Tennessee to Return $1.6 Billion in Previously Paid Franchise Tax

Tennessee is seemingly set to return an estimated $1.6 billion worth of previously paid franchise tax to taxpayers over the coming months, some of which may belong to you.

On April 25, lawmakers in Tennessee approved a plan to repeal the alternative property measure of the franchise tax. The provisions of the law also authorized refunds for the amount of franchise tax “equal to the amount of tax actually paid minus the amount of tax otherwise due without regard to Sec. 67-4-2108″ (i.e., the alternative property measure of the tax that was repealed). Taxpayers who utilized credits to satisfy the franchise tax burden would have those credits reinstated for future use but would not receive cash for those credits.

The eligible refund period includes returns filed on or after January 1, 2021, for tax periods that ended on or after March 31, 2020. For many taxpayers, that equates to three to four years of refunds, depending on whether the 2023 tax return has already been filed.

The law tasks the Tennessee Department of Revenue with defining the procedure for claiming any refunds and states that refund claims must be filed between May 15 and November 30, 2024. Failure to follow the prescribed process within the relatively small claim window could result in a huge missed opportunity for businesses with significant presence in Tennessee.

We’ll continue to update you with more information as the law takes shape. If you have questions in the meantime, please don’t hesitate to reach out.