By Daniel Sabet · Cannabis CFO & Financial Advisor, GreenGrowth CPAs · 280E, Tax Strategy & Growth Planning · Los Angeles, CA | Published August 10, 2026 | Cannabis Advisory
A 280E refund claim used to look like free money. File an amended return, cite rescheduling, wait for a cheque. Several large operators did exactly that, and the cheques arrived. Then in May 2026 the Department of Justice sued TerrAscend to get one of them back, with interest. That single filing changed the calculation for every operator still weighing whether to amend, because it turned a paper tax position into a collection action.
QUICK ANSWER
You can file a 280E refund claim for a prior year. The IRS position, stated publicly since June 2024, is that such claims are not valid. The agency has now sued to recover at least one refund it already paid. The April 2026 rescheduling order removed Section 280E from state-licensed medical cannabis going forward, and the transition rule reaches back only to the start of the 2026 tax year. It did not make prior years deductible. So an amended return is not a claim for money you are clearly owed. Treat it as the opening move in a dispute, and price it that way.
280E Refund Claims: At a Glance
What Operators Need to Know Before Filing Anything
- The IRS said no in 2024: A June 2024 release stated that operators filing amended returns to claim 280E relief are not entitled to a refund, and that the agency was taking steps to address those claims.
- A refund cheque is not approval: The IRS routinely pays first and examines later. TerrAscend deposited its refund in June 2024 and faced a lawsuit in May 2026.
- Rescheduling is prospective: The order moved state-licensed medical cannabis to Schedule III going forward. The transition rule reaches no further back than the start of the 2026 tax year.
- Interest runs the whole time: Money received and spent is far worse than money never claimed, because the clawback arrives with interest attached.
- The courts have not helped taxpayers yet: Federal courts have consistently upheld Section 280E, and the first cases testing rescheduling-based refund arguments are still running.
- The three-year window is real: The statute limits how far back you can amend. That deadline is the one genuine reason to move before Treasury guidance arrives.
- GreenGrowth’s role: We model the downside before you file and build the file that supports whatever position you take. Book a 280E position review →
What Actually Happened to TerrAscend
The sequence matters more than the headline, so here it is in order.
TerrAscend originally filed its 2020 return without claiming ordinary business deductions, because Section 280E barred them. In April 2024 it filed an amended 2020 return claiming roughly $64.2 million in deductions. Two months later a refund cheque for $8.3 million arrived, and the company deposited it the same day.
Then on May 18, 2026, the Justice Department’s Tax Litigation Branch filed suit in federal court in New Jersey seeking the money back plus interest. The government’s position is blunt. The company was not entitled to deduct any amount incurred in carrying on its trade or business during 2020. TerrAscend maintains the claim was properly made.
Why a Paid Refund Proves Nothing
This is the part operators consistently misread. The IRS often issues a refund cheque before deciding whether the refund was correct. Processing and examination are separate functions, and the first does not bind the second. So receiving money tells you the return was processed. It tells you nothing about whether the position will survive.
💬 The Conversation Worth Having
Operators ask us whether a 280E refund claim is worth filing. The better question is what happens to the business if the money comes in, gets spent, and then gets clawed back three years later with interest. A public MSO can carry that on a balance sheet as an uncertain tax position and absorb the outcome. A single-store operator who used the refund to fund an expansion cannot. Same legal argument, completely different risk. Your answer should depend on which one you are.
Considering an amended return, or already received a refund? Model the downside first.
The IRS Position on 280E Refund Claims Is Not New
Some coverage frames the TerrAscend suit as a surprise for anyone weighing a 280E refund claim. It was not. The agency stated its position publicly two years earlier.
In a June 2024 release, the IRS said that taxpayers seeking a refund of 280E-related taxes by filing amended returns are not entitled to a refund or payment. It noted that although the law had not changed, some taxpayers were filing amended returns on varying grounds, that those claims were not valid, and that the agency was taking steps to address them. You can read it directly on the IRS newsroom.
