Governor of Tennessee Signs $1.9 Billion Franchise Tax Cut into Law

The Tennessee House of Representatives and Senate have approved Tennessee Governor Bill Lee’s proposed $1.9 billion franchise tax deal eliminating the franchise tax property tax calculation, which has been signed into law. The deal is expected to save businesses $400 million in revenue beginning in 2024 and offer $1.5 billion in refunds for roughly 100,000 businesses on taxes paid on the property stipulation over the last three years.

The two chambers overcame an impasse that saw House leadership pushing for a single year of refunds and public disclosures of the companies that filed for a refund. Senate leadership did not support public disclosures and were pushing for three years of refunds. Key points of the finalized deal include:

• Businesses have between May 15 and November 15 to claim their refunds
• Three-year window for retroactive refunds
• 30-day public disclosure window for names of businesses and their refund amount range
• Businesses forfeit the right to sue the state if they file for a refund
• No attorney fees awarded to businesses that sue the state for their franchise tax refund

The businesses' names and refund ranges will be public information from May 31, 2025, to June 30, 2025, and then will be removed. The publicly available refund dollar amounts will only be listed in ranges from $0 to $750, $751 to $10,000, and $10,000 and above. Companies whose refunds have not been processed will still have their company disclosed and listed as pending.

Differing opinions remain on both sides, with some believing that more than 50 percent of the refund dollars would go to businesses outside of Tennessee. Questions still exist on how many businesses would qualify for a refund above $10,000, what the highest refund amount would be, and how they could be certain that most of the businesses that benefit will actually be from Tennessee. However, the compromise is seen as a significant win for the state and hopefully dismisses potential legal issues.

Claiming your refund

The Department of Revenue plans to mail notification letters to all taxpayers identified as potentially eligible for a franchise tax refund under the new statute. Any taxpayers who paid franchise tax on the property measure for tax years ending on or after March 31, 2020, for which a return was filed with the Department of Revenue on or after January 1, 2021, are eligible. To claim your refund, you must file amended franchise and excise tax returns for the applicable years and a Claim for Refund of Franchise Tax Paid on Property Measure (Schedule G) form before November 30, 2024. Taxpayers are strongly recommended to file using TNTAP for a timely claim but may submit amended returns and refund claim forms on paper.

Whether you receive notification or not, businesses operating in Tennessee (regardless of where they are based) are strongly advised to seek guidance from a state and local tax professional to review your records to determine if you qualify for a refund.