Tennessee Franchise Tax Change | Business Tax Relief | OH IN KY

Potential Tennessee Franchise Tax Changes on the Horizon

Published on by Cole Dant in State Local Tax, Tax Services

Potential Tennessee Franchise Tax Changes on the Horizon

Proposed changes to Tennessee’s franchise tax would provide substantial tax relief for businesses located in Tennessee. Here’s what you need to know.

Current Tennessee franchise and excise tax

According to The Tennessean, “Businesses currently calculate what they owe in state franchise tax in a dual-pronged model first established in the 1930s.”

Tennessee’s current franchise tax is imposed on corporations, limited partnerships, and LLCs doing business in Tennessee at 0.25% of the greater of the entity’s apportioned net worth or real and tangible property located in the state, with a minimum tax of $100. Excise tax is imposed at 6.5% net income.

Proposed Tennessee franchise and excise tax

Tennessee House Bill 1893 would disallow franchise tax from being based on real and tangible property owned or used in Tennessee. Instead, the tax would be based on apportioned net worth.

The 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.  The tax actually paid includes any credits applied on the return – and while these credits would be reinstated, they would not be refunded.

If it passes, the bill will cost the State of Tennessee an estimated $1.2 billion for the initial refund and $400 million per year after. The initial refund must be claimed within three years from December 31 of the year in which the payment was made or within any period covered by an extension.

This impacts companies with real and tangible property in Tennessee but will not have an impact on the excise tax.

Again, it’s not law at this point – but the possibility is there. And for those doing business in the state of Tennessee, it bears watching.

Let’s talk.

If you have questions about how the potential franchise tax changes might affect your business or are looking for smart strategies to minimize your tax burden, connect with us to set up a free consultation with one of our top tax pros. As always, we’re here to help.


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