Key Takeaways
- Franchise tax will only be calculated based on a taxpayer’s apportioned net worth (assets minus liabilities) for tax years ending on or after January 1, 2024.
- Taxpayers can request refunds for tax returns filed on or after January 1, 2021, based on the net book value of property owned or used in Tennessee.
- A list of taxpayers that receive refunds will be temporarily published on the Department of Revenue’s website.
Governor Bill Lee signed SB 2103 on May 10, enacting changes to the calculation of Tennessee's franchise tax. The change eliminates the net book value of Tennessee property as a measure of the franchise tax base and allows refund claims going back to 2021.
Changes to Franchise Tax Base
Under prior law, the 0.25% Tennessee franchise tax was calculated based on the greater of apportioned net worth or the net book value of real and tangible personal property owned or used in Tennessee (alternative property measure).
The new law repeals the alternative property measure, requiring a taxpayer to pay solely using its apportioned net worth. Further, the law authorizes refunds of franchise tax previously paid based on the alternative property measure.
Refund Opportunities
The law allows refund opportunities based on the difference between the amount of tax paid under the alternative property measure calculation and the apportioned net worth method.
Refunds may be claimed for any return filed on or after January 1, 2021, covering the tax period ending on or after March 31, 2020.
Tens of thousands of taxpayers are expected to receive refunds worth over $1 billion. To claim a refund, taxpayers must fill out a form from the Department of Revenue (not yet published). Refunds will first be used to pay off any outstanding tax liabilities and are subject to the report of debts requirement.
If a taxpayer used credits to pay their franchise tax liability in a refund year, those credits will be reinstated but not refunded. Interest will begin to accrue 90 days from the date the Department receives the claim, along with proof that the refund is due and payable.
Taxpayers have a limited time to file their refund claims. Such claims must be filed between May 15, 2024, and November 30, 2024.
Public Disclosure of Taxpayers that Receive Refunds
The names of taxpayers who receive refunds under this law will be disclosed on the Department of Revenue’s website from May 31, 2025, through June 30, 2025. However, the exact amount of the refund will not be published.
If you need help understanding these changes to Tennessee franchise law or claiming a refund, our State and Local Tax team can help.
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