House Bill 1893/Senate Bill 2103

Tennessee has enacted major changes to its franchise tax. Historically taxpayers have paid franchise tax on the greater of two bases: (1) the taxpayer’s net worth (assets minus liabilities); or (2) the net book value of property owned or used by the taxpayer in Tennessee (“alternative base”). On April 25, 2024, the Tennessee General Assembly enacted House Bill 1893/Senate Bill 2103, which makes two major changes to the 87-year-old franchise tax:

  • Repeal of the alternative base. For tax years ending on or after January 1, 2024, all taxpayers will calculate franchise tax based solely on the net worth measure.
  • Refunds of franchise tax paid in prior years. Taxpayers that have paid on the alternative base in prior tax periods will be allowed to seek refunds from the Tennessee Department of Revenue.

Having been approved by both legislative bodies (69-23 by the House; 25-6 by the Senate) on April 25 after three months of legislative back-and-forth, the legislation was signed by Governor Bill Lee on May 10, 2024. The Tennessee Department of Revenue (TDOR) has begun preparing for the influx of anticipated refund claims, with the refund window opening on May 15.

This is one of the most significant franchise tax law changes ever enacted. The TDOR estimates that it will result in total refunds of approximately $1.5B of franchise tax paid by roughly 100,000 taxpayers.  While a great opportunity for affected taxpayers to get a cash refund, there is much work to be done in a relatively short timeframe as outlined in the FAQs below.

If you think your company might be eligible for a refund or just want to find out more information, please contact your designated LBMC professional, or reach out directly to LBMC’s State and Local Tax Group professionals, Jay Hancock,, or Leigh Ann Vernich,

HB1893/SB2103 Frequently Asked Questions

Who can get a refund?

Eligible taxpayers are those who have previously paid franchise tax on the alternative base. The legislation does not disturb the net worth tax base. Therefore, the refundable amount is the amount of tax actually paid on the alternative base, less the amount of franchise tax that would have been owed on the net worth base. Taxpayers who have paid on the net worth base for affected years will not have a refund opportunity.

What tax periods are open for refunds?

Refunds are available for tax returns that were filed on or after January 1, 2021, covering a tax period that ended on or after March 30, 2020. For a calendar year taxpayer, this could involve up to four separate tax returns, CY2020-2023. Short period returns and fiscal year taxpayers falling into the above parameters are also eligible for refunds.

How do I request a refund?

Taxpayers will need to amend prior year returns and file a refund claim within the window of May 15, 2024 – November 30, 2024. There is a specific refund claim form and procedure that taxpayers will need to follow. Taxpayers will also likely be required to submit additional proof that a refund is actually owed, including a balance sheet and a Report of Debts form for each year.

Will my name and refund amount be published if I seek a refund?

Yes and No. Due to the magnitude of anticipated refunds and need for transparency as to whom will be receiving the money, the identity of taxpayers seeking a refund will be published on the TDOR’s website for the one-month period of May 31, 2025 – June 30, 2025 (the last month of the state’s fiscal year). The exact amount of the refund received will not be published, but refund recipients will be identified by name and categorized by the amount of refund sought into one of three ranges: 0-$750 of refund; $750.01- $10,000; and greater than $10,000. This information will be removed after June 30, 2025.

I used Jobs Tax Credits and/or Industrial Machinery Credits to offset my franchise tax liability instead of paying cash. Will I still get a refund?

Yes. While there is no cash refund opportunity for credits used to offset Tennessee franchise tax liability on an original or previously amended return, those previously utilized credits will be reinstated as part of the refund process. These restored credits can then be used in future tax periods to offset tax liability, as long as the credits are still within Tennessee’s 25-year carryforward window.

How do I get started?

More details will be forthcoming from TDOR as it prepares for the influx of anticipated refund claims.  While an unprecedented opportunity to recoup franchise tax paid in prior years, there is a limited time in which to act. Please contact your designated LBMC professional for more detail.

Content provided by LBMC State and Local Tax professional, Jay Hancock and Leigh Ann Vernich.

LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.

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