v3.26.1
Income Tax Expense
 3 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
Income Tax Expense

9. INCOME TAX EXPENSE

 

 

 

The following table summarizes the Company’s income tax expense and effective tax rates for the three months ended March 31, 2026 and 2025:

 

 

 

Three Months Ended March 31,

 

 

 

2026

 

2025

 

Income before income taxes

$

63,139

$

39,716

 

Income tax expense

 

48,092

 

31,315

 

Effective tax rate

 

76.2%

 

78.8%

 

 

 

The effective tax rates for the three months ended March 31, 2026 and 2025 were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within the periods presented.

 

The IRS has taken the position that cannabis companies are subject to the limitations of the U.S. Internal Revenue Code of 1986, as amended (“IRC”) Section 280E under which cannabis companies are only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E. Therefore, the effective tax rate can be highly variable and may not necessarily correlate with pre-tax income and provides for effective tax rates that are well in excess of statutory tax rates.