New Opportunities for Businesses in Tennessee: Claim Your Franchise Tax Refunds

Recent changes in Tennessee’s franchise tax legislation present an exciting opportunity for businesses to claim refunds. If your business owns substantial real or tangible personal property in Tennessee, these changes could significantly reduce your tax liabilities.

Understanding the Traditional Franchise Tax

Traditionally, Tennessee’s franchise tax was computed based on the greater of two measures:

  1. The taxpayer’s apportioned net worth
  2. The actual value of real and tangible personal property owned or used in the state

This dual-method approach often led to increased tax liabilities for businesses with substantial properties, as they were taxed on whichever measure resulted in a higher amount.

Senate Bill 2103: Simplifying the Franchise Tax

On May 10, 2024, the Senate passed and enacted Senate Bill (SB) 2103. This bill modified and simplified the franchise tax computation by solely relying on the apportioned net worth method and repealing the property measure. The change is applied retroactively to tax returns filed on or after January 1, 2021. This means businesses can amend their 2020, 2021, and 2022 tax years to take advantage of this change.

Who Benefits?

This legislative change primarily benefits businesses with significant real and tangible property in Tennessee. By eliminating the property calculation, many businesses’ tax liabilities may be reduced, creating potential refund opportunities.

Steps to Claim Your Refund

Businesses with significant real and tangible property should review their franchise tax returns to determine whether they overpaid under the old method. Here are the critical steps:

  1. **Review Past Returns**: Examine your franchise tax returns for the 2020, 2021, and 2022 tax years.
  2. **File Refund Claims**: Submit refund claims between May 15, 2024, and November 30, 2024. These claims pertain to tax periods ending on or after March 31, 2020.
  3. **Waive Constitutional Challenges**: Businesses claiming a refund must waive their right to challenge the constitutionality of the franchise tax.

 Awaiting Further Guidance

We are still waiting for more guidance on the refund process from the Tennessee Department of Revenue. However, we anticipate that amended returns must be submitted through the Tennessee Taxpayer Access Point (TNTAP) portal.

Take Action Now

Given the short window for filing refund claims and the complexity of the process, businesses should consult with their tax adviser promptly. At HITO, our State and Local Tax Advisory team is here to assist you in navigating these changes and ensuring compliance with the new legislation.

Schedule a Consultation

Don’t miss this chance to optimize your tax position and secure your business’s financial health. Stay informed, act promptly, and make the most of this significant legislative change to benefit your business.


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