TN Tax Cuts for Businesses 2023 - Tennessee Works Tax Act

The Tennessee General Assembly recently passed the Tennessee Works Tax Act which provides various tax breaks for businesses in Tennessee. Among the provisions are significant changes to franchise and excise tax and business tax.

A few highlights of the new legislation:

Franchise and Excise Tax

• Businesses offering paid family and medical leave will be eligible for a credit against franchise and excise tax liability for the next two years. The credit will be based on amount of wages reimbursed to employees as paid leave up to 50% of franchise and excise tax. Effective date: tax year ending before December 31, 2025‍
• The first $50,000 in a business's net earnings will be exempt from excise tax. Effective date: tax year ending on or after December 31, 2024‍
• Up to $500,000 in business property will be exempt from franchise tax Effective date: tax year ending on or after December 31, 2024‍
• Tax credits- the carryforward period for franchise and excise tax credits will increase to 25 from 15 years for credits earned in tax years ending on or after December 31, 2008‍
• Bonus depreciation- Tennessee will conform to the 2017 Tax Cuts & Jobs Act bonus depreciation provisions allowing accelerated depreciation on qualifying property. Effective date: tax year ending on or after December 31, 2023 for assets purchased on or after January 1, 2023‍
• Apportionment - Tennessee will join 30 other states in adopting a single sales factor for apportionment. Currently, the state uses a three-factor formula- sales, property, and payroll. Effective date: phase-in over three-year period through December 31, 2025. The sales weighting factor is currently 2x and will increase to 5x and 11x, respectively, for years ending on or before December 31, 2024  and December 31, 2025.

Business Tax

• The minimum threshold for filing business tax returns will increase from $10,000 to $100,000 in gross receipts Effective date: tax year ending on or after December 31, 2023‍
• Manufacturers- Extends exemption for goods sold from manufacturing location to any good sold from a facility within 10 miles of the location Effective date: tax year ending on or after December 31, 2023

HHM is still evaluating the impact of the new legislation. Please contact us with questions about the tax law changes.