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2013 Legislative Summaries

The following are brief summaries of the 2013 legislative changes to statutes administered by or affecting the Tennessee Department of Revenue.  The language used is not quoted from the law and should not be used as a substitute for the formal text.  For a complete copy of a particular public chapter, please visit the Secretary of State’s website at www.tn.gov/sos/acts.  For upcoming notices and other information regarding these changes, please visit the Department’s Web site regularly.

These summaries are organized by subject matter.  Some public chapters cover more than one subject and, therefore, appear in more than one section of the summary.  Only the portions of a public chapter that are relevant to a particular section of the summary are included in that section.

Sales and Use Tax

Franchise & Excise Tax

Business Tax

Individual Income Tax

Inheritance Tax

Alcoholic Beverages Taxes

Litigation Tax

Professional Privilege Tax

Tire Fees

Administrative

Title and Registration

 


Sales and Use Tax

State Tax Reduction on Food
Public Chapter 323 reduces the state sales tax rate on food and food ingredients from 5.25% to 5%. Food and food ingredients are taxed at the state rate, plus the applicable local option sales tax rate.

Effective date: July 1, 2013.

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Streamlined Effective Date
Public Chapter 480 delays the effective date of statutory changes to bring Tennessee into compliance with the Streamlined Sales and Use Tax Agreement from July 1, 2013, to July 1, 2015.

Effective date: May 20, 2013

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Tourism Development Zone Sales Tax
Public Chapter 347 allows any metropolitan government that has created a tourism development zone, which completely includes one or more central business improvement districts, to impose an additional fee on the sales price of services and tangible personal property sold at retail that are subject to sales tax. The sale must occur at retail within one central business improvement district located within the tourism development zone. The fee may not exceed twenty-five one hundredths percent (.25%). Note that the bill also exempts certain services and tangible personal property sales from this additional fee, but does not alter whether or not a sales tax applies.

Effective date: January 1, 2014.

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Sales Tax Fraud Study
Public Chapter 339 requires the executive director of the Tennessee District Attorneys Conference and the commissioner of the Department of Revenue to prepare a written report to the General Assembly advising how to best improve sales tax fraud investigations and prosecutions. The Report to the General Assembly is due by March 15, 2014. 

Effective date: May 13, 2013.

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Franchise & Excise Tax

Final Returns and Bankruptcy
Public Chapter 321 provides businesses with clear guidance as to how to compute the franchise tax base on the final tax return(s) by defining “final return status” as the status of a taxpayer that is in the process of winding down business operations. The bill also allows businesses to use the “average monthly value” method to compute its final franchise tax base, in addition to allowing businesses to prorate the franchise tax liability when a return covers a tax period of less than 12 months.

The bill also requires certain businesses being re-organized through a Chapter 11 bankruptcy to reduce their net operating losses by an amount equal to any discharge of debt that has been excluded from federal taxable income, similar to the way such transactions are treated for federal tax purposes. 

Effective Date: Applies to tax periods ending on or after May 13, 2013, except for Section 8 dealing with net operating loss adjustments, which applies to any tax year in which a discharge of indebtedness occurs on or after October 1, 2013.

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Energy Independence Act of 2013
Public Chapter 423 makes certain changes to the target goals for the state’s use of green motor vehicles.
Of significance for tax purposes, this public chapter expands upon the Tenn. Code Ann. § 67-4-2004(9) definition of a “certified green energy production facility” to include facilities utilizing natural gas in a combined heat and power configuration (CHP) to produce heat and electricity for consumption onsite.

Effective Date: May 16, 2013.

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Adventure Tourism Districts
Public Chapter 378 modifies the job tax credit available to qualified business enterprises located in adventure tourism districts by specifying that the credit is available if the business creates: (a) at least 25 new jobs in a tier one enhancement county; (b) at least 19 new jobs in a tier two enhancement county; or (c) at least 13 jobs in a tier 3 enhancement county. Prior law required the creation of at least 25 jobs in any county.

This public chapter also requires that the Commissioner of Revenue, with the approval of the Commissioner of Economic and Community Development, determine that the zone is not structured to create a competitive advantage for one business.

Effective Date: May 14, 2013.

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Business Tax

Uniformity and Small Business Relief Act of 2013
Public Chapter 313 makes changes in the business tax to provide tax relief to small businesses and to increase uniformity across the state. Several highlights include:

  • Business tax exemption is raised from $3,000 in gross sales to any business with less than $10,000 in gross sales (provided that businesses with between $3,000 and $10,000 in gross sales obtain a minimal activity license from their county clerk);
  • Converts the county business tax into a state level tax using the same revenue distribution formula that applied under prior law;
  • Clarifies the application of the business tax to out-of-state businesses that perform certain activities in the state;
  • Authorizes the commissioner of Revenue to accept a single filing of business tax returns covering multiple jurisdictions, a complement to the commissioner’s authority to change the tax period to coincide with the taxpayer’s fiscal year end.