The agency has also gone to court. It sued another operator in late 2024 seeking to recover cannabis-related refunds. In a March 2026 Tax Court filing it argued that rescheduling authority sits with the DEA rather than HHS, and that the taxpayers’ reading would produce an absurd result. Its brief also noted that federal courts have consistently upheld the validity of Section 280E despite many taxpayer challenges.
So an operator filing today does so against a position the government has stated repeatedly, defended in court, and now enforced through collection.
What the April 2026 Order Did and Did Not Do
The order moved state-licensed medical marijuana and FDA-approved marijuana products into Schedule III. For that activity, Section 280E stops applying and ordinary business expenses fall back under Section 162.
Two limits define the whole retroactive question.
The transition rule stops at 2026. Treasury signalled that rescheduling would apply for the full taxable year containing the effective date. For a calendar-year taxpayer that covers all of 2026. It does not reach 2025, 2024 or earlier.
Retrospective relief was encouraged, not granted. The order encouraged Treasury to consider relief for earlier years when a business operated under a state medical licence. Encouragement carries no legal effect. Treasury has committed to nothing, and a group of House members wrote to Treasury in May 2026 urging prompt guidance precisely because none exists.
Every backward-looking 280E refund claim therefore rests on treating cannabis as something other than Schedule I during a year when it was Schedule I. That is the argument the government is contesting, and it has not lost yet.
How Much Money Is Riding on This
Publicly traded cannabis companies were carrying roughly $1.6 billion in uncertain 280E-related tax positions as of early 2026. Several disclose the individual figures in their filings.
▶ Disclosed 280E Exposure at Selected Public Operators
| Operator | Reported Figure | Nature |
|---|---|---|
| Trulieve | Approx. $445m potential exposure | Most of it tied directly to its 280E challenge |
| Verano | Approx. $378m on balance sheet | Disclosed 280E-related position |
| TerrAscend | Approx. $139m uncertain tax positions | Up from roughly $129m at end of 2025 |
| Curaleaf | Approx. $97m uncertain tax liabilities | Company states its position rests on legal interpretation |
Figures as disclosed in 2026 interim filings and industry reporting. Amounts move each quarter, so confirm current numbers before relying on them.
Two things follow from that table for anyone weighing a 280E refund claim. The industry has committed real money to this position, which is a genuine argument in its favour. And the government now has a large, visible pool to work through, which is a genuine argument for expecting more enforcement rather than less.
Four Questions Before You File a 280E Refund Claim
None of this means never file a 280E refund claim. It means the decision needs work before the form goes in.
1. What happens to the business if the money reverses? Model it. If a refund arrives, gets spent on buildout or debt, and then has to come back with interest, does the business survive that? For many single-store operators the honest answer is no, and that alone settles the question.
2. Does the original return support the amendment? An amended return invites a look at the original. If your prior cost of goods sold allocation was aggressive, you may open two arguments while trying to win one.
3. Is the statute about to close? The three-year amendment window is the only real reason to move before guidance lands. Work out which years are about to fall outside it, because that is a hard date and guidance is not.
4. Who is signing? A refund claim the preparer will not sign comfortably is telling you something. Ask directly what position they would take under examination, and whether they would represent you through it.
How GreenGrowth CPAs Approaches a 280E Refund Claim
We have worked with cannabis operators since 2016, through the Harborside line of cases and now through this transition. Our approach to a 280E refund claim runs in three steps.
First, we model the reversal scenario in cash terms, so the decision gets made with the downside visible rather than assumed away. Second, we review whether the original returns actually support an amendment, because that is where most claims are weakest. Third, if you proceed, we build the documentation file that supports the position under examination rather than assembling it after a notice arrives.
If You Already Received a Refund
Talk to tax counsel before spending it, and treat the money as contingent rather than earned. A paid 280E refund claim is not a settled one. TerrAscend’s cheque cleared in June 2024 and the suit landed in May 2026, with interest running the whole way. Setting the funds aside is not overcaution. It is the only version of this that ends well if the position loses. Our tax planning and compliance team works alongside counsel on exactly these situations, and you can see the wider practice on our cannabis accounting page.
