2017 Legislative Summaries

Administration

Background checks for employees with access to federal tax information

Public Chapter 343 authorizes state departments to obtain criminal background checks on all employees or contractors with access to federal tax information. It also requires these departments to establish written policies related to employee background checks, and it authorizes the Commissioner to designate which employees meet the requirement for criminal background checks.

Effective: May 9, 2017

Alcohol

Shipment of wine reporting

Public Chapter 486 requires every common carrier that contracts with a direct wine shipper for delivery of wine into this state to prepare and file a monthly report of known wine shipments with the Department of Revenue. The report must contain the name and business address of the consignor of the wine, the name and address of each consignee of the wine, the weight of the package delivered to each consignee, a unique tracking number, and the date of delivery. Any common carrier that willfully fails to make reports is subject to a notification of violation. In the case of a continuing failure to make reports, the Department may impose a fine of up to $500 for each delivery not reported to the Department.

Effective: July 1, 2018

Optional inclusion of liquor by the drink tax in menu price

Public Chapter 338 allows a business owner to either include the tax on the sale of alcoholic beverages on the premises in the menu price of the alcoholic beverage, or to include the tax on the final bill to the customer. If tax is not included in the menu price, notice must be provided on the menu that a 15 percent tax on the sale of alcoholic beverages will be added to the final bill.

Effective: May 9, 2017

 

Franchise & Excise Tax

Tax credit for the purchase of qualified broadband internet access equipment

Public Chapter 228, the Tennessee Broadband Accessibility Act, creates a franchise and excise tax credit equal to six percent of the purchase price of qualified broadband internet access equipment.  The act defines this equipment to mean new equipment placed into service by a service provider to provide broadband internet access service at certain minimum download speeds to locations in a Tier 3 or Tier 4 enhancement county.  The total amount of credits allowed to all taxpayers per fiscal year is $5,000,000.  The act details an application process. Applications are due to the Department by October 15 for equipment put into service during the prior calendar year.  The Department has until December 15 to notify businesses of the amount of credit they will receive.

Effective: April 24, 2017. The act applies to qualified broadband internet access equipment placed into service on or after the effective date.

Department to report on claimed franchise and excise tax credits

Public Chapter 251 requires the Commissioner of Revenue to report, by January 1, 2018, and annually thereafter, to the members of Finance, Ways and Means Committees of the General Assembly the following information with respect to franchise and excise tax credits claimed for tax periods ending during the previous fiscal year:

• the number of taxpayers claiming the credit;
• the total amount of credit claimed;
• the number of jobs created during the fiscal year as reported by the taxpayer, if the credit is awarded based on jobs created;
• the total amount of credit carried forward from a prior tax year; and
• the nature of business of the taxpayers claiming the credit, if the nature of the business is available.

Effective: May 2, 2017

Calculation of franchise and excise tax payments

Public Chapter 194 allows a taxpayer to calculate its quarterly estimated excise tax payments using an annualized income method. It also changes the date for filing an application for exemption to the 15th day of the fourth month following the close of the first tax year for which the person claims the exemption. It also reduces the penalty for failing to timely file an application for exemption or renewal from $1,000 to $200.

Effective: April 19, 2017, and applies to tax years beginning on or after January 1, 2017

Clarifies the definition of "eligible housing entities"

Public Chapter 417 clarifies that eligible housing entities, for community investment tax credit purposes, includes wholly-owned subsidiaries of specified non-profit corporations or authorities, if these entities and subsidiaries engage in eligible activities on behalf of such corporations or authorities.

Effective: May 18, 2017

IMPROVE Act

Public Chapter 181 provides that, for tax years beginning on or after January 1, 2017, that a qualifying Tennessee manufacturer doing business both in-state and out-of-state may elect to apportion its net earnings and net worth to Tennessee based on a single sales factor. To qualify for the single sales factor option, 50 percent of a taxpayer’s revenue from its activities in Tennessee must be from fabricating or processing tangible personal property for resale and consumption off the premises.

Learn more in the Department's important notice posted here.

Effective: Tax years beginning on or after January 1, 2017

Fuel Tax

IMPROVE Act

Public Chapter 181 increases the state’s gas and diesel tax over the next three years.

