positions cited above; Whitney Economics 280E burden estimates as cited therein.

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