NASHVILLE, Tenn. (WKRN) — The largest business tax cut in Tennessee history has passed the House.
This comes after Tennessee lawmakers adopted Senate Bill 2103. The bill would tie the state's franchise and excise taxes to a company's net worth, allowing companies that paid those taxes last year to claim them back from the state in refunds or rebates. .
House Majority Leader William Lamberth (R-Portland) said the bill is needed because the franchise tax “has really held us back for decades.”
Lamberth told his colleagues that the measure would help Tennessee remain competitive in corporate hiring.
The current franchise and excise taxes have been in place in Tennessee since 1935, Lamberth said Monday, April 8, during the full House session. It applies to the greater of the company's net assets or the value of its real estate.
Lamberth said the measure is the largest business tax cut in state history and is the “right thing to do” for Tennessee businesses. He said that the current tax law allows for retroactivity, but this bill would limit the retroactivity to one year.
This is in contrast to the Senate proposal, which allowed for a three-year retroactive provision and a significantly increased fiscal memo. The House version is about $800 million cheaper than the Senate version, Lamberth said.
Under the terms of the revised bill, businesses that paid franchise and excise taxes last year have until Feb. 3, 2025, to claim a refund of those taxes or sue the state to get them back. However, if you choose to get your money back, you will be required to sign a waiver stating that you will not sue the state over the franchise tax. Additionally, if they accept a refund, the application will be placed on public record, making it possible to see who in Tennessee has requested such a refund.
The tax cuts were supported by the majority party, but the tax refund portion faced resistance from Republicans.
U.S. Rep. Ryan Williams previously told News 2 that the state is not obligated to return money once paid to taxpayers, and that refunding money to businesses would initially be a huge hit, followed by continued losses for years. He said it would happen.
“We have a willing buyer for our business. [and] A willing seller; both parties agree to those terms,” he told News 2’s Chris O’Brien.
Democrats say the measure is irresponsible, even as the franchise tax alone brings in about $400 million in state revenue and a healthy fiscal outlook. They argue that the initiative is not a tax cut but a handout to businesses and a gift to businesses for Tennessee taxpayers.
Rep. Chris Todd (R-Madison County) said he spoke with business owners in his district Monday and was told they only care about future taxes, not past taxes. Stated.
Additionally, Todd challenged the refund reporting requirement, saying it was a slippery slope of privacy issues for Tennessee business owners. He said that it is national policy to keep taxpayer information private and that he would like it to continue to be that way.
Mr Lamberth said his concerns were well-received, but that the relief amount was an “unprecedented amount” and needed transparency.
“If they take advantage of that rebate, it will be public knowledge that they received the rebate and the amount,” he said. “Look, I don't really like that, but here's the deal: If we're going to give taxpayer dollars back to the companies that paid them, the taxpayers of this state are going to know.” You'll probably learn the name of the company and how much money it made in the last year alone. ”
However, Lamberth added that in the future, all that information will remain private as it is now.
The refund measure also received strong opposition from House Democrats on the floor Monday afternoon.
Clemons said the House didn't need to “codify refunds to businesses” and criticized lawmakers for being “fiscally irresponsible” and “not what we're supposed to be doing here.”
Rep. Justin Pearson also said this bill is a responsible bill because businesses don't need $400 million in tax cuts or $700 million in rebates for everyday Tennesseans who need school meals or access to health care. He said it was not.
“If it was a legal issue that people were trying to avoid, I can understand that that's part of why this decision was made,” he told the floor. “But we're just doing this because we think we have money to spend, we think we have resources to donate to these businesses and these businesses in this state. It's just, this is ridiculous.'' We have to spend taxpayer money on taxpayers. ”
Clemons took issue with the rebate portion of the law, saying the law “gives $700 million to people out of the goodness of our hearts.”
“We don't owe those companies anything for the last year. We don't owe them anything, and that difference in values means we don't owe them anything,” he said. . “They operated under Tennessee law. They benefited from Tennessee goods and services. They benefited from Tennessee's hardworking people. They had seven They are not entitled to a billion dollar refund.”
He also called it a “voluntary codification of corporate benefits” and “fiscally irresponsible and unprecedented.”
“That $700 million could make a significant contribution to this year's budget,” he added.
⏩ Read today's top stories on wkrn.com
But Lamberth countered that it was not a gift. Rather, it was about giving back to business owners the money they worked hard to earn.
“It's their money to begin with. It doesn't belong to the government, it doesn't belong to the governor, it doesn't belong to this chamber,” he said. “This money belongs to those people. We are only giving them back a small portion, his 10% of what they worked so hard to pay.”
After significant debate, the bill ultimately passed the House on a near party-line vote, 68-20-8. Republican Reps. Jodi Barrett (Dixon), Michelle Carringer (Knoxville), Scott Sepicki (Kaleoka), John Crawford (Bristol/Kingsport), Johnny Garrett (Goodlettsville); Rep. Michael Hale (Smithville), Rep. Justin Rafferty (Knoxville) and Democratic Rep. Ronnie Glynn (Clarksville) were all present and did not vote.
Johnny Shaw, a Democrat from Memphis, joined Republicans in voting for the bill.
For now, the bill will return to the Senate for final adjustments. The areas of conflict are the provisions for reviewing the past and the issue of transparency. If the Senate cannot agree to follow the House version, the bill will be sent to a conference committee to be discussed with party leadership before going to Gov. Bill Lee's desk.
