House, Senate Remain at Odds on Franchise Tax Reform

Date: April 12, 2024

Bill heading to a conference committee for further debate

Updated: April 16, 2024 

With about one week before the end of session, Governor Lee’s franchise reform bill has passed in differing forms in the Tennessee Senate and House of Representatives. Because of the variations, the chambers likely will appoint members very soon to a conference committee to find common ground. 

Both the House and Senate versions have similarities, including: 1) Would eliminate the alternative minimum measure on the F&E tax prospectively (savings of $400M annually for those taxpayers); 2) use the net worth calculation going forward; and 3) set up refund programs for taxpayers who have used in recent years the alternative minimum measure, which is suspect constitutionally.  

The Senate bill (SB 2103), which passed two weeks ago, would allow for significant refunds for a three-year period back to 2020, totaling $1.5 billion. The House, which passed their bill last week, would only have a one-year lookback period for refunds.   

 NFIB has several concerns with the House version, which if passed, would:  

  • Make public taxpayer information (name and amount) of all refund recipients. This would violate the Tennessee Taxpayer Bill of Rights and confidentiality clauses in Chapter 67 (67-1-110 and 67-1-1701 and 1702). No other state publishes taxpayer information, according to the Council on State Taxation. 
  • Limit these refunds to one year instead of three years, which would violate a basic taxpayer right. No state has one year for refunds.  
  • Make all F&E refund claims going forward one year only instead of three years. TN would become the only state with such a policy. States around us generally have three-year refund claim periods, the same as the IRS.  

NFIB is communicating these concerns with lawmakers and encouraging them to find a reasonable compromise before the end of the 113th General Assembly.  

Why is This Legislation Important to Small Business? 

This measure will provide significant tax relief and certainty to 100,000 impacted entities, 75,000 of which are in state and mostly small to mid-sized businesses. All businesses would use the net worth calculation going forward.

NFIB has put together a one-pager explaining why HB 1893/SB 2103 is important to many of our members and to sound tax policy in Tennessee. Read it here. 

Related Content: Small Business News | Tennessee

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