05/02/2008
Revenue commissioner testifies
Revenue Commissioner Reagan Farr made the rounds in the Legislative Plaza this week to explain the administration's so-called "technical corrections" package. The amendment to Senate Bill 4173 filed by Sen. Jim Kyle (Memphis) and House Bill 4129 by Rep. Gary Odom (Nashville) is expected to net the state $27 million, up from an earlier $20 million estimate provided by Commissioner Farr's department.
Last week, NFIB mentioned a section of the amendment that would remove a franchise and excise tax exemption on family-owned non-corporate entities, or FONCEs, which are certain limited liability corporations and limited partnerships that derive passive income through commercial property. Commissioner Farr explained the effort as a fairness issue to ensure FONCEs are treated the same as those not owned by families. To date, no NFIB member has expressed concerns to our office about this effort. If you expect your small business to be impacted by this proposal, please call me immediately.
Several tax experts believe it would be fair to establish an effective date no earlier than Jan. 1, 2009, in order to allow impacted small business owners and families to plan properly. The experts said the owners of FONCEs will need this time, at a minimum, to reposition their assets under another appropriate entity while obtaining the necessary liability coverage. NFIB and others are waiting to learn the amount of dollars raised by this specific provision.
Other provisions in the Kyle-Odom amendment would:
- Require a taxpayer who is required to file electronically for one outlet or location to file returns electronically for each location
- Change the rules so that hotels that have breakfast bars but no restaurants would pay sales and use tax on food
- Require financial institutions to disclose dividends received from a captive real estate investment trust
- Tighten the existing statute that is designed to prevent a taxpayer from moving assets to an exempt affiliate for the purpose of avoiding excise tax on the gain of the asset when sold
- Eliminate the distinction between Class A and Class B gift recipients for tax purposes
- Amend the exemption for kerosene to include all sales from a blocked pump
- Revise and expand the circumstances under which a taxpayer may claim a deduction for bad debt
At the request of NFIB and other groups, the Revenue Department removed a provision that would have given the commissioner authority to promulgate rules and regulations with regard to determining the difference between tangible personal property and real estate. The commissioner already has this authority, and no statute is necessary.
Also of note, NFIB thanks Sen. Diane Black (Gallatin), co-prime sponsor of the healthcare tax credit bill for small business (SB 2659), for comments made during a Senate Tax Subcommittee hearing this week. Black said she believes a proposed tax credit in the technical corrections amendment (for facilities engaged in manufacturing a product necessary for the production of green energy) sends a curious signal, given other important initiatives like her proposed healthcare tax credit for existing small businesses in Tennessee. Black noted that important, worthy proposals for in-state businesses shouldn't necessarily take a backseat to the green energy proposal in this year's amendment.
NFIB expects to remain neutral on the overall amendment, but will continue to monitor it as it continues to evolve. NFIB thanks members of our Tax Advisory Committee, including Chairman Larry Hyatt with Larry Hyatt CPAs in Brentwood, for their input during this process.
Legislative update
Legislators continue to show signs they're serious about wrapping up session by mid-May. Here's a report on this week's activity.
Small group health cooperatives: House Bill 4066, sponsored by Reps. Charles Curtiss (Sparta) and Charles Sargent (Franklin), passed the House Finance, Ways & Means and Calendar committees this week and will be heard by the full House early next week. The bill would let small business owners join together to negotiate for health insurance rates and give small business owners an important option to look for better rate predictability and stability. Please contact your representative as soon as possible (click "House," then "Members") and ask them to vote YES on HB 4066. The Senate unanimously passed its version earlier this session.
Workers' comp: Some issues are too important not to mention twice. Last week, Rep. Craig Fitzhugh (Ripley) took HB 3710 off notice Tuesday in the House Consumer & Employee Affairs Committee and requested a summer study. The bill would have righted a surprising Tennessee Supreme Court Decision that essentially created a new workers' compensation system for injuries that occur during recreational activities. This week, several NFIB members informed us they will be padlocking their wellness centers and postponing traditional summer softball events. NFIB encourages all employers that have wellness equipment (fitness or sports-related) or plans to install such equipment to obtain legal advice before allowing onsite (like weight-lifting or basketball games) or offsite (team-building events like softball games) activities.
