Amendments	Fiscal Memos
SA0664	Amendment 1-0 to SB2103
SA0733	Amendment 2-0 to SB2103
SA0753	Amendment 3-0 to SB2103
SA0754	Amendment 4-0 to SB2103

	Amendments	Fiscal Memos
HA0898	Amendment 1-1 to HB1893
HA0965	Amendment 2- to HB1893

NOTE: Each fiscal memorandum applies only to the amendment(s) identified in the memorandum. The fiscal memorandum must be matched to any amendments that have been adopted.

Fiscal Summary

Increase State Revenue – $1,561,577,600/FY24-25/Franchise Tax Refund Fund Decrease State Revenue – $393,400,000/FY24-25/General Fund $405,200,000/FY25-26 and Subsequent Years/General Fund Increase State Expenditures – $1,561,577,600/FY24-25/General Fund Other Fiscal Impact – Should taxpayers amend estimated tax payments as a result of the proposed legislation in FY23-24, decreases in state franchise tax revenue will be realized prior to FY24-25. The amount of any decrease is dependent on multiple unknown factors and cannot be reasonably determined. An amount of up to $1,561,577,600 will be expended from the Franchise Tax Refund Fund beginning in FY24-25 and ending in FY27-28. The Governor’s FY24-25 proposed budget includes a one-time appropriation of $1,200,000,000 in FY23-24 and recognizes a decrease in recurring revenue of $410,000,000, beginning in FY24-25.

Bill Summary

TAX FOR DOING BUSINESS IN STATE AND HAVING SUBSTANTIAL NEXUS IN STATE Present law requires all persons doing business in this state and having a substantial nexus in this state, including any limited liability company regardless of how it is treated for federal income tax purposes, or any person exercising the corporate franchise, except for those having not-for-profit status or otherwise exempt under existing law, to pay to the commissioner of revenue annually a privilege tax in addition to all other taxes. The privilege tax imposed on all taxpayers is a tax of 25¢ per $100, or major fraction thereof, of a taxpayer's net worth, determined in accordance with the provision below, at the close of the tax year covered by the required return. The tax must be paid for the privilege of doing business in Tennessee, and must be in addition to all other taxes levied by any other statute. A not-for-profit entity must be subject to the franchise tax on all of its Tennessee net worth or real or tangible personal property owned or used, as the case may be, that is attributable to activities subject to income taxes under unrelated business taxable income or any other provision of the Internal Revenue Code. A taxpayer that is exempted from the franchise tax must be subject to such tax on all of its Tennessee net worth or real or tangible personal property owned or used, as the case may be, that is attributable to any activities that are unrelated to and outside the scope of the activities that gave the entity its exempt status. As used in present law, for taxpayer's filing on a separate entity basis, "net worth" generally means the difference between a taxpayer's total assets less its total liabilities computed in accordance with generally accepted accounting principles. However, if the taxpayer does not maintain its books and records in accordance with generally accepted accounting principles, net worth must be computed in accordance with the accounting method used by the taxpayer for federal tax purposes, so long as the method fairly reflects the taxpayer's net worth for purposes of the privilege tax levied. The bill changes the present law by requiring a not-for-profit entity to be subject to the franchise tax on all of its Tennessee net worth that is attributable to activities subject to income taxes under unrelated business taxable income or any other provision of the Internal Revenue Code. Additionally, this bill changes the present law by requiring a taxpayer that is exempted from the franchise tax to be subject to such tax on all of its Tennessee net worth that is attributable to any activities that are unrelated to and outside the scope of the activities that gave the entity its exempt status. This bill removes any reference to real or tangible personal property owned or used from the above provision.VALUE OF TANGIBLE PROPERTY AS MINIMUM TAX BASE Present law prohibits the measure of the tax levied by the Franchise Tax Law of 1999 from being less than the actual value of the real or tangible property owned or used in this state, excluding exempt inventory and exempt required capital investments. However, for tax years ending on or after December 31, 2024, the measure of the tax levied in these provisions applies to the actual value of the taxpayer's aggregate real or tangible property in excess of $500,000. There must not be included within the meaning hereof the value of any property while construction of that property is in progress and, in addition thereto, there is no actual utilization of such property by the taxpayer either in whole or in part. For purposes of these provisions, “property” must be valued at cost less accumulated depreciation in accordance with generally accepted accounting principles. However, if the taxpayer, other than any taxpayer required to file as a unitary group on a combined basis, does not maintain its books and records in accordance with generally accepted accounting principles, the value of the property must be computed in accordance