Historically, the Tennessee franchise tax was imposed on the greater of (1) apportioned net worth or (2) the value of real and tangible property owned or rented in the state at a rate of .25%.
However, Tennessee lawmakers passed HB 1893/SB 2103 (the Legislation) which eliminated the property measure of the franchise tax for tax years ending on or after Jan. 1, 2024, and authorized refunds in specific years.
In response, the Tennessee Department of Revenue has issued guidance, which can be found at Tennessee Notice No. 24-05, TN Schedule G webpage, and is in the process of sending letters to potentially impacted taxpayers.
Refund claims for prior years
Taxpayers who are eligible for refund claims should request a refund based on the following:
Refund period:
- Tax years ending on or after March 31, 2020, and for which a return was filed with the department on or after Jan. 1, 2021.
Refund calculation:
- The amount of tax that may be refunded is the difference between the amount of franchise tax paid based on the property measure and the amount of tax that would have been owed based on the net worth measure.
Timing:
- Refund claims related to the Legislation must be filed between May 15, 2024, and Nov. 30, 2024.
Amended returns:
- As the first step, taxpayers must file amended returns for applicable years to calculate the franchise tax based solely on net worth.
Refund claim form(s):
- After the amended returns have been processed in the Tennessee Taxpayer Access Point (TNTAP) and the overpayments have been posted to their account, taxpayers must file the refund claim using the Claim for Refund of Franchise Tax Paid on Property Measure (schedule G) form (the Form). Taxpayers are strongly encouraged to file the Form in TNTAP to expediate the process. Note: this refund
