The large Multi-State Operator (MSO) TerrAscend is being sued by the federal government over an $8.3 million tax refund in the US District Court of New Jersey.
The federal Internal Revenue Service (IRS) says they owe $8.3 million in taxes. So, they are taking them to court to collect.
They are suing them in the Federal District Court of New Jersey to “collect an erroneous refund,” according to court documents.
TerrAscend variously says it is based in NJ in Boonton in Morris County, or King of Prussia, PA, by Philadelphia, or Ontario, Canada.
However, US Court documents say it is based in Union City in Hudson County.
TerrAscend’s Federal Tax Case
TerrAscend said they were exempt from Section 280-E of the IRS Tax Code, which says companies selling federally illegal drugs cannot deduct their expenses from their taxes.
In April 2024, it filed an amended claim for a refund of $64,622,286 from their 2020 taxes.
The IRS then sent them the $8.3 million refund in June 2024. TerrAscend deposited it shortly afterward the same month.
However, in US court documents, the IRS now says the refund was wrong or “erroneous.”
To complicate matters, the lawsuit says federal law “prohibits any refund in excess of $5,000,000 to be made to C-Corporations until 30 days after a report describing the refund is submitted to the Joint Committee on Taxation.”
They note the defendant, TerrAscend, is a C-Corporation.
The Joint Committee on Taxation is a committee of the United States Congress with members from both the US Senate and House of Representatives.
Cannabis Rescheduling and Taxes
TerrAscend is among the large MSOs in the medical cannabis market that would most benefit from the ongoing federal medical cannabis rescheduling process to Schedule III from Schedule I on the Controlled Substances Act (CSA) list.
Notably, the administration of President Donald Trump (R), through acting Attorney General Todd Blanche, has sped up the rescheduling process to move medical cannabis to Schedule III.
A recent federal notice did acknowledge that it is part of the ultimate process.
However, it says “nothing in this rule constitutes a determination regarding federal tax liability, and qualifying state licensees should consult with tax counsel regarding the applicability of Section 280E to their specific circumstances.”
Some cannabis companies have been hoping there would be retroactive tax relief and have been acting as if it is not a problem.
However, the feds have given the state-licensed cannabis markets little guidance so far.
Many cannabis companies would likely save a lot of money if they could deduct their taxes.
TerrAscend and Jersey
TerrAscend won a New Jersey medical cannabis license in the 2018 cannabis lottery round. It included vertical integration permission for dispensaries, cultivation, manufacturing, and wholesale distribution. The 2018 medical cannabis license lottery was launched shortly after former Governor Phil Murphy (D) took office.
TerrAscend operates the Apothecarium dispensary chain of Maplewood in Essex County, Lodi in Bergen County, and Phillipsburg in Warren County on the Pennsylvania border.
They were among those that were first open for adult-use cannabis sales in April 2022.
In May 2025, TerrAscend bought the initially female-owned Union Chill in Lambertville in Hunterdon County, on the Delaware River. That was after the annual license holder beat the conditional Social Equity license applicant, Baked by the River, to open.
Social Equity licenses were supposed to be prioritized by the NJ Cannabis Regulatory Commission (CRC).
TerrAscend has had many types of production deals for products with Berner’s Cookies and Mike Tyson, along with their own Kind Tree, Legend, and Wana brands.
In addition, they operate a very large cultivation site in Boonton in Morris County, which opened in January 2020.
According to their website, TerrAscend is in New Jersey, Pennsylvania, California, Ohio, Maryland, and Canada to be a global MSO.
It is a publicly traded corporation in Canada where adult-use cannabis is federally legal. But TerrAscend stock is worth less than a dollar per share.
In 2023, it was fined multiples times by the CRC when medical cannabis patients were forced to buy off the adult-use cannabis menu.
An anonymous poster on Reddit was very critical of them as an employer.
