INCOME TAXES

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The following table sets forth the components of income tax expense:

	Year Ended December 31,
(in thousands)	2025		2024		2023
Current taxes:
Federal	$	56,094	$	55,297	$	43,143
State	3,271		2,181		2,561
Deferred taxes:
Federal	(7,008)		(6,391)		(7,916)
State	(979)		(5,915)		(4,334)
Total income tax expense	$	51,378	$	45,172	$	33,454

The Internal Revenue Service has taken the position that cannabis companies are subject to the limitations of IRC Section 280E, under which such 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. Effective during 2023, Illinois and New Jersey, two states in which the Company has significant operations, began permitting cannabis businesses to deduct ordinary and necessary business expenses from gross profit for state tax purposes. For 2025, 2024, and 2023, state and local income taxes in Illinois, Maryland, Massachusetts, and New Jersey comprise the majority of the Company’s state and local income taxes.

The following table sets forth a reconciliation of income tax at the federal statutory rate to recorded income tax expense:

($ in thousands)	Year Ended December 31, 2025
Loss before income taxes	$	(66,815)
U.S. Statutory Rate	21		%
Recovery based on Statutory Rate	$	(14,031)
Expense (recovery) resulting from:
State and local income taxes, net of federal income tax effect	(3,442)			5.2	%
Effect of changes in tax laws or rates enacted in the current period	3,931			(5.9)	%
Uncertain tax position, inclusive of interest and penalties	62,138			(93.0)	%
Equity-based compensation shortfall	152			(0.2)	%
Changes in valuation allowance	1,803			(2.7)	%
Other, net	827			(1.2)	%
Income tax expense	$	51,378		(76.9)	%

As previously disclosed for 2024 and 2023, prior to the adoption of ASU 2023-09, the following table sets forth a reconciliation of income tax at the federal statutory rate to recorded income tax expense:

	Year Ended December 31,
($ in thousands)	2024			2023
Loss before income taxes	$	(39,822)		$	(14,760)
U.S. Statutory Rate	21		%	21		%
Recovery based on Statutory Rate	$	(8,363)		$	(3,100)
Expense (recovery) resulting from:
State and local income taxes	(3,734)			(1,773)
Uncertain tax position, inclusive of interest and penalties	51,127			40,149
(Refundable) nondeductible penalties and interest	—			(658)
Equity-based compensation shortfall	980			1,322
Acquisition-related adjustments	—			(3,150)
Other permanent differences	1,960			429
Nondeductible executive compensation	3,202			267
Other, net	—			(32)
Income tax expense	$	45,172		$	33,454

The following table presents supplemental cash flow information related to income taxes paid (net of refunds received), subsequent to the adoption of ASU 2023-09:

(in thousands)	Year Ended December 31, 2025
US federal	$	—
US state and local	4,502
Total cash taxes paid, net of refunds received	$	4,502

The following tables set forth the components of deferred income taxes:

	December 31,
(in thousands)	2025		2024
Deferred tax assets attributable to:
State and local net operating loss carryforwards	$	1,265	$	873
Federal net operating loss carryforwards	69		—
Operating lease liabilities	69,904		67,439
Acquired intangible assets	4,292		3,964
Property and equipment	833		686
Loyalty program	328		425
Equity-based compensation	251		184
Other	5,919		3,868
Gross deferred tax assets	82,861		77,439
Valuation allowance	(1,803)		—
Total deferred tax assets	$	81,058	$	77,439
Deferred tax liabilities attributable to:
Goodwill and other acquired intangible assets	$	(48,150)	$	(46,620)
Property and equipment	(19,316)		(24,969)
Operating lease right-of-use assets	(35,107)		(29,289)
Total deferred tax liabilities	$	(102,573)	$	(100,878)
Net deferred tax liabilities	$	(21,515)	$	(23,439)

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. In 2025, the Company reflected a valuation allowance of $1,803 primarily attributable to various states’ net operating loss and credit carryforwards related to limitations on business interest expense carryover amounts.

As of December 31, 2025, the Company has gross state and local net operating loss carryforwards totaling $44,774, which begin to expire in 2026, and federal net operating loss carryforwards totaling $329. The Company files income tax returns in the United States and various state and local jurisdictions, which jurisdictions have varying statutes of limitations. The U.S. federal statute of limitations remains open for tax years 2020 and forward. The state and local statutes of limitations generally remain open for tax years 2020 and forward.

The Company operates in a number of domestic tax jurisdictions and is subject to examination of its income tax returns by tax authorities in these jurisdictions who may challenge any item of those returns. Because tax matters that may be challenged by tax authorities are typically complex, the ultimate outcome of these challenges is uncertain. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is more-likely-than-not that the position will be sustained upon examination. The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. The measurement of the uncertain tax position is based on the largest benefit amount to be realized upon settlement of the matter. If payment ultimately proves to be unnecessary, then the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, then a further charge to income tax expense may result. 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 Consolidated Balance Sheets.

The following table shows a reconciliation of the beginning and ending amount of unrecognized tax benefits:

Balance, December 31, 2022	$	—
Additions for tax positions related to the current year	35,367
Additions for tax positions related to prior years	37,588
Balance, December 31, 2023	$	72,955
Additions for tax positions related to the current year	38,289
Additions for tax positions related to prior years(1)	38,163
Balance, December 31, 2024	$	149,407
Additions for tax positions related to the current year	36,728
Additions for tax positions related to prior years	17,749
Balance, December 31, 2025	$	203,884

(1)Includes approximately $27,000 of IRC Section 280E refunds received during 2024.

A total of $39,300 of interest and penalties is accrued for the uncertain tax positions as of December 31, 2025, which includes $19,132 related to the current year and $20,168 for the prior years. Of the $20,168 of interest and penalties accrued as of December 31, 2024, $14,744 was related to that year and $5,424 related to prior years. The Company has been selected for examination of its amended tax returns filed with these unrecognized tax benefits but does not currently anticipate its unrecognized tax benefits to be resolved within the next twelve months and anticipates that the total amount of unrecognized tax benefits may change within the next twelve months for additional uncertain tax positions taken on a go-forward basis. If favorably resolved, then the unrecognized tax benefits 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 year ended December 31, 2025 which resulted in a $887 reduction to our uncertain tax position. Additionally, our deferred tax liabilities increased by $1,153 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.