On April 25, the Tennessee General Assembly passed a historic bill to repeal and refund the so-called alternative property measure of the franchise tax. Tennessee’s franchise tax has historically been imposed on the value of a taxpayer’s property located in Tennessee or the taxpayer’s net worth — whichever is greater — but the property measure has recently been challenged as being unconstitutional.

After months of deliberation and debate, the House and Senate have agreed on and passed legislation that repeals the property measure for all tax years beginning with 2024, making the franchise tax based solely on net worth going forward.

Refunds Available

Just as importantly, the legislation also provides automatic refunds to any taxpayer that paid on the property measure in the last three years. Specifically, the bill authorizes a refund in the amount of the difference between the franchise tax paid using the property measure and what would have been paid using the net worth base. This refund is available for payments made in connection with returns filed on or after January 1, 2021, for tax periods ending on or after March 31, 2020.

To claim the refund, taxpayers must file a claim using a special form provided by the Tennessee Department of Revenue (DOR) and must file the claim between May 15, 2024 and November 30, 2024. In a hotly debated component of the bill, the legislation also requires the names of any taxpayers that receive a refund under this statute to be listed on the DOR website from May 31, 2025 to June 30, 2025.

The specific refund amounts received by each taxpayer will not be revealed on the website, but taxpayers will be identified by categories of refund amounts. Those categories will identify taxpayers whose refunds fall into any of the following categories:

  • Less than $750.
  • Between $750 and $10,000.
  • Over $10,000.
  • Still pending at the time of publication.

Governor Lee is expected to sign this bill into law shortly.

If you have any questions or would like more information about how to take advantage of the refunds provided by this legislation, contact the authors.