KEY TAKEAWAYS
- ›The DOJ sued TerrAscend in May 2026 for $8.3 million plus interest over a refund paid in June 2024. It is the clearest signal yet on how the government treats prior-year 280E claims.
- ›The IRS said in June 2024 that amended-return 280E claims are not valid. That position predates rescheduling and has not been withdrawn.
- ›Receiving a refund cheque is not approval. The IRS pays first and examines later, and the two functions do not bind each other.
- ›The transition rule reaches back only to the start of the 2026 tax year. Retrospective relief for earlier years was encouraged, not granted, and Treasury has committed to nothing.
- ›The three-year statutory window is the only genuine reason to move before guidance arrives. Work out which years are about to close.
- ›Scale changes the answer. A public MSO can carry an uncertain tax position for years. A single-store operator who spent the refund usually cannot.
280E Refund Claim Questions Answered
The Rules Today
Can I amend prior-year returns to claim a 280E refund?+
You can file the claim. The IRS stated in June 2024 that taxpayers seeking a refund of 280E-related taxes through amended returns are not entitled to a refund, and that such claims are not valid. The agency is now litigating to recover refunds it already paid. Treat an amended return as the opening move in a dispute rather than a routine filing.
Does the April 2026 rescheduling order apply to prior years?+
No. The order applies prospectively to state-licensed medical cannabis. Treasury signalled a transition rule covering the full taxable year that contains the effective date, which for a calendar-year taxpayer means 2026. The order encouraged Treasury to consider relief for earlier years but did not require it, and Treasury has not committed to providing it.
Why did the IRS pay TerrAscend’s refund and then sue for it back?+
Refund processing and examination are separate functions. The IRS commonly issues a refund before determining whether the claim was valid, then recovers it later if it was not. TerrAscend received its cheque in June 2024 and the Justice Department filed suit in May 2026 seeking the money plus interest. A paid refund is not agency approval of the position behind it.
Weighing the Risk
What happens if the IRS claws back a refund I already spent?+
You owe the amount back with interest accruing from when the refund was issued. That is the core risk. A refund received and spent is a considerably worse position than a refund never claimed, because the liability arrives years later and larger. Operators who have received refunds should treat the funds as contingent and speak to tax counsel before deploying them.
Is there any reason to file before Treasury guidance arrives?+
One. The statute generally allows three years to amend a return, so a year approaching the end of that window cannot wait for guidance that has no announced date. Every other reason to rush is weaker than it looks. Work out which of your years are actually about to close before treating urgency as a given.
Do large MSOs and small operators face the same risk?+
The legal argument is identical. The business risk is not. A public company can disclose an uncertain tax position, reserve against it, and absorb an adverse outcome over years. A single-store operator who used a refund to fund expansion has no such cushion. Scale should drive the decision as much as the merits do.
Next Steps
How much 280E money is the industry disputing?+
Publicly traded cannabis companies carried roughly $1.6 billion in uncertain 280E-related tax positions as of early 2026. Trulieve has disclosed roughly $445 million in potential exposure, Verano roughly $378 million, TerrAscend roughly $139 million and Curaleaf roughly $97 million. These figures move each quarter, so confirm current numbers before relying on them.
How does GreenGrowth CPAs help with a 280E refund claim?+
We model the reversal scenario in cash terms so the decision gets made with the downside visible. We review whether the original returns support an amendment, which is where most claims are weakest. If you proceed, we build the documentation file that supports the position under examination. GreenGrowth CPAs has served cannabis operators since 2016.
A Refund You Have to Give Back Is Worse Than One You Never Claimed.
Book a 280E position review. We model the reversal in cash terms and tell you honestly whether the claim fits a business your size.
Book Your Free Position Review →
GreenGrowth CPAs · Cannabis Advisory Team