Rep. Fitzhugh's bill specifies that injuries incurred during an employee's recreational activities are not compensable by workers' compensation unless the employer either: expressly required participation or made the activity part of the services of the employee; or the employer derives substantial direct benefit from the activity beyond the intangible value of improvement in employee health and morale. SB 3271 by Sen. Randy McNally (Oak Ridge) passed the Senate 33-0 two weeks ago. NFIB will be working soon with opposition groups to help them understand the benefits of the bill – healthier workers, lower healthcare costs, and better worker productivity and morale – while addressing any remaining concerns.
Budget shortfall could approach $600 million next year
On Thursday, the State Funding Board announced next year's budget shortfall could be as high as $585 million. Gov. Phil Bredesen continues to contend now is not the time to tap the state's rainy day fund, preferring to make cuts this year in state government On Wednesday, the governor said he was looking at a "serious change in the number of people who are employed by the state." This year's budget needs to be cut by as much as $380 million in order to be balanced. Read more here and here, which includes comments from legislative leaders.
More reasons to attend NFIB Summit in June
Are you on the bubble about signing up for next month's NFIB Small-Business Summit in Washington, D.C.? Maybe this will help: Sen. John McCain, the presumptive Republican Party nominee for president, will be a keynote speaker. Sens. Hillary Clinton and Barack Obama also have been invited to speak to the hundreds of small business owners from around the country who are expected to attend.
The Summit will be held Monday, June 9, and Tuesday, June 10, at the Grand Hyatt Washington, 1000 H St. N.W., in Washington, D.C. Sen. McCain is scheduled to address attendees at 9:30 a.m. on Tuesday. The 2008 National Small-Business Summit, "We Are Stronger Together," presented by NFIB and eBay, offers attendees the opportunity to meet their lawmakers face-to-face and share their experiences about how Washington, D.C. decisions affect small businesses. The Summit will focus on top small business legislative priorities, including healthcare reform efforts. Other speakers include Todd A. Stottlemyer, NFIB president and CEO; Meg Whitman, former president and CEO, eBay; Tony Snow, CNN political commentator and former White House press secretary; Roger Staubach, founder of The Staubach Co. and NFL Hall of Fame member; Charles Cook, The Cook Political Report; and Stuart Rothenberg, The Rothenberg Political Report. Deadline for attendees to receive a discounted hotel rate is May 9. More information about the Summit, including online registration, is available at www.NFIB.com/summit.
Join us in Jackson, Memphis
NFIB will be hosting grassroots meetings later this month in Jackson and Memphis sponsored by Regions Bank. The Jackson Area Action Council will be held from 11:30 a.m.-1 p.m., Tuesday, May 20, at Brooks, Shaw & Sons at the Old Country Buffet (Heritage Room) at 56 Casey Jones Road in Jackson. Guest speaker is Sharon Taylor McKinney with the Tennessee Economic and Community Development Business Enterprise Resource Office. Taylor McKinney is an expert in coordinating procurement, manufacturing and international trade initiatives for small, minority and women-owned businesses within 21 West Tennessee counties. The Memphis Area Action Council will be held from 11:30 a.m.-1 p.m., Wednesday, May 21, at Regions Bank at 6200 Poplar Ave. in Germantown. Guest speaker is Shelby County Mayor AC Wharton Jr. Please contact Valerie Nagoshiner at 615-872-5331 by May 19 to make reservations.
Small business news you can use
Small business: Playing for keeps (BusinessTN magazine)Small businesses look to Washington for helpCoverTN story from Knoxville TV stationBelmont a 'watering hole' for entrepreneursSite Selection magazine recognizes TennesseeAT&T bill passes both chambers
Sincerely,
Jim Brown
NFIB/Tennessee State Director
615-874-5288
Jim.Brown@NFIB.org
