Jushi Holdings, a multistate cannabis operator, isn’t waiting around for the IRS to process its Employee Retention Credit (ERC) claims. Instead, the company sold its pending ERC claims to a third party for $5.1 million, securing cash upfront. It’s a move few cannabis businesses have taken advantage of, despite the ERC program offering a lucrative tax break.
A Rare Move in the Cannabis Industry
While many businesses across industries have tapped into the ERC, the cannabis sector has largely overlooked it. The credit, part of the CARES Act, was designed to help businesses that retained employees during the pandemic.
Glen Frost, managing partner of Frost Law, believes many cannabis companies have missed out. “If a business is eligible, it can be a particularly lucrative tax credit,” he told MJBizDaily.
Despite its potential, the window to claim the ERC is closing fast. Companies can still submit claims for the 2021 tax year, but they must do so by April 15.
Why Jushi Sold Its ERC Claims Instead of Waiting
Jushi’s strategy was simple: get the money now rather than wait for the IRS. Trent Woloveck, the company’s chief strategy officer, compared the move to invoice factoring, where businesses sell outstanding invoices for immediate cash.
- The IRS still owes Jushi about $6 million in ERC claims.
- By selling the claims to a third party, Jushi received $5.1 million upfront.
- The company also received $1.3 million from previous IRS refunds.
- Another $3 million in ERC claims remains outstanding, which Jushi expects the IRS to pay “in due course.”
“IRS has been slow in getting refunds to many different industries for the ERC program,” Woloveck said. “For us to receive cash today, it helps for liquidity on our balance sheet.”
ERC Delays and Fraud Concerns Slow Down Processing
The ERC program, originally part of the CARES Act in March 2020, has undergone several changes. Initially, the IRS processed claims relatively quickly. But that pace has slowed, and some businesses now face a two-year wait for their payments.
Rachel Gillette, a cannabis industry-focused attorney at Holland & Hart, explained that the IRS placed a moratorium on processing claims submitted after Sept. 14, 2023. The reason? A wave of potentially fraudulent submissions.
Many so-called “promoters” filed ERC claims for businesses, often taking a percentage of the refund. However, they didn’t always verify eligibility, leading to concerns about fraudulent claims clogging the system.
More Cannabis Companies Could Benefit—But Time Is Running Out
Jushi’s approach highlights a missed opportunity for many cannabis operators. The ERC was designed to provide financial relief, yet few in the industry have taken full advantage of it.
The IRS still allows claims for the 2021 tax year, but the April 15 deadline is approaching. With processing delays and fraud investigations slowing the system, companies looking to cash in need to act fast—or consider alternative financing options like Jushi.