Several large cannabis companies operating across multiple U.S. states collectively owe over $1.6 billion in unpaid federal taxes, according to information disclosed in recent corporate filings. The outstanding balances stem largely from disputes over Internal Revenue Code Section 280E, a provision that significantly limits the deductions marijuana businesses can claim.
Some marijuana companies have intentionally withheld payments in an attempt to preserve cash while challenging the rule. In a recent court filing tied to a marijuana tax dispute, IRS attorneys said the liabilities remain enforceable under existing law. They also say recent political developments surrounding federal cannabis policy do not alter obligations tied to earlier tax years.
Section 280E prevents businesses that handle substances listed under Schedule 1 or 2 of the Controlled Substances Act from writing off many routine operating costs on federal tax returns. The restriction has long weighed heavily on cannabis companies, many of which operate legally under state law but remain prohibited federally.
Over 40 operators have taken their arguments to the U.S. Tax Court, hoping to weaken or overturn the rule. Those efforts have so far not succeeded.
A New Mexico company, Top Organics, which sells products under the Ultra Health brand, is the latest to seek relief. Court records show the business filed a petition in December 2024 asking to claim deductions under Section 280E for tax years 2018 through 2020.
In an October filing, the company said the federal push to move marijuana to a less restrictive classification could transform the legal landscape. The filing pointed to an August 2023 recommendation from federal health regulators suggesting cannabis should move to Schedule 3.
However, marijuana remains listed under Schedule 1 for now, even after an executive order issued by President Trump on December 18 directing officials to begin the rescheduling process.
The DOJ has yet to carry out that directive. Until any formal change takes effect, the IRS maintains that prior tax obligations remain governed by the law in place when the income was earned.
In a March 6 court filing tied to the Top Organics dispute, IRS Acting Chief Attorney Kenneth Kies argued that courts have consistently upheld the constitutionality of Section 280E. Because marijuana was classified as a Schedule 1 substance during the years cited in the case, he wrote, the court must apply the rules that existed at that time.
The agency has taken the same position before, including in a memo issued in 2024.
Meanwhile, several large cannabis operators that began disputing their 280E liabilities in late 2023 have accumulated substantial uncertain tax positions. Trulieve Cannabis Corp. reported the largest exposure. The company amended returns dating back to 2019 and sought roughly $143 million in refunds based on its interpretation of the law. Its financial statements now list $630 million tied to the ongoing tax dispute.
Other companies have reported sizable amounts as well, including Curaleaf Holdings with $531.5 million, Verano Holdings at $378.26 million, and Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) with $171.4 million.
Many legal specialists remain skeptical that businesses will ultimately avoid the tax burden. Lawyer Henry Wykowski warned in a 2024 interview that betting on favorable court rulings is a dangerous approach. He said firms pursuing that path could face additional penalties exceeding 20% on top of unpaid taxes if their arguments fail.
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