Small Businesses in Tennessee Score Big Legislative Victories in 2023

April 25, 2023

NFIB members will see significant tax relief as a result of several bills that passed the legislature this session

Small Businesses in Tennessee Score Big Legislative Victories in 2023

Many NFIB members in Tennessee will see significant tax relief as a result of several bills that passed the legislature this session. Lawmakers also approved other protections for small business in the first half of the 113th Tennessee General Assembly, which ended Friday. Lawmakers are expected to return, however, for a special session to be called by Governor Bill Lee, perhaps as early as mid-May, to address additional safety protection proposals after the tragic shootings at Covenant School in Nashville. As the dust settles from this year’s session, here’s a list of small business victories and challenges.

Small Business Victories

Small Business Tax Relief Governor Lee’s “Tennessee Work’s Tax Act,” a $400 million tax relief package and one of the largest in state history, passed with strong bipartisan support. The highlights of SB 275/HB 323 include:

More than $150 million in annual small business tax relief, including 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 excise tax (70,000 will qualify, maximum savings of $3,250) and protecting the first $500,000 in property investment from the franchise tax (68,000 will qualify, maximum savings of $1,250)
$64 million to simplify tax administration and conform with the federal bonus depreciation provisions of the 2017 Tax Cuts & Jobs Act, allowing businesses to more quickly recover costs and further incentivize investment
Aligning Tennessee with more than 30 states by adopting “single sales factor” apportionment for the franchise and excise tax (removes property & payroll in the calculation over a three-year period)
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

Tangible Personal Property Tax Reform NFIB led the way to reduce the administrative burden on small businesses that must file the tangible personal property (TPP) tax schedule each February. With passage of SB 384/HB 804, approximately 135,000 small businesses will have the option to pay a small tax and bypass filling out the schedule, which can be costly and time-consuming. Businesses with $2,000 of TPP or less or between $10,000 and $2,000 of TPP will have this choice beginning in 2025. All businesses still must fill out the schedule next year. We will share a comprehensive update separately in the weeks ahead. Interview ‘Ghosting’ Addressed Small businesses have complained consistently about interview no-show’s, also called ghosting, in recent years. With passage of SB 1285/HB 1060, employers will have the option to report no-shows on a website that the Department of Labor & Workforce Development is improving. The bill better defines what constitutes a work search and increases required weekly 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. Work Output Mandates Prohibited Legislation passed that ensures local governments cannot 1) dictate limits on hours an employee works; 2) regulate worker output; or 3) mandate certain benefits 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, healthcare and predictive scheduling. These workplace decisions should always be between private employers and their employees, many of whom want extra hours and overtime. Secret Ballots Required of Entities Receiving State Dollars SB 650/HB 1342 preserves 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. Labor Mandates Defeated Dozens of mandates on your business were defeated again. NFIB testified against a bill (SB 166/HB 278) that would have allowed local governments to require their contractors to pay leave. NFIB also successfully opposed bills that would have doubled OSHA penalties, established a state minimum wage, and many others. Other Bills of Interest NFIB Supported SB 907/HB 814 will greatly ease the burden for food truck operators by creating a state fire permit that these small businesses can use to satisfy local requirements. Currently, these small businesses are spending significant time and money obtaining multiple permits in local jurisdictions. SB 11/HB 2 makes permanent limitations on claims against a person for loss, damage, injury, or death arising from COVID-19. The protections have been important to small businesses and other entities, protecting them from frivolous claims just to get a settlement. SB 469/HB 125 will help level the playing field for TN operators who sell trailers to customers in other states.

Small Business Challenges

NFIB joined other groups in calling for passage of SB 1140/HB 886, which would reinstate modest vendors’ compensation that was removed 20 years ago during a budget crisis. Retailers should not be unpaid tax collectors for the state. The measure failed to be included in the final budget; we will renew our efforts in 2024. Various proposals to eliminate the remaining five professions subject to the professional privilege tax also failed. No professional, in-state or out-of-state, should be taxed $400 annually to go to work. Transportation Reform & Data Privacy While NFIB did not take a position on the governor’s Transportation Modernization Act (SB 273/HB 321), it’s worth noting what it does:

$3 billion to the Transportation Modernization Fund to alleviate urban congestion and fund rural road projects across the state, which includes $750 million allocated to each of Tennessee’s four TDOT regions
$300 million to expand the State Aid Program for local road projects, allocating 15 times more funding toward local communities than they receive each year for transportation projects
Ensures that Tennessee has the resources necessary to meet current and future transportation needs by engaging in Public-Private Partnerships (P3s), Alternative Delivery Models and Electric/Hybrid vehicle fee parity

After three years of debate, a data privacy bill (SB73/HB1181) passed. As amended, the bill does not contain a private right of action and will require businesses with information of 175,000 or more consumers to comply with consumers’ requests regarding personal information rights. The business community also worked to remove a section on attorneys fees, reduced proposed penalties in half, and clarified that the privacy program is voluntary.

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