TerrAscend says the feds sued a company that doesn't exist

TerrAscend USA asked a federal judge on September 17 to throw out the Justice Department's lawsuit seeking back $8,360,683.19 in tax refunds — and its lead argument is that the government sued a company that doesn't exist.

The DOJ's May complaint named "TerrAscend USA, Inc. & Subsidiaries" as the defendant. TerrAscend's 38-page motion says that's not a legal entity at all — it's just the label used for a consolidated federal tax-return group, not something capable of being sued. TerrAscend is asking the U.S. District Court for the District of New Jersey to dismiss the case with prejudice, meaning the government wouldn't get a do-over with the right name.

The underlying dispute goes back to Section 280E, the tax-code provision that blocks marijuana businesses from deducting ordinary business expenses because the plant is still federally illegal. TerrAscend claimed 280E-related deductions on an amended 2020 return and got the refund; the government now wants it back.

TerrAscend also argues New Jersey isn't the right venue — the company is Delaware-incorporated, runs operations out of Florida, Ohio and Connecticut, and says the Union City, NJ address the suit cites is just a virtual mailing service, not an actual office. The government has until October 5 to respond, with a hearing set for October 19.

Whatever the outcome, it's a preview of how messy 280E clawback fights could get as rescheduling works through the courts — operators who claimed deductions in good faith are now stress-testing exactly how far the government can reach back, and on what legal footing.