Gasoline tax will increase by six cents over the next three years:
from $0.20 to $0.24 from July 1, 2017 to June 30, 2018;
from $0.24 to $0.25 from July 1, 2018 to June 30, 2019;
from $0.25 to $0.26 from July 1, 2019 and after.

Diesel tax will increase by 10 cents over the next three years:
from $0.17 to $0.21 from July 1, 2017 to June 30, 2018;
from $0.21 to $0.24 from July 1, 2018 to June 30, 2019;
from $0.24 to $0.27 from July 1, 2019 and after.

Learn more in the Department's important notice here.

Local governments will receive a portion of the gas and diesel tax increases over the next three years to fund roads. For a breakdown of the estimated additional amounts that will go to cities and counties for road funding over the next three years, click here (for cities) and click here (for counties).

Effective: July 1, 2017

IMPROVE Act

Public Chapter 181 increases the state’s compressed natural gas and liquified gas taxes over the next three years.

Compressed natural gas tax will increase by eight cents over the next three years:
from $0.13 to $0.16 from July 1, 2017 to June 30, 2018;
from $0.16 to $0.18 from July 1, 2018 to June 30, 2019;
from $0.18 to $0.21 from July 1, 2019 and after.

Liquified gas tax will increase by eight cents over the next three years:
from $0.14 to $0.17 from July 1, 2017 to June 30, 2018;
from $0.17 to $0.19 from July 1, 2018 to June 30, 2019;
from $0.19 to $0.22 from July 1, 2019 and after.

Learn more in the Department’s important notice here.

Effective: July 1, 2017

Allocation of fuel taxes

Public Chapter 478 increases the distribution of gasoline tax revenue to the Wildlife Resources Fund. It also establishes that no portion of the revenue generated from the gasoline tax increase imposed by the IMPROVE Act will be allocated to the Wildlife Resources Fund.

Effective: July 1, 2017

 

Hall Income Tax

People 100 years of age or older exempt from the Hall income tax

Public Chapter 453 exempts individuals 100 years of age or older, or any persons who file a joint return and either spouse is 100 years of age or older, from the Hall income tax.

Effective: May 25, 2017, for tax years beginning on or after January 1, 2018

IMPROVE Act

Public Chapter 181 phases out the Hall income tax over the next five years, and it repeals the tax starting in 2021.  The applicable tax rate for each year is as follows:
• 4%  for tax years beginning January 1, 2017
• 3%  for tax years beginning January 1, 2018
• 2% for tax years beginning January 1, 2019
• 1% for tax years beginning January 1, 2020
• Repeal beginning January 1, 2021

Effective: April 26, 2017, for tax years beginning January 1, 2017

Miscellaneous

Bail bonds tax excluded from total gross sales reported on business tax returns

Public Chapter 236 clarifies that the bail bond tax that a bail bondsman collects is excluded from the total gross sales reported on the business tax return.

Effective: April 28, 2017

Sales and Use Tax

IMPROVE Act

Public Chapter 181 decreases the sales tax on food and food ingredients from five percent to four percent beginning July 1, 2017.

Read more in the Departments important notice here.

Effective: July 1, 2017

Continues permanent rules filed with the Secretary of State

Public Chapter 452 continues permanent rules filed with the Secretary of State after January 1, 2016, including Department Rule 1320-05-01-.129. It prohibits the Department from collecting any internet sales or use taxes authorized under Department Rule 1320-05-01-.129(2), and permitted under a ruling of any court, until such court’s ruling has been fully reviewed, and the rule has been approved by the General Assembly, pursuant to Tenn. Code Ann. § 4-5-226. Businesses may still voluntarily collect and remit the tax.

Learn more in the Department’s important notice here.

Effective: May 25, 2017

Sales tax relief for Sevier County residents who lost homes in 2016 wildfires

Public Chapter 390 expands Tennessee’s natural disaster sales tax refund provision to individuals whose secondary residence was damaged or destroyed because of the Sevier County wildfires in late 2016.  The public chapter increases the maximum amount of Tennessee sales tax that can be refunded from $2,500 to $3,500.  The refund is for sales tax paid on eligible items purchased to replace or repair items used in the individual’s primary and/or secondary residence that was damaged or destroyed by the wildfires. 

Learn more in the Department’s important notice here.

