Image Credit: capitol.tn.gov
The Center Square [By Jon Styf] –
A bill to repeal and refund Tennessee’s franchise tax has two significant changes in the House.
House Bill 1893 requires a list of companies receiving a portion of the $813.5 million refund to be named on the website of Tennessee’s Department of Economic and Community Development. The other requires those companies to first use any department tax credits to offset the refund amount.
The Senate version of the bill had a fiscal note of $1.55 billion, which Rep. William Lamberth, R-Portland, noted was an intentional drop in the cost of the bill.
Lamberth said he doesn’t believe the current franchise tax is unconstitutional but that it is good policy to end the tax. He also said that the additional funds allocated to the refund will not be reallocated, giving a safety net if refund requests are higher than estimated.
The economic development department does not name individual companies and the tax credits they receive but the Tennessee Department of Revenue reported $1.1 billion in tax credits carried over from the 2022-23 fiscal year. Of that, $830 million was for industrial machinery credits and $252 million was job creation credits.
Tennessee offers a 1% to 10% tax credit on the purchase of qualified industrial machinery and between $4,500 to $5,000 per new job tax credit for companies expanding or coming to the state.
Those incentives are in addition to FastTrack grants received by companies.
“Requiring credits issued by ECD to offset refund amounts will decrease the total amount of refunds paid. However, the precise amount of tax credits that received by the specific taxpayers impacted by this legislation is unknown,” the bill’s fiscal note says.
Gov. Bill Lee’s budget amendment proposed putting $351.7 million from the current year’s budget into the franchise tax refund fund.
The bill’s fiscal note says it will result in nearly $400 million less in tax collections next fiscal year before it becomes $405 million annually thereafter.
Lee’s initial budget proposal included $1.2 billion for the fund and $410 million in decreased annual state tax collections.
Businesses must file for a rebate before Feb. 3, 2025.
About the Author: Jon Styf, The Center Square Staff Reporter – Jon Styf is an award-winning editor and reporter who has worked in Illinois, Texas, Wisconsin, Florida and Michigan in local newsrooms over the past 20 years, working for Shaw Media, Hearst and several other companies. Follow Jon on Twitter @JonStyf.