A U.S. district court has ruled that state-regulated cannabis companies are not eligible for tax refunds under the Employee Retention Credit (ERC) program that helped businesses continue to pay workers when companies were shut down during the COVID-19 pandemic.
That’s according to a ruling from the U.S. District Court for the Western District of Washington that determined Section 280E of the Internal Revenue Code is not limited to income tax credits, according to Marijuana Moment.
The case – Receivership Estate of Solstice Group; Solstice Holdings C/O Turning Point Receiver v. United States of America – has been dismissed.
Section 280E prohibits businesses that traffic in Schedule 1 or 2 substances from taking standard tax deductions and credits – even if such allowances comply with state law.
A post on the website for Florida-headquartered law firm Greenspoon Marder noted that many marijuana companies applied for and received refunds from the ERC program.
“Some were deemed ‘essential’ and had to stay open during the pandemic despite the higher costs associated with continued operations during the pandemic and various restrictions that rendered it much more difficult to visit their stores,” Denver-based attorneys Nick Richards and Sabrina Strand wrote in the post.
Marijuana multistate operator Jushi Holdings, for example, filed more than 40 ERC claims worth millions of dollars to account for each entity it operates.
In one instance, the Boca Raton, Florida-based MSO sold about $6 million of its ERC claims to a third party for about $5.1 million in cash, the company told MJBizDaily in February.
According to the IRS website, ERC credits were “available to eligible employers that paid qualified wages to some or all employees after March 12, 2020, and before Jan. 1, 2022.”
But the windows to file ERC claims have closed.
It’s unclear what happens if businesses already received ERC refunds.
