Significant Legislation Proposed to Change Tennessee’s Franchise Tax
Recently, there have been challenges to Tennessee’s franchise tax alternative measure, which is based on real and tangible personal property utilized by a taxpayer in Tennessee. The challenges have raised the argument that the alternative measure violates the dormant Commerce Clause of the United States Constitution’s internal consistency test, meaning double taxation would occur if another state adopts a similar tax.
In response to these challenges, the Tennessee Legislature has introduced HB 1893, which eliminates the provision requiring the Tennessee Franchise Tax to be calculated based on the value of real or tangible personal property used in the state. Should the bill pass, taxpayers subject to the Tennessee Franchise Tax would only calculate the tax based on net worth. Thus, taxpayers who paid the tax based on real or tangible property have a refund opportunity and prospective tax savings.
HB 1893 also allows impacted taxpayers the ability to apply for refunds and only permits a refund if a claim is filed. Marcum is tracking these changes and encourages our clients to review how they calculated the tax (i.e., based on net worth or the alternative measure) and follow up with their tax advisors on potential refund opportunities and the impact on future payments.
If you’re concerned about how the proposed changes to Tennessee’s Franchise Tax might impact your business, Ask Marcum for more details.
