Tennessee House, Senate reach deal on franchise tax bill — including public disclosures
After days of negotiations, a compromise between House and Senate leaders on Tennessee Gov. Bill Lee’s proposed $1.9 billion franchise tax deal passed both chambers on Thursday, offering businesses three years of refunds and – for the first time in state history – publicly disclosing names of companies and the ranges of refund amounts.
Lee’s franchise tax package is largest new spending item this year. The plan would eliminate the franchise tax property tax calculation (expected to cost the state $400 million in revenue beginning this year) and offer up to $1.5 billion in refunds for as many as 100,000 businesses that paid taxes based on the property measure over the last three years. Administration officials have said the refunds are indispensable to avoid lawsuits and court-ordered penalties.
House leadership had pushed for offering only one year of refunds, and requiring names and refund amounts to be publicly disclosed. Senators did not support any public disclosure, and wanted three years of refunds, to align with the statute of limitations.
Days after declaring the two chambers “at an impasse,” a conference committee on the bill met Thursday morning and agreed on final details of the deal.
Senate members adopted the conference committee report Thursday morning in a 25 to 6 vote. Retiring Sen. Art Swann, R-Maryville, was the lone Republican who voted against the deal. Sens. Janice Bowling, R-Manchester, and Sara Kyle, D-Memphis, were both absent.
House members passed the deal in a vote of 69 to 23. Republican Reps. Jody Barrett, R-Dickson, and Gino Bulso, R-Brentwood, voted against the bill. One Democrat in the House, Rep. Johnny Shaw, D-Bolivar, voted in favor of the deal.
Key points of the deal include:
A three-year retroactive refund window.
Names of businesses and ranges of refund amounts would be made public, but only for a 30-day window.
Businesses must sign away ability to sue the state if they file for a refund.
No attorney fees will be awarded to businesses suing the state for franchise tax refunds.
Businesses would have between May 15 and Nov. 15 to file their refund claims.
Funding for three years of refunds – $1.5 billion – is included in the budget already adopted by both chambers.
$800M in exchange for transparency
House members who previously pushed for only one year of refunds (estimated to cost the state $700 million) agreed to offer businesses three years of refunds (a projected $1.5 billion) in exchange for public disclosure of businesses receiving a refund.
“That is quite a concession obviously on our side, but we're willing to do that,” said House Majority Leader William Lamberth, R-Portland. “We value our business community, as I know our Senate colleagues do as well, and we see that as a significant reinvestment of those dollars back into our community here in Tennessee.”
Names of businesses who have filed for a refund and wide ranges of refund amounts will be publicly disclosed by the Department of Revenue for a 30-day period from May 31, 2025 to June 30, 2025 and then will be taken down.
“That information is not going to live in perpetuity out there,” said Senate Majority Leader Jack Johnson, R-Franklin, during the conference committee meeting.
Specific refund dollar amounts will not be disclosed: businesses receiving refunds will be listed in ranges $0-$750, $751-$10,000, and $10,000 and above. Companies whose refunds have not yet been processed will be disclosed and listed as "pending."
“The disclosure information is a significant concession by the Senate – both the names as well as the ranges that are being provided,” said Senate Finance Committee Chair Bo Watson, R-Hixson.
Seventeen senators declared a personal interest in the legislation before voting on the franchise tax reform earlier this month.
Lee said Monday he opposes those transparency measures. It remains unclear how much Lee’s family business, the Lee Company, would financially benefit from the refund, something critics of the deal regularly cite.
Records from the Department of Revenue obtained by The Tennessean show that an estimated 53% of the refund dollar total would go to businesses located primarily out of state.
In addition, the bill specifies that any business that sues the state over the franchise and excise tax will not be able to recover attorney fees.
“It is not going to be attractive to sue this state under this issue and we hope that this puts to bed any potential legal issues that even might have been out there,” Lamberth said. “We see this is a big policy win for the state of Tennessee and our citizens.”
Bipartisan push for more transparency in Senate
During Senate debate, Sen. Heidi Campbell, D-Nashville, asked what percentage of refund-eligible businesses will fall above the $10,000 refund category, and what the highest refund amount could be.
