Florida-based Trulieve Cannabis Corp. (OTCQX: TCNNF) is cashing in on tax refunds and banking on federal rescheduling to light up its future, after the company reported strong first quarter 2024 results.
CFO Wes Getman reported that Trulieve has received tax refund checks totaling $113 million to date related to its challenge of the applicability of 280E to its business. The company previously filed amended returns for the tax years 2019 through 2021 and has claimed an overpayment of $148 million for 2022.
“Final resolution to our approach may ultimately take years to conclude,” Getman told investors. “If rescheduling of cannabis to Schedule III occurs this year, the 280E tax burden would be removed, effectively capping the downside risk to our tax challenge.”
The positive effects, however, could be immense. CEO Kim Rivers noted during an investor call that Trulieve would have realized positive net income for the first quarter if rescheduling had been in effect and the incremental impact of 280E was removed.
“I do believe that rescheduling is underway, and we’re going to enter into the proposed rulemaking period here soon. Then there’ll be a public comment period, et cetera. And so, we are certainly hopeful that that could wrap this year, and certainly would be exciting for us to have clarity as it relates to 280E relief for calendar year 2024,” she said.
After analysts on the call pressed for more details, Getman confirmed that there has been no material update since the last earnings call regarding the company’s tax strategy and the status of outstanding refunds.
“Our position remains as it was, and we continue to monitor and be optimistic,” he said.
Rivers clarified that Trulieve is not holding a restricted reserve related to 280E and the refund claims. Instead, the company views the cash as available for deployment in the business or to return capital to debtors or shareholders.
Throughout the call, Rivers expressed optimism about the potential for rescheduling and other regulatory catalysts to boost Trulieve’s already strong position in the market.
“We are marching toward a meaningful inflection point, and Trulieve is in the best position for the coming wave of growth catalysts with strong financial performance and significant scale in key markets,” she said. “I wouldn’t trade hands with anyone in the industry.”
While rescheduling alone would not allow cannabis companies to list on major U.S. stock exchanges, Rivers said, each incremental federal reform brings the industry closer.
“Look, I think there’s a desire to list cannabis companies, but they’ve got compliance departments and legal departments,” she said. “And until there is either broader federal reform or specific safe harbor language included in or coming out of Congress, I think they’re not able to, currently at least, accept cannabis companies.”
Tax refunds played a key role in Trulieve’s the first quarter performance, with $50 million in refunds contributing to $139 million in operating cash flow and $124 million in free cash flow during the quarter.
Looking ahead, Rivers noted its home-base shot at adult-use legalization passage in November. She called it “the single biggest play” for the company, estimating the Florida market could reach $6 billion in annual sales.
Trulieve remains a leading funder of the legalization campaign. While acknowledging opposition from Florida’s governor, Rivers said the campaign is “excited about having the opportunity to be in front of voters” closer to the election.
CEO Kim Rivers said Trulieve would have realized positive net income for the first quarter if rescheduling had been in effect. Read More