NASHVILLE, Tenn. (WKRN) — The largest business tax cut in Tennessee history has passed the House.
This after the Tennessee lawmakers adopted Senate Bill 2103, which would tie the state's franchise and excise tax to a businesses' net worth and allow for businesses who paid into those taxes over the last year to claim them back from the state in a refund or rebate.
According to House Majority Leader William Lamberth (R-Portland), the bill is necessary because the franchise tax has "really held us back for decades."
By cutting the franchise tax, Lamberth told colleagues the measure would keep Tennessee in a competitive position for business recruitment.
The current franchise and excise tax has been on the books in Tennessee since 1935, Lamberth said during the House floor debate Monday, April 8. It applies to the greater of a business's net worth or real property value.
Lamberth said the measure would be the biggest business tax cut in state history and was "the right thing to do" for Tennessee businesses. He said current tax law allows for a look-back provision, and this bill keeps that look-back provision to just one year.
This is in contrast to the Senate proposal, which allowed for a three year look-back provision and significantly higher fiscal note. According to Lamberth, the House version is about $800 million cheaper than the Senate proposal.
According to the terms of the amended bill, businesses who paid into the franchise and excise tax in the last year have until Feb. 3, 2025 to claim a refund for those taxes or sue the state for them back. If they opt for the refund, however, they would be required to sign a waiver stating they would not sue the state over the franchise tax. Additionally, if they accept the refund, that filing would be made public record for anyone in Tennessee to see who claimed such a rebate.
While the tax cut was supported by the majority party, the refund portion is where there was some resistance from the GOP.
Rep. Ryan Williams previously told News 2 the state did not owe taxpayers that money back once they've already paid it, and refunding money to businesses would be a huge hit at first and then continuous losses in subsequent years.
"In our business, we have willing buyer [and] willing seller; both agree to those terms," he told News 2's Chris O'Brien.
The franchise tax alone brings in about $400 million in state revenue, and with leaner fiscal outlooks, Democrats say the move is irresponsible. They say the effort is a corporate handout rather than a tax cut as well as a gift to corporations over Tennessee taxpayers.
Rep. Chris Todd (R-Madison County) said Monday he spoke with business owners in his district who told him they only cared about the taxes going forward, not taxes they've paid previously.
Additionally, Todd took issue with the reporting requirements of the refund, calling it a slippery slope of privacy issues for business owners in Tennessee. The state policy has been to keep taxpayer information private, he said, and he would like to see it remain that way.
Lamberth said his concerns were well-taken, but because the relief was an "extraordinary amount," it necessitated the transparency.
"If they take advantage of that rebate, it is going to be public that they got a rebate and how much," he said. "Now, look, I'm not wild about that, but here's the deal: if we're going to grant taxpayer dollars back to a company that's paid in, then the taxpayers of this state are gonna know. They're going to know what name of the company and how much they got just for the last year."
Going forward, however, all of that information would be kept private just as it is currently, Lamberth added.
The refund measure also received intense pushback from House Democrats on the floor Monday afternoon.
Clemmons said the House did not have to "codify a refund to corporations" into law, calling it "fiscally irresponsible" of lawmakers and "not what we are here to do."
Rep. Justin Pearson also said the legislation was not a responsible piece of legislation because corporations didn't need either the $400 million tax cut or $700 million rebate over everyday Tennesseans who needed meals at school or access to health care.
"I could understand if it was a legal problem that folks were trying to get around, that this is partly why this decision is being made," he said on the floor. "But we're just doing this because we think we have the money to spend, we think we have the resources to give away to these corporations and these companies in our state—this is ridiculous. We need to use taxpayer money on taxpayers."
Clemmons challenged the rebate portion of the law, saying it was "gifting people $700 million out of the goodness of our heart."
"We don't owe those companies anything for the last year. We don't owe them anything, and that difference in value—we owe them nothing," he said. "They operated under the laws of Tennessee. They benefitted from the goods and services of Tennessee. They benefitted from the hard working people of Tennessee. They do not deserve a $700 million refund."
He also called it the "voluntary codification of a corporate handout" and "fiscally irresponsible and unprecedented."
"That $700 million could go a long way in our budget this year," he added.
Lamberth bit back, however, saying it wasn't a gift; rather, it was giving back money that business owners worked hard for and earned.
"It's their money to begin with. It doesn't belong to the government, or the governor or this chamber," he said. "This money belongs to those folks. We are merely giving them back a tiny portion—10% of what they've worked hard and paid in for."
After significant debate, the bill ultimately passed the House 68-20-8 on a mostly party-line vote. Republican Reps. Jody Barrett (Dickson), Michele Carringer (Knoxville), Scott Cepicky (Culleoka), John Crawford (Bristol/Kingsport), Johnny Garrett (Goodlettsville), Michael Hale (Smithville), and Justin Lafferty (Knoxville) and Democratic Rep. Ronnie Glynn (Clarksville) were all Present Not Voting.
Memphis Democrat Johnny Shaw joined with Republicans in voting for the measure.
For now, the bill will likely be sent back to the Senate for final adjustments. The pieces at odds are the look-back provision and the transparency piece. If the Senate can't agree to conform with the House version, the bill would head to a conference committee to hash things out with party leadership before heading to Gov. Bill Lee's desk.
from WKRN News 2 https://ift.tt/jbB3SJT
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