Senate Republican Caucus Chair Ken Yager, R-Kingston, pushed back saying that the state does not yet know, but when the bill “is approved and once people start applying for refunds, then we’ll know.”
"If that's the case, how do we know that 80% [of businesses] are going to be from this state?" Campbell asked. "Surely if we can get that information, we can also get the information about who's going to be receiving above $10,000."
Watson, incensed, claimed Thursday that the administration does not have that information and should not be able to share it.
"What you are asking for is information that is not disclosed," Watson said. "To ask specific questions about who gets what ― we don't know the answer to those questions, and revenue is not allowed to give us the answers. ... If you're going to ask us who's gonna pay for what, we can't answer that question nor should we be able to answer that question."
But while the Department of Revenue has repeatedly said that sharing information about what specific companies eligible for a refund would violate state law, when pressed, the department has acknowledged that aggregate data on the proposal is not confidential.
In fact, Lee administration officials circulated talking points and a fact sheet developed by revenue officials that contained aggregate data on businesses that would qualify for a refund under the proposal to lawmakers earlier this year.
Administration officials have also calculated what percentage of businesses would fall in to certain refund category levels ― and shared that data with stakeholders. For example, the National Federation of Independent Businesses leadership was told that 62% of the refund claims eligible under the administration's proposal would be for amounts $5,000 or less, and 98% of the refund claims filed would be for $50,000 or less.
The Department of Revenue declined to provide The Tennessean with a breakdown of how many eligible businesses would fall into each of the proposed disclosure categories.
"We are reviewing the revised legislation and preparing for implementation of this law upon the Governor's signature," Revenue spokesperson Kelly Cortesi told The Tennessean in an email. "We do not anticipate having any more information about refund claims until they are received and processed."
"If we're gonna be transparent, but let's be completely transparent, and let's tell the Tennessee taxpayers exactly what is happening with this egregious decision to give away over $1.5 billion of taxpayer money voluntarily," Campbell said.
Republican Sen. Frank Niceley, R-Strawberry Plains, argued there should be more disclosure categories to allow for better understanding of what how much money companies get, saying that businesses "knew what the deal was when they moved into this state."
"We ought to have another bucket," Niceley said. "We should have a bucket that said over $50,000, another bucket that said over $1 million – over $10 million… I’d like to know.”
Niceley ultimately voted for the bill.
House approves compromise deal
House members passed the deal in a vote of 69 to 23. Republican Reps. Jody Barrett, R-Dickson, and Gino Bulso, R-Brentwood, voted against the bill.
Lamberth touted the measure as “one of the biggest tax cuts for businesses in the history of our state.”
House Democrats, including House Democratic Caucus Chair John Ray Clemmons, D-Nashville, criticized the deal by saying the lower chamber “got rolled” by the Senate.
“If you vote for this bill, I don’t want to hear the words ‘fiscal conservative’ come out of your mouth,” Clemmons said. “If you vote for this, you are signing a check to the governor of Tennessee.”
Rep. Bo Mitchell, D-Nashville, also criticized the deal, noting that legal challenges must be filed in Sumner County – which several members of House and Senate Republican leadership represent.
“We’re going to give away $1.5 billion and run and hide,” Mitchell said, citing the numerous lawsuits filed against the state. “We’re giving away $1.5 billion out of fear.”
But Lamberth touted the plan as a fiscally conservative remedy that would avoid significant liability in the future.
“This money doesn’t belong to the state of Tennessee,” Lamberth said, saying instead it belongs to businesses that overpaid the state – listing off a handful of business names eligible for refunds. “It belongs to the taxpayers. It doesn’t belong to the state.”
Rep. Chris Todd, R-Madison County, argued that the tax cut “will trickle down to every person in this state.”
Vivian Jones covers state politics and government for The Tennessean. Reach her at vjones@tennessean.com or on X at @Vivian_E_Jones.
This article originally appeared on Nashville Tennessean: Tennessee House, Senate reach compromise on franchise tax deal
