Franchise Tax Reform Passes: Refunds Coming for Tennessee Businesses

Late last month, the Tennessee legislature came to an agreement on HB 1893/SB 2103, effectively repealing the franchise tax minimum measure based on property owned and rented in the state.  With Gov. Bill Lee expected to sign the bill into law soon, the action allows for businesses affected by the alternate method for calculating the franchise tax to apply for a refund of the difference between the franchise tax originally paid over the amount of tax calculated based upon net worth.  The reform brings Tennessee’s franchise tax structure into line with that of other states, not only making Tennessee a more attractive state in which to do business, but also alleviating potential legal challenges related to the constitutionality of the franchise tax.

Affected businesses may claim refunds with respect to franchise returns filed on or after January 1, 2021, for fiscal tax years ending March 31, 2020, or later.  In return for the refund, businesses will waive the right to file a constitutional legal challenge for the tax years for which refunds are received.  Due to the large amount of expected refunds to be issued, the Department of Revenue is required to publish the names of all businesses receiving refunds to allow for transparency of the use of the funds set aside for this purpose. Along with the business names, the information published by the Department of Revenue will include the dollar range in which each business’s refund amount falls.

The state will begin accepting claims for refunds on May 15, 2024, and all claims must be filed by November 30, 2024.  If you anticipate your business was affected by the alternative franchise tax base, HHM can assist you in obtaining your refund.  

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