TN Franchise Tax Update | HBl 1893 | Franchise Tax Refund

Tennessee Franchise Tax Changes Mean Refunds for Some Taxpayers

Published on by Mary Benintendi in State Local Tax, Tax Services

Tennessee Franchise Tax Changes Mean Refunds for Some Taxpayers

Tennessee is making major changes to how it assesses franchise tax – and some taxpayers may be due a refund – based on a new law signed by Tennessee Governor Bill Lee on May 10, 2024. But the timeframe for getting that refund is short. Here’s what you need to know.

Tennessee House Bill 1893, as originally introduced, would disallow franchise tax from being based on real and tangible property owned or used in Tennessee. Instead, the new tax would be based on apportioned net worth. It was introduced on January 22, 2024 and passed on April 25, 2024.

This bill also allows for a refund equal to the amount of tax actually paid less than the amount of tax that would be due under the revised law. (For more, please see our previous post on the topic).

What’s the impact for the 2023 tax year?

This new law eliminates the property measure from the franchise tax calculation for the tax years ending on or after January 1, 2024, though it’s important to note the prior law applies to the 2023 tax year. For tax years ending on or before December 31, 2023, taxpayers must complete both Schedule F, for net worth, and Schedule G, for property, then calculate the franchise tax due based on the greater of the two. However, some taxpayers might be eligible for a tax refund.

Who’s eligible for the tax refund?

Taxpayers who paid the franchise tax on Schedule G (the schedule for property measure) for a return filed on or after January 1, 2021, covering tax periods that ended on or after March 31, 2020, are eligible for a refund from the state of Tennessee.

The Tennessee Department of Revenue is sending letters to taxpayers they’ve identified as potentially being eligible.

Eligible taxpayers could receive a refund that equals the amount of franchise tax paid based on the property measure calculated on Schedule G minus the amount of franchise tax that would have been paid based on the net worth measure calculated on Schedule F for the same tax year.

How do I claim my Tennessee franchise tax refund?

Refund claims must be submitted between May 15 and November 30, 2024. These claims must be filed using the two-step process set forth by the state of Tennessee listed below.

  1. Amend the return(s) for the period(s) to be included in the refund. For the amended returns, taxpayers should report the franchise tax on the amended refunds using the net worth method calculated on Schedule F.
  2. Submit the claim for refund of franchise tax paid on property measure calculated on Schedule G.

The Tennessee Department of Revenue strongly encourages eligible taxpayers to amend returns and file the claim for a refund electronically.

Let’s Talk.

If you believe you may be eligible for a franchise tax refund from the state of Tennessee based on this recent law change, contact us for a free consultation. As always, your team of top Barnes Dennig tax pros is here to help!


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