On April 25, 2024, the 113th General Assembly wrapped up its session, finalizing a tax reform proposed by Gov. Bill Lee regarding Tennessee’s franchise tax law. This reform aimed to address legal risks and potential challenges to the state’s franchise tax. The legislation proposed repealing the property provision of the franchise tax and providing a window for Tennessee businesses to seek refunds for previous tax years.
Gov. Lee's proposal was prompted by concerns over legal challenges to Tennessee's franchise tax, influenced by a Maryland court case. This case, Maryland v. Wynne, raised questions about the constitutionality of Tennessee's tax structure. Gov. Lee proposed setting aside funds to pay refunds and repealing the property provision, with estimated costs of over $1.6 billion for refunds and $400 million annually for the repeal.
Both the House and Senate supported repealing the property portion of the franchise tax. However, they differed on aspects such as refund eligibility, disclosure of recipients, and the duration of refunds. The disagreement led to the bill being sent to conference.
A consensus was reached in conference committee and the conference report was passed last week. The notable points of the adopted legislation include the following:
· The refund lookback period will include all tax periods that ended on or after March 31, 2020.
· The refund claim must be filed between May 15, 2024, and November 30, 2024.
· The Department of Revenue will publish a list of companies claiming the refund. That list will be grouped into four categories based on the amount of refunds received.
It is anticipated that Gov. Lee will sign the bill this week.
For further information on how these changes may affect you, please do not hesitate to contact us