Jushi Holdings, a multistate cannabis operator (MSO), found a way to turn delayed IRS payments into immediate cash. The company sold its Employee Retention Credit (ERC) claims to a third party, securing $5.1 million instead of waiting for the $6 million owed by the IRS. This move highlights an overlooked tax-credit opportunity for cannabis businesses, though time is running out for others to take advantage.
Jushi Cashes In on IRS Delays
The IRS has been slow to process ERC claims, leaving many businesses—including those in the cannabis industry—waiting for their money. Jushi, rather than sitting idle, took matters into its own hands.
Trent Woloveck, the company’s chief strategy officer, likened the sale of its ERC claims to invoice factoring—a method where businesses sell unpaid invoices for immediate cash. The deal provided Jushi with $5.1 million in liquidity, a move that strengthens its balance sheet.
“For us to receive cash today, it helps for liquidity on our balance sheet,” Woloveck told MJBizDaily.
While Jushi has already collected $1.3 million directly from the IRS for previous claims, another $3 million is still outstanding. The company remains confident those funds will eventually arrive. However, waiting on the IRS isn’t always the best financial strategy, especially for businesses operating in a capital-intensive industry like cannabis.
A Tax Credit Many Cannabis Businesses Have Ignored
The ERC program was designed to help businesses that kept employees on payroll during the COVID-19 pandemic. It’s been available for years, yet many cannabis businesses have failed to take advantage of it.
“If a business is eligible, it can be a particularly lucrative tax credit,” said Glen Frost, managing partner at Frost Law in Maryland. “A lot of cannabis businesses have missed out on this credit.”
The reason? Complexity and misinformation.
Rachel Gillette, an attorney specializing in the cannabis industry, noted that while the IRS initially processed ERC claims quickly, a surge of fraudulent applications caused the agency to slow down. In September 2023, the IRS even placed a moratorium on processing new claims, adding to the delay.
Many businesses were approached by “promoters” who filed ERC claims on their behalf in exchange for a percentage of the refund. However, these promoters often failed to ensure businesses actually qualified for the credit. That left some companies vulnerable to audits, penalties, and even fraud accusations.
The ERC’s Changing Landscape
The ERC was introduced in March 2020 under the CARES Act, evolving over time through several amendments. Initially, it was a lifeline for businesses struggling to keep workers employed during pandemic-related shutdowns.
But as with many government programs, its complexity grew.
• The IRS initially processed claims quickly, but the influx of fraudulent submissions forced stricter oversight.
• Claims filed after September 14, 2023, were halted due to concerns over improper filings.
• Businesses that fail an ERC audit could face a 20% penalty for errors—or worse, a 75% penalty for fraud.
Tax professionals now warn against filing ERC claims without proper guidance. “I would recommend that no taxpayer do this on their own,” Frost emphasized. “The IRS has described this program as one of the most complex that’s ever been administered.”
Time Is Running Out for Cannabis Companies
While Jushi managed to secure funds by selling its ERC claims, other cannabis companies still have a chance to claim their refunds. But the clock is ticking.
ERC claims for the 2021 tax year must be submitted by April 15, 2024. That means cannabis operators who haven’t yet explored this credit need to act fast.
The cannabis industry has long struggled with limited financial tools due to federal restrictions on banking and taxation. The ERC, though not widely utilized, represents one of the few government-backed financial relief options available. However, with the IRS tightening its grip and deadlines approaching, businesses that fail to move quickly may miss out entirely.
Jushi’s strategy of selling its ERC claims provides an alternative path—one that ensures liquidity without the long wait. Whether other cannabis businesses follow suit remains to be seen, but one thing is clear: waiting for the IRS is no longer the only option.