IMPLEMENTATION LEVEL

Subnational

AFFECTED FLOW

Inflow

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

all

JUMBO

No

TARIFF PEAK

No
← back to the state act
Inception date: 20 May 2015 | Removal date: open ended
Still in force

Tax or social insurance relief

On May 20, 2015 the governor of Tennessee signed into law a bill (HB291) that made numerous changes in the incentives provided by the state. It generally reduced incentives more than it expanded them. The bill eliminated several tax incentives as of July 1, 2015 (provided that any taxpayer that has filed a business plan with the department prior to July 1, 2015 will continue to be eligible for the credit). These include tax credits for call centers; projects to eliminate mercury from the manufacturing process and operations of one or more existing chlor-alkali manufacturing and ancillary facilities; for the purchase price of brownfield property for the purpose of a qualified development project; airline companies that establish international, national, or regional headquarters in Tennessee; headquarters facility relocation expenses; green energy supply chain manufacturers; medical trade center relocation expenses; and emerging industries or major cultural attractions.
 
The bill also redefines "headquarters facility" (a category of investment eligible for certain incentives) to include only a taxpayer's sole international or sole national headquarters, thereby limiting eligibility for the above-described sales and use tax credit.
 
Other provisions in the bill expand the scope of certain existing incentives. The bill redefines the "qualified business enterprises" that are eligible for job tax credits to include an enterprise that makes a capital investment necessary to permit the creation or expansion of back office operations.
 
Under existing law, no sales or use taxes are assessed on "industrial machinery". The bill redefined "industrial machinery" to include several items that had not previously fit within this category, namely machinery, apparatus, and equipment with all associated parts, appurtenances, and accessories, including hydraulic fluids, lubricating oils, and greases necessary for operation and maintenance, repair parts, and any necessary repair or taxable installation labor therefore, that is necessary to, and primarily for, the purpose of research and development. The bill requires the commissioner of economic and community development to conduct a review of franchise and excise, and sales and use tax credits.
 
The review will evaluate the previous four fiscal years and may include an evaluation of the purpose of the credit, any benefits provided to the state as a result of the credit, and the estimated indirect economic impact of the tax credit, where applicable.
 
The bill also requires the departments to prepare a report of their findings and recommendations and to deliver the report to the governor, the speakers of both houses, and the finance, ways and means committees of both houses no later than January 15, 2017. The report must include a recommendation to modify, discontinue, or take no action with respect to each credit.
 
This bill additionally requires the departments to conduct the above review and issue the above reports every four years thereafter.

AFFECTED COUNTRIES

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