Income tax expense |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2026 | |||
| Income Tax Disclosure [Abstract] | |||
| Income tax expense |
The Company’s provision for income taxes for the three months ended March 31, 2026 and 2025 was $974,580 and $721,113, respectively. The effective tax rate for the Company’s cannabis operations is significantly affected by the application of Section 280E of the Internal Revenue Code, which disallows certain deductions and credits for businesses trafficking in Schedule I controlled substances, including cannabis.
As of March 31, 2026 and December 31, 2025, the Company’s uncertain tax position liability was $16,190,724 and $15,219,548, respectively. The increase during the three months ended March 31, 2026 reflects the continued accrual of potential tax liabilities associated with the Company’s cannabis operations.
The Company has a deferred tax liability of $766,796 as of March 31, 2026 and December 31, 2025 generated from the non-goodwill intangible assets acquired in the 2023 business combination.
Uncertain Tax Positions
As the Company operates in the cannabis industry, it is subject to the limits of U.S. IRC Section 280E under which the Company is 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 U.S. IRC Section 280E.
During the three months ended March 31, 2026, the Company has filed its previous years tax filing to become compliant through calendar year 2025. The Company has recorded the income tax payable as an uncertain tax position long-term liability on the balance sheets as of March 31, 2026 and December 31, 2025 . The computed interest and penalty amounts are also included within current income tax provision on the statement of operations and comprehensive income (loss) in the accompanying financial statements for the three months ended March 31, 2026 and 2025. |