The first session of the 111th Tennessee General Assembly adjourned the evening of May 2, with small business faring exceptionally well. Much of the NFIB agenda, which emphasized tax reform and tax fairness, passed along bipartisan lines.
Late in session, the Legislature repealed the professional privilege tax on 15 of 22 professions. Bills harmful to small business died in committees. Several remaining issues will be studied over the summer.
This year was notable for impressive activism from the small fitness center, car washes, and waste haul industries. It also showed, once again, how one individual speaking up (an NFIB member in Crossville) can have a profound impact on policy. Here are some highlights!
Tax Repeal, Tax Fairness
The House and Senate passed HB 1262/SB 398, which eliminates the $400 professional privilege tax on all professions except lobbyists, stockbrokers, and investment advisers, osteopathic physicians and physicians, and attorneys. The amended legislation is a significant step in the right direction to reduce the burden on more than 56,000 Tennesseans in various professions who pay Tennessee’s last income tax.
Winners include accountants, architects, audiologists, chiropractors, dentists, engineers, landscape architects, optometrists, pharmacists, podiatrists, psychologists, real estate brokers, speech pathologists, sports agents, and veterinarians.
Special thanks to Lt. Gov. Randy McNally, Sens. Brian Kelsey, and Janice Bowling, Reps. Andy Holt, Micah Van Huss, and Jay Reedy for their work over the years to get this done.
NFIB has lobbied aggressively in recent years to eliminate this discriminatory tax completely and will work next year to repeal the tax on remaining professions. According to state law, “engaging in any vocation, occupation or business named in this part is declared to be a ‘privilege.’” NFIB members believe strongly that owning and operating a business should be a right in Tennessee, not a privilege. It is important that you make your voice heard over the summer and fall to help us get the rest of this cumbersome, unfair tax off Tennessee’s books.
Small Gyms, Car Washes, Waste Haul Businesses
Gov. Bill Lee’s first bill signing was the repeal of the unfair amusement tax on small gyms (SB 960/HB 1138) at NFIB member Orangetheory Fitness-Midtown in Nashville. The bill levels the playing field for smaller fitness centers to compete with large big box gyms that weren’t collecting the nearly 10 percent tax. More than 5,500 gym owners and their customers sent more than 50,000 emails to legislators this year. The wave had a huge impact, as lawmakers agreed with the governor it was time to “Toss the Tax” on Tennessee fitness. The bill, which passed both chambers 123-1, goes into effect July 1.
NFIB led the way for tax clarity for owners of dumpsters. The House passed HB 1441/SB 1309 94-0 and the Senate joined by a vote of 33-0. The bill would not have passed unless a concerned NFIB member spoke up. Larry Davis, owner of Middle TN Disposal in Crossville, didn’t agree with an auditor’s preliminary findings that the rental, delivery, and removal of dumpsters from construction sites were taxable events. He was especially concerned with a potential three-year retroactive tax assessment that would have harmed his business greatly.
When NFIB engaged stakeholders, we learned most of the industry agreed, having received direct guidance or cleared audits that showed inconsistencies in the state’s interpretations. Thanks to our bill sponsors, Sen. Jon Lundberg and Rep. Chris Todd, Lt. Gov. McNally and House leadership, the bill was funded in the final budget and passed unanimously.
Similarly, owners of automatic car washes banded together to protect their industry from potential economic chaos. HB 84/SB 237 makes clear that services related to automatic car washes are not taxable. NFIB was pleased to join small operators in this industry, arguing a state auditor should never be able to determine tax policy in the field, especially when the state has issued previous guidance that certain services are not taxable.
NFIB remains concerned, along with other business groups, of occurrences of retroactive tax assessments being issued or considered by the Department of Revenue when grey area exists, in particular when there is no specific legislative authority to tax these industries (92% on recent NFIB TN special survey) and when field audits are being used to establish tax policy (73%). Improving state law in this area will be a priority NFIB issue in 2020.
