Update on March Blog regarding TN HB 1893 and SB 2103

Significant Refund Opportunity Created

It’s a done deal! Tennessee has changed its franchise tax by removing the property measure. The bills making this change authorize refunds to certain taxpayers. Namely, those taxpayers who paid franchise tax based on the value of real or tangible property owned or rented in the state for all applicable open years (2020-2023).

Effective for tax years ending on or after January 1, 2024, the legislation removes the property measure from the Tennessee franchise tax base. Additionally, taxpayers who paid franchise tax on the greater property measure can recalculate the tax using the apportioned net worth and file refund claims for the difference in tax paid. To the extent a taxpayer utilized credits on the return, the credits will be reinstated but won’t be paid as a refund. The franchise tax subject to refund must have been reported on a Tennessee return filed on or after January 1, 2021, covering a tax period that ended on or after March 31, 2020.

Effective for tax years ending on or after January 1, 2024, the legislation removes the property measure from the Tennessee franchise tax base.

We are proactively starting the refund process for all our affected clients. Refund claims must be filed between May 15 and November 30, 2024. The process involves first amending the returns for all four affected years, then submitting one Claim for Refund of Franchise Tax Paid on the Department’s special Property Measure form. This can all be accomplished electronically in TNTAP. By filing the refund claim, the taxpayer is affirmatively waiving any claim by the taxpayer or the right to file suit alleging that the franchise tax under prior law was unconstitutional by failing the internal consistency test.

Interest will be computed beginning 90 days after Tennessee receives the refund claim and proper proof to verify the refund.

As stated in the March Blog, this will significantly impact you, our clients, and our workload in getting those refunds back for you. Please do not hesitate to contact us with any questions you may have.

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