Effective: May 18, 2017

Delays effective date of certain streamlined sales tax provisions

Public Chapter 193 delays the effective date of certain streamlined sales tax provisions until July 1, 2019.

Learn more in the Department’s important notice here.

Effective: April 19, 2017

Major league soccer franchise allocation

Public Chapter 449 expands the special sales and use tax allocation for sports authorities to apply to major league soccer franchises. 

Effective: July 1, 2017

Taxation of telecommunication providers

Public Chapter 490 discontinues the Ad Valorem Tax Reduction Fund effective June 2, 2017 and redistributes the sales and use tax collected from interstate or international telecommunications services sold to businesses. It also implements a privilege tax for modern market telecommunication providers beginning January 1, 2018, and repeals that tax on December 31, 2022.

Effective: June 1, 2017 (relevant sections)

Title and Registration

IMPROVE Act

Public Chapter 181 increases the cost of registering a vehicle in Tennessee.

• Registration for a passenger vehicle (personal car) will increase by $5.
• Registration for a commercial vehicle used for hire to transport passengers (buses, taxis) will increase by $10.
• Registration for freight motor vehicles will increase by $20.

Additionally, there will be a new registration fee of $100 for electric vehicles beginning July 1, 2017.  This fee will be in addition to the standard registration fee.

Learn more in the Department’s important notice here.

Effective: July 1, 2017

Automated driving systems (ADS) in Tennessee

Public Chapter 474 establishes guidelines for the operation of automated driving systems (ADS) on the public roads of Tennessee, and it also requires an ADS-operated vehicle to be registered as an ADS-operated vehicle if registered in Tennessee.

Effective: Upon becoming law

24-month rental car registration

Public Chapter 325 authorizes the Department to issue motor vehicle registrations that are valid for 24 months to businesses that register 15,000 or more vehicles annually and are engaged in the rental of motor vehicles, trucks, and trailers for periods of 31 days or less.

Effective: July 1, 2017

General transportation of antique motor vehicles on federal holidays

Public Chapter 10 authorizes motor vehicles registered as antique motor vehicles to be driven for general transportation purposes on Saturdays, Sundays, and federal holidays, not just on weekends.

Effective: March 15, 2017

Electronic insurance verification program

Public Chapter 8 makes various changes to the vehicle insurance verification program, such as extending the time that owners have to respond to a notice of noncompliance and requiring proof of financial responsibility after the suspension of a vehicle’s registration.

Effective: March 22, 2017

Specialty License Plates

Public Chapter 384 designates new specialty plates including:

• Save the Bees
• Childhood Hunger Awareness
• Boy Scouts of America
• In Remembrance
• Strictly Vettes
• Baylor School
• Police Activities League
• Martin Luther King Jr.
• Alzheimer's Association
• Diabetes Awareness
• Germantown Charity Horse Show
• Mothers Against Drunk Driving
• Retired female firefighter
• A Soldier's Child
• Childhood Cancer Awareness
• Children's Hospital at Erlanger
• Cystic Fibrosis Awareness
• Legislator Emeritus
• Chattanooga Football Club

It specifies new specialty plates that have one year to meet the issuance requirement for 1,000 plates, including: Historic Whitehaven, Historic Collierville, Ohio State University, Justin P. Wilson Cumberland Trail State Scenic Trail State Park, and the Niswonger Children's Hospital license plates.

The public chapter creates new license plate designs for veterans who served in the Vietnam War, Korean War, Operation Desert Storm, Operation Iraqi Freedom, Operation Enduring Freedom, and Operation New Dawn.

It extends until July 1, 2018, the timeframe for meeting the issuance requirement of 1,000 plates for the Pat Summitt Foundation new specialty earmarked license plate.

Effective: May 18, 2017

Issuance of an emergency license plate to constables

Public Chapter 97 authorizes the issuance of an emergency license plate to constables.

Effective: April 4, 2017

Waiting period for specialty plates failing to meet minimum issuance requirement removed

Public Chapter 359 removes the three-year waiting period for plates that have failed to meet minimum issuance or renewal requirements to be eligible for re-issuance.

Effective: July 1, 2017

Optional standard registration plates with "In God We Trust"

Public Chapter 429 authorizes a motor vehicle owner or lessee to choose to be issued a standard registration plate that includes the language "In God We Trust."

Effective: For plates issued or renewed on or after July 1, 2017