with the accounting method used by the taxpayer for federal tax purposes, so long as the method fairly reflects the property's value for purposes of the tax levied by the franchise tax law of 1999. Railroad companies may compute the value of their “property” in accordance with the method used for federal tax purposes so long as such method fairly reflects the property's value for purposes of the tax levied by the franchise tax law of 1999. A return being filed by a limited liability company that has a general partnership as its single member must include in its franchise tax minimum measure only the real and tangible property owned or used by the limited liability company. For this purpose, “property” includes a taxpayer's ownership share of the real or tangible property owned or rented by any general or limited partnership, subchapter S corporation, limited liability company, or other entity treated as a partnership for federal tax purposes and not subject to the tax levied by the franchise tax law of 1999 and in which the taxpayer has an ownership interest either directly or indirectly through one or more such entities. In cases where part or all of the property is rented, the value of rented property used must be determined by multiplying the net annual rental by the multiples (i) 8 for real property, (ii) 3 for machinery and equipment used in manufacturing and processing, (iii) 2 for furniture, office machinery and equipment, and (vi) 1 for delivery or mobile equipment. Present law requires, for purposes of these provisions, the value of owned or leased mobile or movable property located both in and outside Tennessee during a tax period to be determined on the basis of the total percentage of time such property is within the state during the tax period. However, the value of an automobile or truck assigned to a traveling employee must be considered in Tennessee, if the employee's compensation is assigned to Tennessee for purposes of the taxpayer's apportionment formula payroll factor, or if such vehicle is licensed in Tennessee. Present law prohibits any system, method, improvement, structure, device or appliance appurtenant thereto, used primarily for the control, reduction, or elimination of water or air pollution, or used primarily for the disposal, treatment or recycling of hazardous waste, and required to meet mandatory requirements of state, federal or local law, from being deemed to be property that is actually utilized by the taxpayer in the conduct of its principal business. Copies of certificates provided for in existing law must be furnished to the commissioner by the taxpayer with the franchise tax return to verify exemption. However, this exemption must apply only to property, the construction, reconstruction or erection of which is completed by the taxpayer during corporate fiscal years ending on or after July 15, 1981, or which is acquired by the taxpayer during such fiscal years, and the original use of that commences with the taxpayer and commences during such fiscal years. Finally, present law prohibits machinery and equipment used to produce or store electricity in a certified green energy production facility from being deemed to be property that is actually utilized by the taxpayer for purposes of these provisions. A copy of the facility certification issued by the department of environment and conservation must be furnished to the commissioner by the taxpayer with the franchise tax return to verify exemption. This bill deletes all of the above provisions.TAX REFUND This bill requires, if a taxpayer paid the tax levied by the franchise tax law of 1999 as a result of the existing law regarding value of tangible property as minimum tax base, as that law existed prior to the effective date of this bill, then the commissioner must issue a refund equal to the amount of tax actually paid minus the amount of tax otherwise due pursuant to the franchise tax law of 1999 without regard to the existing law regarding value of tangible property as minimum tax base, as that law existed prior to such date. However, the refund is subject to the following provisions: (1) The refund must be claimed within three years from December 31 of the year in which the payment was made or within any period covered by an extension permitted by existing law; (2) The claim for refund, including information necessary to determine the proper amount due, must be filed on a form prescribed by the commissioner exclusively for the purpose of seeking a refund pursuant to this bill and must not include a claim for refund on any other basis. A claim on any other basis must be filed separately under existing law. The commissioner is also authorized to refund, in accordance with this bill, a claim timely filed under existing law and filed prior to January 1, 2024, that alleges that the franchise tax in the franchise tax law of 1999, or any provision of the franchise tax law of 1999, is unconstitutional by failing the internal consistency test. The commissioner is not authorized to make a refund under this bill unless a claim is filed; (3) As used in this bill, "tax actually paid" includes any credits applied on the return. Credits must be reinstated but not paid as a refund; (4) This bill does not prevent the commissioner from auditing the refund claim, appropriately