Great State Budget
Rarely do state budgets pass unanimously, but this year’s budget did. Gov. Lee proposed an excellent $38 billion budget that included a massive $225 million contribution to the state’s Rainy Day Fund. NFIB has been one of the few groups encouraging lawmakers to increase our reserves, and thankfully they did.
Read more about how this happened and what was funded. NFIB thanks House Finance Chair Susan Lynn and Subcommittee Chair Andy Holt, Senate Finance Chair Bo Watson, and House and Senate leadership for reaching an accord on a great budget.
Bills Good for Small Business Pass
The Statewide Standardization Bill (SB 431/HB 1021), supported by NFIB based on 2019 Ballot results, passed both chambers. The legislation establishes that state government has authority over any restrictions on auxiliary containers and food standards, making it clear they are not subject to local ordinance. The legislation will ensure employers in food retail and food service abide under one set of rules rather than by community patchwork. The legislation is necessary since the cities of Nashville and Memphis have considered regulation of plastic disposables and menu labeling. Senator Richard Briggs, who voted for the bill, announced he is planning to introduce some form of a statewide ban on plastics in 2020.
Other good bills:
SB 433/HB 12, “Lemonade Stand Bill”: Allows children under 18 to sell lemonade, etc., without having to get a license, pay fees.
SB 510/HB 419, Right to Shop Act supported by NFIB (as amended): A good starting point to improve transparency in healthcare and incentivize health insurance plan enrollees to shop for non-emergency, outpatient services. More information to follow soon, check out www.NFIB.com/TN.
SB 466/HB 539, IRS 20-factor test for unemployment, replacing the current TN ABC test: The original bill included workers’ comp, which was removed after the business community expressed concerns about undermining many years of common law.
Harmful Bills Fail
The following bills died or stalled in committee.
HB 216, Tennessee Pay Equality Act
HB 514, Tennessee State Family Leave Act
HB 363, Leave mandate to visit school
HB 986/SB 758, Pregnancy Workers Fairness Act: NFIB and the Tennessee Chamber of Commerce & Industry proposed a compromise amendment, but it was declined by the sponsors/advocates. NFIB cannot support a new cause of action that would have stacked state claims on federal claims (the law is already robust), or a reasonable accommodation standard of eight employees or more (current federal law is 15) and new authorities with the state’s Human Rights Commission, as originally proposed.
HB 1239/SB 1165, would have dropped Tennessee’s E-Verify mandate from 50 employees to 25. The original bill was too onerous (dropped mandate to six employees, made contractors liable for subs’ hiring of illegals, issuance of work stops for major projects where illegals are hired). The amended bill passed the House but stalled in a Senate committee.
HB 387/SB 380, well-intended legislation that could have had a significant negative impact on our employer-employee relationship laws. NFIB has pledged to work over the summer with committee members and the sponsors to find alternative ways to protect independent contractors who are sexually harassed, without having frivolous lawsuits.
Your Membership is Important
None of these successes happen without support from you as part of our membership. Why invest in being an NFIB member? Consider this year alone:
- Gym, yoga and barre studio owners will save hundreds of thousands of dollars in the years ahead and be able to grow their businesses faster.
- Owners of waste haul businesses saved tens of thousands of dollars (or much more) in possible tax assessments.
- Car wash owners saved hundreds of thousands of dollars and in some cases millions (one car wash owner in Morristown saved $2.4 million).
- All of the above will avoid headaches, legal fees and time away from growing their businesses.
- Professionals in 15 areas will save $400 annually; their firms and practices will save much more.
- Restaurants and convenience store owners won’t be burdened with costly, patchwork regulations and fees on plastics and menu-labeling mandates.
- All NFIB members:
- Are less likely to see big tax increases in the next downturn because the state’s Rainy Day Fund is larger.
- Have a better employer-employee relationship test for unemployment.
- Avoided having costly labor mandates burdening their businesses.
Thank you for your membership and support of free enterprise! Please contact State Director Jim Brown at 615-874-5288 or [email protected] with any questions.