Key Changes to Tennessee’s Franchise Tax

On April 25, 2024, the Tennessee General Assembly enacted substantial reforms to the state’s franchise tax structure through House Bill 1893 and Senate Bill 2103, collectively referred to as the Amended Conference Committee Bill. This legislation signifies a fundamental shift from the traditional method of calculating franchise taxes. The Tennessee General Assembly Fiscal Review Committee projects over $1.5 billion in refund claims, with the Department of Revenue preparing for roughly 100,000 refund requests, indicating significant financial implications.

In short:

Tennessee is amending its Franchise tax law.
This is happening because the state fears that a portion of the law enforcing the tax may be unconstitutional under the US Constitution and is taking a proactive measure to change it.
Claims for refund must be filed between May 15, 2024, and November 30, 2024.
Those eligible: C/S Corps, LLCs, PLLCs, LLPs, LPs, Cooperatives, REITs, Banks, and Savings and Loan Associations that have filed a TN Franchise tax return for tax years 2020-2023.

Historically, Tennessee franchise tax was calculated based on the greater of a business’s apportioned net worth or the book value of its property within the state. The recent reforms include the repeal of the Alternative Minimum Property Measure, transitioning to a system based solely on apportioned net worth. This simplifies tax calculations, potentially reducing complexity and compliance costs for businesses, offering tax savings, and providing refund opportunities for overpayments made under the previous system. For those needing further clarification or seeking to maximize the opportunities provided by the new tax laws, our experts are ready to provide guidance and support.