adjusting or denying the claim, or auditing the amount of tax otherwise due under the franchise tax law of 1999 within the applicable statute of limitations; (5) A refund due under this bill must first be used to offset any outstanding tax liabilities and is subject to the report of debts requirements in existing law; (6) A denial of a refund claimed under this bill is subject to the remedies provided in existing law regarding taxpayer remedies for disputed taxes. (7) Interest at the rate established by determination of rate of interest under the Internal Revenue Code for a large corporate overpayment in the amount of the federal short-term rate plus five-tenths of a percentage point must be added to the amount refunded under this bill beginning 90 days from the date the commissioner receives the refund claim and proper proof to verify that the refund or credit is due and payable; and (8) Attorneys' fees must not be added to the amount of refund due. This bill requires that all refunds paid pursuant to this bill must be paid from an appropriately designated fund established by the commissioner of finance and administration, and any unexpended balance at the end of a fiscal year must not revert to the general fund but must be carried forward to be expended in the subsequent fiscal year until such time as the commissioner of finance and administration and the commissioner of revenue jointly certify to the chairs of the finance, ways and means committees of the senate and the house of representatives that the fund is no longer necessary. Upon certification, any remaining funds must revert to the general fund. It is the legislative intent that the beginning balance in the designated fund must be from funds appropriated by the general assembly in the general appropriations act for the purposes of this bill.REPORT This bill requires, on or before December 31, 2024, and annually until December 31, 2027, the department of revenue to report in writing to the chairs of the finance, ways and means committees of the senate and the house of representatives, and to the directors of the office of legislative budget analysis, the total number of refund claims filed and the total amount paid pursuant to this bill each fiscal year.RATE OF PENALTY AND INTEREST Present law provides, when it is determined by administrative review that a person is entitled to a refund or credit of any tax collected or administered by the commissioner of revenue, and such person is not a debtor, interest must be added to the amount of refund or credit due, beginning 45 days from the date the commissioner receives proper proof to verify that the refund or credit is due and payable. In the case of a taxpayer who is a debtor, when it is determined by administrative review that such taxpayer is entitled to a refund or credit of any tax collected or administered by the commissioner, interest must be added to the amount of refund or credit due, beginning 90 days from the date the commissioner receives proper proof to verify that the refund or credit is due and payable. This bill adds to the present law above by prohibiting interest from being added to any refund paid pursuant to this bill until 90 days from the date the commissioner receives the refund claim and proper proof to verify that the refund or credit is due and payable. This bill provides that the rate of interest is the rate established by determination of rate of interest under the Internal Revenue Code for a large corporate overpayment in the amount of the federal short-term rate plus five-tenths of a percentage point for any refund issued based on the allegation that the franchise tax in the franchise tax law of 1999 or any provision of the franchise law of 1999, is unconstitutional by failing the internal consistency test.ATTORNEY FEES Present law requires the court to award to the prevailing party in a tax dispute reasonable attorneys' fees and expenses of litigation up to 20 percent of the amount finally assessed or denied, including interest after payment. However, this bill adds to the present law by prohibiting attorneys' fees and expenses from being awarded or paid for any amount awarded or denied based on an allegation that the franchise tax in the franchise tax law of 1999 is unconstitutional by failing the internal consistency test.FILING OF RETURN Present law requires the franchise tax return to be filed as provided in existing law. On any return covering less than a 12-month period, including the return of a taxpayer in final return status, but excluding any return based on a 52- to 53-week year, the franchise tax must be prorated to cover the proportionate part of the year covered by the return. In the event the taxpayer's taxable year is closed within less than 12 months of incorporation, formation, domestication, or commencing of business, the franchise tax of a domestic entity must be prorated to cover the proportionate part of the year since the date of incorporation or formation, or the date of commencing business, whichever occurred first. The franchise tax of a taxpayer formed outside of Tennessee must be prorated to cover the proportionate part of the year since beginning business in this state. On any return where the franchise tax is prorated, annualization of rent paid must be required when determining