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 The exact amount of the refund received will not be published, but refund recipients will be identified by name and categorized by the amount of refund sought into one of three ranges: 0-$750 of refund; $750.01- $10,000;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.
