Last week, the legislature adjourned “sine die” in year two of the 114^th General Assembly. Small business fared well this session, with one notable exception. Important labor, regulatory and civil justice reforms passed.

Separate attempts to undo the 2013 workers’ comp reform act and to bust the 2011 tort caps failed, thanks in part to NFIB’s efforts. A tax increase on certain money transmissions passed, however; small businesses often use these services to make important B2B purchases overseas.

Important Regulatory Reform Passes

One of the more notable reforms this year was the Regulatory Freedom Act. HB 1913/SB 2199 will require state agencies to obtain feedback from the community they’re seeking to regulate so agencies, lawmakers and impacted businesses understand the true cost of proposed rules and regulations.

Additionally, any proposed agency rule estimated to have a negative fiscal impact exceeding $1 million over five years will have to be voted on by the full General Assembly as a separate bill rather than in the omnibus rules bill.

The bill also will require state agencies to report annually the cumulative cost of their new/amended rules and regulations to provide transparency of regulatory costs to our state’s economy.

NFIB thanks NFIB member Rep. Clark Boyd (Lebanon) and Sen. Adam Lowe (Calhoun) and Senate Majority Leader Jack Johnson (Franklin), an NFIB member, for their work on this legislation.

Local Governments Blocked from Imposing Labor Mandates on Your Business

Tennessee has passed legislation over the last 13 years that has prohibited local governments from dictating certain labor policies upon private employers, thus avoiding a patchwork of costly, cumbersome local mandates.

Passage of HB 900/SB 674 adds to these efforts and makes clear that the General Assembly controls all labor policies by:

• Restricting local governments from regulating terms of private employment
• Reinforcing that labor and employment laws on private businesses should be uniform across the state
• Protecting businesses from compliance burdens caused by varying local mandates

NFIB thanks NFIB member Rep. Chris Todd (Humboldt) and Sen. Brent Taylor (Memphis) for their work on this bill.

Workers’ Comp Reforms and Tort Caps Protected

As proposed, HB 2179/SB 1981 would have undone many of the workers’ comp reforms that NFIB advocated for in 2013, which has resulted in lower premiums for many of our members.

NFIB and other groups opposed the bill successfully but did find one area of compromise – allowing payments to plaintiff’s attorneys when employers are clearly acting in bad faith. The legislation has a sunset in five years so it will be monitored.

As introduced, HB 5/SB 419 would have doubled the amount of compensation an injured plaintiff in a civil action may receive for noneconomic damages from $750,000 to $1.5 million; if the injury or loss is catastrophic in nature, those caps would have moved from $1 million to $2 million.

NFIB opposed increasing the caps because they would have increased insurance costs. The caps also were set higher than other states when they were adopted in 2011.

The bill continued to evolve in various forms but finally met its demise in the Senate on the last day of session.

Tax Relief Bill Stalls, Tax Increase Passes

Unfortunately, an effort that sought to align Tennessee’s bonus depreciation rate with the current federal level of 100 percent in the One Big Beautiful Bill Act did not advance.

SB 32/HB 477, which was a priority issue at NFIB’s day on the hill in February, would have allowed businesses to immediately deduct the cost of qualifying capital investments, supporting expansion, job creation, and economic growth.

Conforming to the federal provision would reduce complexity, strengthen the manufacturing base, and ensure Tennessee remains attractive for new and expanding businesses compared to neighboring states that already follow the federal rate. We will renew efforts in 2027.

Legislation that will newly classify money transmissions from Tennessee to locations outside the U.S. as taxable service transactions under the state sales and use tax passed overwhelmingly in both chambers.

HB 2502/SB 2166 will establish a new tax of 2% on these money transmissions, which includes global B2B transactions. The legislation signals an unprecedented shift toward taxing essential business services and is contradictory to our reputation as a pro-business state.

Small businesses often use “fintech” money transfer providers instead of banks because they get lower foreign exchange rates, faster delivery, simpler onboarding and fewer wire‑related fees. After originally being considered in a House version last month, banks were exempted.

The new law will create winners (banks) and losers (180 licensed money transmitters in TN and small businesses that use them). The law will take effect on Jan. 1, 2027. A legal challenge on constitutional grounds is possible, if not likely.

Commercial Lawsuit Financing Protections Enacted

Positively, the legislature addressed the practice of commercial litigation financing, specifically the practice of hedge funds, wealthy individuals and activists, and even foreign adversaries and their sovereign wealth funds that invest large sums of money into lawsuits in Tennessee.

HB 2108/SB 2101 provides guardrails that assure that the secret funders backing lawsuits in the state (but are not parties to those lawsuits) are not allowed to make critical litigation decisions, including representation, litigation strategy and settlement.

It also ensures a litigation financer cannot walk away with more money from an award or settlement than the party they are backing.

Modified Non-Compete Agreement Bill Passes

As introduced, HB 1034/SB 995 would have prohibited non-compete agreements (NCA) that employers have with their employees. NFIB and others worked with the sponsors – NFIB members Rep. Rebecca Alexander (Jonesborough) and Sen. Paul Bailey (Sparta) – to find a compromise that addressed some of the overreaches that do exist.

Lawmakers understood that many small businesses need non-competes to protect their proprietary intellectual property and software.

The amended bill mirrors a part of Georgia’s law by requiring a court to apply rebuttable presumptions when determining the reasonableness in time of a restrictive covenant sought to be enforced after the termination of an employment or business relationship. It also prohibits an employer from requiring, requesting or enforcing an NCA against an employee whose annualized compensation is less than $70,000.

The new law will take effect July 1, 2026, and only will apply prospectively.

To read what passed in the first year of the 114^th General Assembly, click here.

Comments or questions? Please contact State Director Jim Brown at jim.brown@NFIB.org or 615-874-5288.