INCOME TAXES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAXES |
The following table summarizes the Company’s income tax expense and effective tax rates for the three months ended March 31, 2026 and 2025:
The Company has computed its provision for income taxes based on the actual effective rate for the three months ended March 31, 2026 and 2025 as the Company believes this is the best estimate for the annual effective tax rate. Therefore, the Company’s effective income tax rates for the three months ended March 31, 2026 and 2025 are not indicative of the effective income tax rate for each respective fiscal year of 2026 and 2025. The Company’s effective income tax rate is significantly higher than the statutory income tax rates due in part to (i) an increase in the uncertain tax position liability due to tax positions based on legal interpretations that challenge the Company’s tax liability under Internal Revenue Code Section 280E (“280E”), (ii) interest and penalties accrual for tax liabilities, and (iii) state income taxes.
The Internal Revenue Service (“IRS”) has taken the position that cannabis companies are subject to the limitation of 280E, a position held by state tax regulators in Nevada, Ohio and Virginia. Under the IRS’s interpretation of 280E, cannabis companies are only allowed to deduct expenses directly and indirectly related to the production of inventory. In April 2026, the U.S. Department of Justice announced a regulatory action reclassifying certain state-licensed medical marijuana products and FDA-approved marijuana products from Schedule I to Schedule III under the Controlled Substances Act. Refer to Note 19 - Subsequent Events for more information.
In connection with the preparation and filing of the fiscal 2022 income tax return, the Company changed its previous application of 280E to exclude certain parts of its business. In regards to fiscal years 2023 through 2026, the Company has taken the position that its deductions of ordinary and necessary business expenses is not limited by IRC Section 280E. However, since the Company’s tax positions on 280E may be challenged by taxing authorities, the Company elected to treat the deductibility of these related expenses as an uncertain tax position. As of March 31, 2026 and 2025, the balances in income tax payable and unrecognized tax benefits on the consolidated balance sheets include the impact of the tax position on 280E, which decreased current liabilities with a corresponding increase in non-current liabilities. There was no material impact to the consolidated statement of operations.
In February 2026, the IRS issued a Notice of Proposed Adjustment ("NOPA") in connection with its audit of the Company's tax year ended December 31, 2021. The Company submitted a response to the NOPA disputing the proposed adjustments. The response reflects substantive and procedural arguments that Jushi believes have merit, and the Company plans to defend its position vigorously. The proposed tax amounts were previously included in the Company's liability for unrecognized tax benefits.
The Company has a liability for unrecognized tax benefits of $186,234 and $177,242 as of March 31, 2026 and December 31, 2025, respectively, inclusive of interest and penalties of $41,524 and $38,342, respectively. The Company anticipates that it is reasonably possible that its new tax position on 280E may require changes to the balance of unrecognized tax benefits within the next 12 months. However, an estimate of such changes cannot reasonably be made.
The total amount of interest and penalties related to the liability for unrecognized tax benefits recorded in income tax expense during the three months ended March 31, 2026 and 2025 was $3,183 and $3,049, respectively.
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