the minimum franchise tax measure under existing law. Proration of the franchise tax and annualization of rent paid must be computed by a fraction based on a days method. This bill changes the above law by removing the requirement that on any return where the franchise tax is prorated, annualization of rent paid must be required when determining the minimum franchise tax measure under existing law. This bill also changes the present law by removing the requirement of the proration of the annualization of rent paid to be computed by a fraction based on a days method. Present law provides that if a person or taxpayer in final return status effects a complete liquidation that is initiated and completed on the same date, then the franchise tax must be computed utilizing net worth, or the minimum franchise tax base under existing law, on the date immediately preceding the liquidating event; otherwise, on any return of a taxpayer in final return status, the franchise tax must be computed by using the average monthly value of net worth or the average monthly value of the real and tangible property owned in Tennessee. Such average monthly value must be determined by totaling the value of net worth as of the final day of each month of the tax period, or the book value of the real and tangible property owned in Tennessee as of the final day of each month of the tax period, and then dividing that total by the number of months in the tax period. In the event the taxpayer is part of an affiliated group that has elected to compute its net worth on a consolidated basis, such election must not apply to the taxpayer while it is in final return status unless the entire affiliated group is in final return status during the same tax period, in which case the election must continue to apply to the taxpayer. This bill changes the present law by removing any reference to the minimum franchise tax base under existing law. This bill also removes any reference to the average monthly value of the real and tangible property owned in Tennessee. Finally, this bill removes any reference to the book value of the real and tangible property owned in Tennessee as of the final day of each month of the tax period.APPORTIONMENT Present law requires the unitary members of the financial institution affiliated group to report and pay the franchise tax computed under existing law on a combined return. As such, the unitary group must pay franchise tax on the greater of the unitary group's combined apportioned equity, or the unitary group's combined minimum tax base, calculated in accordance with existing law. The nonunitary members of the financial institution affiliated group must report and pay the franchise tax computed under the existing law on a separate entity basis. As such, the nonunitary members must pay franchise tax on the greater of apportioned net worth, as calculated on a consolidated basis, or the nonunitary member's minimum tax base, as determined in accordance with under existing law. This bill changes the above law by removing any reference to the unitary group's combined minimum tax base, calculated in accordance with existing law and or the nonunitary member's minimum tax base, as determined in accordance with under existing law.TAX IMPOSED ON MANUFACTURER Present law provides that the tax imposed by the franchise tax law of 1999 on any manufacturer must be levied only on the first $2,000,000,000 of apportioned net worth or real and tangible personal property owned or used in Tennessee. The bill removes the option for the tax to be levied on the first $2,000,000,000 of apportioned real and tangible personal property owned or used in Tennessee. ON MARCH 21, 2024, THE SENATE ADOPTED AMENDMENT #2 AND PASSED SENATE BILL 2103, AS AMENDED. AMENDMENT #2 makes the following changes to the bill: (1) Requires the tax subject to refund to have been reported to the department of revenue ("department") on a return filed on or after January 1, 2021, covering a tax period that ended on or after March 31, 2020, and the refund claim must be filed between May 1, 2024 and February 3, 2025, instead of requiring the refund to be claimed within three years from December 31 of the year in which the payment was made or within any period covered by an extension; (2) Requires all refunds paid pursuant to the bill to be paid from an appropriately designated fund established by the commissioner of finance and administration. Except as otherwise provided in this (2), any unexpended balance at the end of a fiscal year must not revert to the general fund but must be carried forward to be expended in the subsequent fiscal year. On or before June 30, 2025, the commissioner of finance and administration and the commissioner of revenue must jointly certify to the chairs of the finance, ways and means committees of the senate and the house of representatives the amount claimed pursuant to the bill. On July 1, 2025, any funds in excess of the certified amount must revert to the general fund. The fund specified in this (2) expires upon final payment of all refunds due pursuant to this section, and any remaining balance must revert to the general fund. It is the legislative intent that the beginning balance in the fund must be from funds appropriated by the general assembly in the general appropriations