Cannabis firm Harborside owes $11 million under 280E, US Tax Court rules

After a lengthy legal fight with the Internal Revenue Service over the applicability of 280E business deductions to state-legal marijuana companies, Harborside on Monday got its final tax bill from the case: $11 million in back taxes from 2007 to 2012.

The case dates to 2016, when Harborside, based in Oakland, California, took the IRS to U.S. Tax Court in an attempt to invalidate 280E – a portion of the federal tax code that prevents MJ companies from taking standard business tax breaks – for all state-licensed cannabis firms.

However, Harborside lost in December when the Tax Court ruled in favor of the IRS.

According to a news release from Harborside, the updated bill is actually good news for the company: If the U.S. Tax Court had ruled that IRS penalties had applied, the tab could have been $36 million.

Harborside’s executives referred to the decision as a “good outcome,” one it knew was coming.

“We have succeeded in reducing Harborside’s liability from the $36 million originally sought by the IRS to approximately $11 million – a $25 million reduction,” Harborside CEO Andrew Berman said in the release.

“The reduction includes $6 million in penalties that the court previously ruled we did not need to pay because of the unclear state of the law, and because Harborside acted in good faith,” Berman said.

He added that the company intends to file another appeal regarding the calculation of cost of goods sold for federal tax purposes.

Harborside co-founder and Chairman Emeritus Steve DeAngelo added in the release that the news “has strengthened our already-strong resolve to continue pursuing … the goal of modifying or reducing 280E liability for Harborside and, in the future, eliminating it for every other state-legal cannabis business in the United States.”

Earlier this month, California Gov. Gavin Newsom signed a bill into law that will allow some MJ firms to deduct business expenses on state taxes.

Harborside trades on the Canadian Securities Exchange as HBOR.

For more on Harborside’s tax fight, click here.

Meanwhile, listen in Thursday when Harborside’s Berman appears in an exclusive webinar with Mike Regan, an analyst for Marijuana Business Daily’s Investor Intelligence.

John Schroyer can be reached at johns@mjbizdaily.com

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