COLUMN: Much-Needed Reforms Coming for Small Business

Date: May 22, 2023

NFIB State Director Jim Brown writes in The Tennessean that small businesses scored some important victories in the General Assembly

This column by NFIB State Director Jim Brown first appeared in the May 19 edition of The Tennessean:

The dust is still settling after the 113th Tennessee General Assembly adjourned last month. One thing is clear, though. Small business had a great year, thanks to multiple tax and labor relief reforms.

The headliner is Gov. Bill Lee’s Tennessee Works Tax Act, a $400 million tax relief package with $150 million in annual savings for small businesses. The timing of the bipartisan reform couldn’t be better, with many small businesses dealing with high inflation and supply chain challenges and struggling to find qualified workers. Highlights of SB 275/HB 323 include:

∎ Raising the exemption threshold for the business tax from $10,000 to $100,000 in gross receipts (140,000 businesses will qualify); exempting the first $50,000 of net income from the excise tax (70,000 will qualify, with maximum savings of $3,250 each); and protecting the first $500,000 in property investment from the franchise tax (68,000 will qualify, with maximum savings of $1,250 each) .

∎ Simplifying tax administration and conforming with the federal bonus depreciation provisions of the 2017 Tax Cuts and Jobs Act.

∎ Adopting a “single sales factor” apportionment for the franchise and excise tax (removes property and payroll from the calculation over a three-year period), benefiting mostly in-state businesses

∎ Extending the in-state business tax exemption to manufacturers with storage facilities within a 10-mile radius.

∎ $273 million for a one-time, three-month sales tax holiday on grocery items from August through October.

Elsewhere, my organization, the National Federation of Independent Business, worked with many groups on a bill to reduce the administrative burden on small businesses that must file the tangible personal property tax schedule each February. With the bipartisan passage of SB 384/HB 804, beginning in 2025 approximately 135,000 small businesses will have the option to pay a small tax and bypass completing the schedule, which can be quite costly and time-consuming.

Important labor reforms also passed. Employers soon will have the option to report interview no-shows online with the Department of Labor & Workforce Development. SB 1285/HB 1060 also better defines what constitutes a work search and increases required work searches from three a week to four in order to certify for unemployment benefits. Non-compliance would result in loss of unemployment benefits for that week only.

Lawmakers also passed legislation that ensures local governments cannot dictate limits on hours an employee works or regulate worker output at a private employer. SB 681/HB 774, the Protecting Tennessee Businesses and Workers Act, builds on previous efforts since 2013 to preempt local governments from private employer mandates relating to wages, paid leave, health care and predictive scheduling.

Lastly, the passage of SB 650/HB 1342 will preserve the right of a secret ballot in unionization efforts in instances where employers receive economic development incentives from our state. In such situations, a process called “card check” (where unions collect signatures in the open in efforts to unionize an employer) would be prohibited and a secret ballot would be required. Tennessee workers deserve the right to a private vote and should never be subject to any attempt at intimidation.

Several good proposals that did not pass this year remain on the table. Reinstating modest vendors’ compensation for our retailers and eliminating the harmful professional privilege tax on five remaining professions would make Tennessee even more business-friendly.

Related Content: Small Business News | Tennessee

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