act for the purposes of the bill; and (3) On or before December 31, 2024, requires the department of revenue to report in writing to the chairs of the finance, ways and means committees of the senate and the house of representatives, and to the directors of the office of legislative budget analysis, the total number of refund claims filed and the total amount paid pursuant to the bill; this removes the requirement to report annually until December 31, 2027. ON APRIL 8, 2024, THE HOUSE SUBSTITUTED SENATE BILL 2103 FOR HOUSE BILL 1893, ADOPTED AMENDMENT #1, AND PASSED SENATE BILL 2103, AS AMENDED. AMENDMENT #1 makes the following changes: (1) Revises the provision in the bill requiring the tax subject to refund to have been reported to the department of revenue ("department") on a return filed on or after January 1, 2021, covering a tax period that ended on or after March 31, 2020, and the refund claim must be filed between May 1, 2024 and February 3, 2025, by, instead, requiring the tax subject to refund must have been reported to the department on a return filed on or after January 1, 2023, covering a tax period that ended on or after March 31, 2022, and the refund claim must be filed pursuant to this section between May 1, 2024, and February 3, 2025; (2) Adds to the provision in the bill requiring the claim for refund, including information necessary to determine the proper amount due, to be filed on a form prescribed by the commissioner exclusively for the purpose of seeking a refund and must not include a claim for refund on any other basis by requiring the form to include a statement that upon acceptance of a refund, the taxpayer knowingly waives any claim by the taxpayer or the right to file suit alleging that the franchise tax in the Franchise Tax Law of 1999 is unconstitutional by failing the internal consistency test; (3) If a taxpayer is due a refund under this bill and the taxpayer is a party to an agreement with the department of economic and community development and, as a result of such agreement, has received or is entitled to a tax credit administered by the department of revenue, requires the tax credit must first be used to offset and reduce the amount of the refund due to the taxpayer (4) Requires the name of each taxpayer issued a refund and the amount of the refund issued to be published on the department's website; (5) Prohibits attorneys' fees from being added to the amount of refund due; (6) Requires the office of the attorney general to review and approve the department's process for reviewing refund claims under this bill before the department is authorized to review and approve such claims; (7) If the application of the Franchise Tax Law of 1999 to a tax period results in a lower tax base than the minimum tax base of the value of tangible property, as it existed prior to the effective date of this bill, and as it applied to tax periods ending before December 31, 2023, then this amendment authorizes a taxpayer to annually elect to use the minimum tax base of the value of tangible property as it applied to tax periods ending before December 31, 2023. However, the election must result in a higher tax levied for the tax period under the law relevant to the rate of tax under the Franchise Tax Law of 1999, and the taxpayer waives any claim that the minimum tax base of the value of tangible property is unconstitutional by failing the internal consistency test; (8) Adds to the present law providing that the commissioner of revenue, with the approval of the attorney general is empowered and directed to refund to taxpayers all taxes collected or administered by the commissioner that are, on the date of payment, paid in error or paid against any statute, rule, regulation or clause of the constitution of this state or of the United States. The commissioner is also authorized to automatically issue a credit or refund, without the necessity of the approval for the portion of estimated taxes paid in excess of the actual liability established by the initial and subsequently filed return for the tax period. The authority granted in this present law extends only to taxes for which a claim is filed, with the commissioner under penalties of perjury, within three years from December 31 of the year in which the payment was made. However, this amendment provides that with regard to the payment of a franchise tax levied under the Franchise Tax Law of 1999, the authority granted in the present law in (8) above extends only to taxes for which a claim is filed, with the commissioner under penalties of perjury, within one year from December 31 of the year in which the payment was made; and (9) Requires a suit that contains a claim or allegation that the franchise tax in the Franchise Tax Law of 1999, or any provision of that act is unconstitutional by failing the internal consistency test to be filed on or before February 3, 2025. ON APRIL 11, 2024, THE SENATE NON-CONCURRED IN HOUSE AMENDMENT #1. ON APRIL 15, 2024, THE HOUSE REFUSED TO RECEDE FROM ITS ADOPTION OF HOUSE AMENDMENT #1. ON APRIL 17, 2024, THE SENATE REFUSED TO RECEDE FROM ITS NON-CONCURRENCE IN HOUSE AMENDMENT #1 AND APPOINTED A CONFERENCE COMMITTEE. ON APRIL 18, 2024, THE HOUSE APPOINTED A CONFERENCE COMMITTEE. ON APRIL 25, 2024, THE SENATE ADOPTED THE CONFERENCE COMMITTEE REPORT.