Proposed Tennessee Franchise Tax Reform

On February 5, 2024, Tennessee Governor Bill Lee addressed the state.  In his push to make Tennessee a stronger choice for companies to do business in, he discussed proposed tax cuts that simplify the Tennessee franchise tax.  In simplifying the franchise tax calculation, Governor Lee hopes to lessen the tax burden for businesses that are invested in Tennessee.

Currently, the franchise tax is imposed at a rate of .25% on the greater of net worth or real and tangible personal property owned or used in Tennessee.  Introduced on January 22, 2024, Tennessee House Bill 1893 deletes the provision requiring that the measure of the franchise tax must not be less than the actual value of real or tangible property owned or used by a taxpayer in the state. This would provide tax relief to businesses that are invested in the state.  Additionally, this bill authorizes the commissioner of revenue to issue refunds under certain conditions to taxpayers who properly file a claim for refund for prior years’ (2021 or later) franchise taxes paid in excess of the net worth portion.

At this time, although the legislation is still under proposal, taxpayers may want to assess how the proposed changes could impact their estimated tax or extension payments.  HHM will remain vigilant in tracking developments and will promptly communicate any updates as the legislation advances, ensuring that we can provide guidance to affected taxpayers.