As previously shared through an earlier update, in January Governor Bill Lee announced plans to amend the Tennessee franchise tax to simplify the calculation. Under existing law, the franchise tax base is the greater of 1) the taxpayer’s net worth or 2) the net book value of the property owned, and the rental value (using a defined multiple) of property used in Tennessee. Once calculated, the franchise tax base is subjected to a tax rate which is $0.25 per $100 of the tax base. Under Governor Lee’s simplification, the franchise tax would be determined based solely on net worth, with the alternative method using net book value of assets being repealed.
Since its announcement, this planned overhaul to the state’s franchise tax law has been subject to significant debate and negotiation among lawmakers; however, in the final hours of Tennessee’s legislative session last week, both chambers approved a compromise plan. The plan is projected to send approximately $1.5 billion back to taxpayers and reduce the state’s franchise tax revenue by approximately $400 million annually. Additionally, the compromise plan provides for three years of tax refunds desired by the Senate while also providing transparency provisions desired by the House. Tax refunds will be available for returns filed after January 1, 2021, covering a tax period that ended on or after March 31, 2020. Generally speaking, for calendar year taxpayers the applicable periods are tax years 2020 through 2023. The refund claims will be required to be filed between May 15th and November 30th of this year and taxpayers claiming refunds will be required to waive all rights to sue the state over franchise tax obligations during the affected period. Specific to transparency, the compromise plan will require refunds paid to taxpayers to be disclosed in ranges – $750 or less; $751 to $10,000; greater than $10,000; or “pending” if a final payment has not been determined.
Governor Lee is expected to sign the legislation.
Within the next few weeks, RBG tax advisors will be contacting our impacted Tennessee taxpayers to discuss the details of anticipated refund claims and expected timing of filings. Should you have any immediate questions, feel free to contact your RBG advisor.
Q: What have you learned so far during your time at RBG?
A: “During my time at RBG I have learned how to prepare tax returns for individuals and trusts. I have also learned how to improve my professional communication and time management skills throughout this internship.”
Q: What has been your favorite part about interning at RBG?
A: “My favorite part of interning at RBG has been the people, everyone is so willing to help and answer any questions I may have. It feels like everyone tries their best to make others feel comfortable asking questions and receiving help.”
Q: Based on your experience, what’s the biggest piece of advice you’d give to a future intern?
A: “My biggest piece of advice for a future intern would be to not be too hard on yourself at first. Taxes are complicated, and I often felt down about myself or my work especially in the beginning. The point of an internship is to learn and grow, so as long as you are willing to ask questions and learn from mistakes, then you will do great!”