Almost Every Major Cannabis Company Could See Positive Cash Flow If 280E Is Removed In 2025

A recent analysis of 14 multi-state cannabis operators (MSOs) looks at how the potential removal of 280E in 2025 could impact their cash flows.

Section 280E of the U.S. tax code, which prevents cannabis companies from deducting normal business expenses due to federal prohibition, has long been a burden on the industry. If this tax provision were eliminated, cannabis companies would enjoy far better financial health.

Breakdown Of The Analysis

The chart provided by Viridian Capital Advisors shows the projected 2025 sources and uses of cash among the industry’s top MSOs, with an emphasis on how eliminating 280E could alter their financial standing.

• EBITDAR (Earnings Before Interest, Taxes, Depreciation and Rent): This is a critical metric because it represents the companies’ operational cash flow, excluding fixed charges.
• Additional Cash: Some companies are sitting on significant cash reserves, which serve as a buffer for covering operational needs. This is represented by the black line that shows EBITDAR plus existing cash.
• Impact of 280E: The red bars on the chart represent the additional tax expenses cannabis companies are incurring due to 280E. The black bars below reflect the estimated tax liability if 280E were removed. The significant gap between these bars shows how much relief companies could experience.

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Financial Outlook For Major MSOs

According to the analysis, six companies, including Green Thumb GTBIF, Trulieve TCNNF, Verano VRNOF, Cresco CRLBF, Glass House GLASF, and MariMed MRMD, are projected to have enough cash flow to cover all fixed charges in 2025, even without the removal of 280E. Notably, every other company except Schwazze SHWZ would have positive cash flow if 280E were eliminated.

However, while 2025 looks relatively benign for MSO credit, 2026 could present challenges, with significant debt maturities that many companies will need to refinance, Viridian Capital analysts warn.

Additionally, companies like Curaleaf and Trulieve have substantial back taxes recorded as "uncertain tax liabilities," which could become a financial strain depending on how repayment plans are structured.

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What This Means For The Cannabis Industry

If 280E is eliminated in 2025, the financial outlook for most cannabis companies would significantly improve. Companies would have more flexibility with cash flow and this relief could lead to higher profitability and more strategic investments. The potential tax reform could mark a turning point for an industry that has struggled under the burden of high taxes and federal prohibition.

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Cover: image generated with IA tools.