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INCOME TAXES
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands)2026202520262025
Loss before income taxes
$(15,527)$(12,576)$(33,113)$(20,803)
Income tax (benefit) expense(5,721)11,831 6,186 22,862 
Effective tax rate36.8 %(94.1)%(18.7)%(109.9)%
Gross profit$45,491 $41,392 $90,373 $80,953 
Effective tax rate on gross profit(12.6%)28.6%6.8%28.2 %
Under the limitations of IRC Section 280E, which applies to Schedule I and Schedule II controlled substances, cannabis companies are only allowed to deduct expenses directly related to the sales of product (cost of goods sold). This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E and those allowed for financial statement reporting purposes (“book-to-tax” differences). Cannabis companies operating in states that align their tax codes with IRC Section 280E are also unable to deduct ordinary and necessary business expenses for state tax purposes. Ordinary and necessary business expenses deemed non-deductible under IRC Section 280E are treated as permanent book-to-tax differences. Therefore, the effective tax rate on income realized by cannabis companies can be highly variable and may not necessarily correlate with pre-tax income or loss.
On April 23, 2026, the U.S. Department of Justice (the “DOJ”) issued an order rescheduling cannabis products subject to qualifying state medical cannabis licenses and other cannabis products that are FDA-approved from Schedule I to Schedule III under the Controlled Substances Act (21 U.S.C. § 801 et seq.) (the “CSA”) (the “April 2026 Order”). Because IRC Section 280E applies exclusively to Schedule I and Schedule II controlled substances, this rescheduling removes IRC Section 280E expense disallowances for qualifying medical cannabis activities. The Department of the Treasury and the Internal Revenue Service (“IRS”) announced that forthcoming transition guidance will apply this relief to the full 2026 taxable year for qualifying medical cannabis activities. For businesses that operate both medical and adult-use cannabis under state licenses, the IRS has indicated that the guidance will include clarification on activity-based allocation and apportionment. The specific details and timing of such guidance remain unclear. Accordingly, the extent to which the Company may ultimately benefit from relief under IRC Section 280E is uncertain.
As of June 30, 2026, the Company recognized relief from IRC Section 280E for its qualifying medical cannabis activities. Adult-use (recreational) cannabis operations remain classified under Schedule I, and, accordingly, IRC Section 280E remains applicable with regard to disallowance rules related to adult-use operations and apportioned shared expenses, pending further regulatory developments. State conformity to federal rescheduling varies, and the Company will evaluate state tax impacts as regulations and state guidance evolve.
The Company’s quarterly tax provision is calculated under the discrete method which treats the interim period as if it were the annual period and determines the income tax expense or benefit on that basis. The discrete method is applied when application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The Company believes, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method due to the high degree of uncertainty in estimating annual pre-tax income.
As of June 30, 2026 and December 31, 2025, the Company has net deferred tax liabilities of $17,794 and $21,515, respectively, which are reflected net of a valuation allowance of $3,983 and $1,803, respectively. The Company’s valuation allowance is primarily attributable to various states’ net operating loss and credit carryforwards related to limitations on business interest expense carryover amounts. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion, or all, of its deferred tax assets will not be realized and reflects a valuation allowance to the extent that the full benefit may not be realized in the applicable jurisdictions based on estimates of future taxable income.
The Company has recorded an uncertain tax liability for uncertain tax positions primarily related to the treatment of certain transactions and deductions under IRC Section 280E based on legal interpretations that challenge the Company’s tax liability under IRC Section 280E. These uncertain tax positions are included within “Other non-current liabilities” on the unaudited Condensed Consolidated Balance Sheets. The following table shows a reconciliation of the beginning and ending amount of unrecognized tax benefits:
Six Months Ended June 30, 2026
Balance, December 31, 2025
$203,884 
Additions for tax positions related to the current year15,065 
Additions for tax positions related to prior years10,356 
Decrease related to settlements with taxing authorities(14,818)
Balance, June 30, 2026
$214,487 
A total of $14,818 was released from the Company’s reserve during the three and six months ended June 30, 2026 with regard to specific matters for tax positions that were settled with taxing authorities, which favorably impacted the Company’s effective tax rates for the current year periods. The Company is evaluating the impact of the April 2026 Order on its existing uncertain tax positions recorded under IRC Section 280E, but, given the limited implementation guidance issued to date, the Company has not adjusted prior year positions as of the date these Financial Statements were issued.
A total of $47,419 of interest and penalties is accrued for the uncertain tax positions as of June 30, 2026, including $10,554 related to the current year, $39,300 for prior years, less $2,435 that was released in conjunction with a decrease to the uncertain tax liability reserve settlements for settlements with taxing authorities during the three and six months ended June 30, 2026. A total of $39,300 of interest and penalties was accrued as of December 31, 2025, which included $19,132 for the year then ended and $20,168 for prior years.
The Company has been selected for examination of its amended tax returns filed with these unrecognized tax benefits. The total amount of unrecognized tax benefits, and the related impact to the Company’s effective tax rate, may change within the next twelve months for additional uncertain tax positions taken on a go-forward basis, or, if favorably resolved, would decrease the Company’s effective tax rate.
In July 2025, the U.S. government enacted a reconciliation bill, commonly referred to as the One Big Beautiful Bill Act (the “Act”), with certain provisions of the Act effective in 2025 and other provisions becoming effective in 2026 and beyond. Among the various provisions contained in the Act, modifications to Section 163(j) interest expense limitations are expected to favorably impact the Company’s state tax calculations. We reflected a discrete tax event during the three and six months ended June 30, 2026 which resulted in reductions to our uncertain tax position of $480 and $695, respectively. Additionally, during the three and six months ended June 30, 2026, our deferred tax liabilities increased by $642 and $925, respectively, resulting from state decoupling considerations. The net impact to the effective tax rate was not material. The Company continues to evaluate the impact of the various provisions of the Act, but does not expect the other provisions will have a material impact on its effective tax rate.