Reforms to Franchise Tax Set to Cost Tennessee $1.6 Billion

Fearing an onslaught of constitutional challenges, Tennessee is poised to enact a $1.6 billion overhaul of its franchise tax and offer refunds to businesses that paid the tax over the last three years.

Gov. Bill Lee (R) is backing legislation that would modify the calculation of the Tennessee franchise tax base and permit taxpayers to claim refunds for taxes paid going back to 2021. A line item in Lee’s budget puts the price tag at $410 million for fiscal year 2025, plus a provision offering three years of refunds costing $1.2 billion.

Administration officials have said as many as 80 ...