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Federal Tax Reform Rolls Into Tennessee, But Will It Stick?

02/15/2018  |  By: Brian McCuller, JD, CPA, Shareholder, Practice Leader Tax

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Federal tax reform has been enacted, but what does it mean for the State of Tennessee?

What does it mean for businesses filing Tennessee franchise and excise tax returns?

Where Tennessee Begins

Tennessee uses federal taxable income as the starting point for computing Tennessee taxable net earnings on the Tennessee Franchise and Excise Tax return. Consequently, any changes made to federal taxable income are changes to Tennessee taxable income.

Tennessee is what they call a “rolling” conformity state; meaning, Tennessee automatically conforms to the latest version of the Internal Revenue Code. However, Tennessee, like other ‘rolling’ conformity states, may specifically ‘decouple’ from provisions it does not wish to follow. Examples of provisions that Tennessee has decoupled from in the past include bonus depreciation and the Domestic Production Deduction (Sec. 199).

This article attempts to see the future and provide insight into the following:

  • federal changes Tennessee may decouple from
  • federal changes that may have no impact on Tennessee franchise and excise tax
  • federal changes that may increase Tennessee franchise and excise tax
  • federal changes that may decrease Tennessee franchise and excise tax

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Posted in: Tax