CBIZ
  • Article
February 7, 2024

Significant Legislation Proposed to Change Tennessee’s Franchise Tax

Table of Contents

Recently, there have been challenges to Tennessee’s franchise tax alternative measure, which is based on real and tangible personal property utilized by a taxpayer in Tennessee. The challenges have raised the argument that the alternative measure violates the dormant Commerce Clause of the United States Constitution’s internal consistency test, meaning double taxation would occur if another state adopts a similar tax.

In response to these challenges, the Tennessee Legislature has introduced HB 1893, which eliminates the provision requiring the Tennessee Franchise Tax to be calculated based on the value of real or tangible personal property used in the state. Should the bill pass, taxpayers subject to the Tennessee Franchise Tax would only calculate the tax based on net worth. Thus, taxpayers who paid the tax based on real or tangible property have a refund opportunity and prospective tax savings.

HB 1893 also allows impacted taxpayers the ability to apply for refunds and only permits a refund if a claim is filed. CBIZ is tracking these changes and encourages our clients to review how they calculated the tax (i.e., based on net worth or the alternative measure) and follow up with their tax advisors on potential refund opportunities and the impact on future payments.

If you’re concerned about how the proposed changes to Tennessee’s Franchise Tax might impact your business, Ask CBIZ for more details.

© Copyright CBIZ, Inc. All rights reserved. Use of the material contained herein without the express written consent of the firms is prohibited by law. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. Material contained in this publication is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their organization.

“CBIZ” is the brand name under which CBIZ CPAs P.C. and CBIZ, Inc. and its subsidiaries, including CBIZ Advisors, LLC, provide professional services. CBIZ CPAs P.C. and CBIZ, Inc. (and its subsidiaries) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations, and professional standards. CBIZ CPAs P.C. is a licensed independent CPA firm that provides attest services to its clients. CBIZ, Inc. and its subsidiary entities provide tax, advisory, and consulting services to their clients. CBIZ, Inc. and its subsidiary entities are not licensed CPA firms and, therefore, cannot provide attest services.