Bass, Berry & Sims attorney Mike Sontag, Steve Jasper, Sara Morgan and Robert Guth authored an article for Tax Notes State examining Tennessee's recent repeal of the state's so-called alternative property measure of the franchise tax, the automatic refund granted by that change, and its long-term ramifications for the state's budget and tax policy.
As the authors explain, prior to the May 2024 bill, Tennessee entities were taxed on the "the total book value of all real and tangible property owned or used in the state, with no reduction for the debts associated with acquiring or owning that property." That "alternative property measure" has now been repealed, and "going forward every taxpayer will pay franchise tax on apportioned net worth for tax years ending in or after 2024. ... In addition to the property measure repeal, the law provides for special refunds to all taxpayers that paid franchise tax using the property measure in returns filed on or after January 1, 2021, for tax years ending on or after March 31, 2020."
The new bill, signed by Tennessee Governor Bill Lee on May 10 – is estimated to cost the state nearly $2 billion.
The full article, "Tennessee Makes History ... Again," was published by Tax Notes State on June 10 and is available online (subscription required).
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