Advancement of Tennessee bill could lead to massive tax refunds for businesses

NASHVILLE, Tenn. (WZTV) — A bill that could result in tax refunds for thousands of Tennessee businesses is moving through the Senate.

In simple terms, the measure lawmakers are considering would repeal a state property tax on businesses because court rulings suggest the tax is unconstitutional.

Right now, every company in the state pays a franchise tax on its operations. The amount is tied to the company's net worth or the value of the property they own in Tennessee, whichever is greater. This law has been on the books since 1937.

"This legislation removes the property measure so that companies pay on net worth alone which is consistent with the way this tax is imposed in other states that have this tax," said Commissioner David Gerregano with the Tennessee Department of Revenue.

Turns out only 15 other states do and state leaders say it's been an issue when trying to recruit companies to come here.

The governor wants to get rid of it because he's afraid some company or companies will sue as they have in other states and Tennessee will be on the hook for damages.

"It would also require the department to establish a fund from which refunds could be made to any taxpayer who overpaid based on the property tax measure of the excise tax during the previous three tax periods," said Senate Majority Leader Jack Johnson.

The state estimates the most the refunds could cost at about $1.6 billion. It's essentially a tax cut there for the asking. In case you were wondering, the state has never done anything like this before.

"What's the need to give people who may not have a claim, may not have damages, a refund?" askedSen. Jeff Yarbro.

"There's no reason to think those won't result in litigation imminently if this is not resolved," said Gerregano.

The stakes are high as the property portion of this tax generates about $400 million a year for the state.

Right now, the state can afford the refunds. In a few years, who knows?

Senate lawmakers discussed the bill at length Tuesday. They expect to vote on it next week and FOX 17 News will keep you posted.

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