Effective date: January 1, 2014, and applies to tax periods that begin on or after that date.

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Individual Income Tax

Individual Income Tax - Increased Exemption
Public Chapter 322 increases the exemption for individuals age 65 years and over for individual income tax purposes. For tax years beginning on or after January 1, 2013, single filers, age 65 and older, having total annual income from all sources of $33,000 or less are exempt from the income tax.  Joint filers, with either spouse being age 65 years or over, having total annual income from all sources of $59,000 or less, will be exempt. 

Effective date: May 13, 2013.

Individual Income Tax and Grantor Trusts
Public Chapter 480 allows the grantor, instead of the trustee, of a grantor trust to file the individual income tax return and pay the tax if the grantor reports the trust income on his or her own individual federal tax return. This law clarifies a point that has caused confusion for taxpayers in recent years and brings the law up to date with how taxpayers and practitioners are generally filing.

Effective Date: Applies to tax returns filed on or after May 20, 2013.

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Inheritance Tax

Small Estates Act
Public Chapter 360 makes various changes to the administration of small estates with less than $25,000 in assets. Of particular import to the Department of Revenue, this act removes the requirement currently in law that the court clerk send a certified affidavit to the Department regarding the estate’s assets, debts, and heirs.

Effective date: July 1, 2013, and applies to small estate affidavits filed on or after that date. 

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Alcoholic Beverages Taxes

Manufacturing Locations for Intoxicating Liquors and High Alcohol Content Beer
Public Chapter 445 clarifies and expands where intoxicating liquors can be manufactured. It states that intoxicating liquors and high alcohol content beer can be manufactured without a voter referendum as long as the municipality or unincorporated area of a county allows, as a result of a prior voter referendum, both retail package sales and consumption of alcoholic beverages on the premises. The bill also addresses various other location and administration issues, which fall under the purview of the Alcoholic Beverage Commission and certain federal agencies.

Effective Date:  July 1, 2013.

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Wholesale Beer Tax
Public Chapter 189 changes the tax rate on beer in Tenn. Code Ann. § 57-6-103, from 17% of the wholesale price to $35.60 per barrel (31 gallons), with 17 cents allocated to the Department of Revenue for administrative expenses and 92 cents to be retained by the wholesaler or manufacturer to cover collection costs.
Effective date:  July 1, 2013.

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Brewery Beer Sales - Off Premises
Public Chapter 386 authorizes a beer manufacturer holding a license as a restaurant or limited service restaurant to sell beer for off-premises consumption at a location contiguous to where the beer is manufactured and at any other (non-contiguous) restaurant or limited service restaurant owned by the same person (subject to the local laws at the site of the off-premises restaurant or limited services restaurant).

Effective date: May 14, 2013.

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Brand Registration
Public Chapter 171 expands the definition of “brand” for alcohol tax purposes to include the name, trademark, or trade name of the product. This public chapter also authorizes the Department of Revenue to accept brand registration and related contracts by electronic means.
Effective date:  April 16, 2013.

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Litigation Tax

Cocke County Litigation Tax
Public Chapter 450 authorizes Cocke County to levy a privilege tax, not to exceed $4.75, on all civil and criminal cases filed in general sessions court. The proceeds of the tax are to be used exclusively for funding the general sessions court and for ensuring fire codes compliance at the justice center.

Effective Date: May 16, 2013.

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Professional Privilege Tax

Professional Privilege Tax Profitability Study
Public Chapter 419 urges the Commissioner of Revenue to study the advisability of using profitability ratios for different professions, based on nation-wide studies of such professions as published by the Office of Budget and Management and the Internal Revenue Service, to determine the amount of tax to be levied upon professionals subject to the tax. The bill also urges that if the study is undertaken, the Commissioner report the findings and recommendations to the Senate and House Ways and Means Committees by January 15, 2014.

Effective Date: May 16, 2013

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Tire Fees

Return of Tire Disposal Fee to Counties
Public Chapter 457 requires the Commissioner of Revenue to allocate to a county that does not have a tire grant contract with the Department of Environment and Conservation one dollar ($1.00) of the one dollar and thirty-five cents ($1.35) pre-disposal fee for each tire sold in that county.

Effective Date: July 1, 2014, and applies to any pre-disposal fee received after such date, regardless of when the fee was imposed.

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Administrative

Confidentiality of Returns, Tax Information and Tax Administration
Public Chapter 400 clarifies that officers or employees of any office of the district attorney general as well as any state or local law enforcement agency are prohibited from disclosing confidential “Returns,” “Tax Information,” and “Tax Administration Information,” and that such improper disclosure is a Class E felony.

Effective date: May 7, 2013.

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Revenue Agents/Officers - Service Weapons and Badges
Public Chapter 434 authorizes retired agents or officers of the Department of Revenue to retain the officer or agent’s service weapon and badge upon retirement under certain circumstances.

Effective date: May 16, 2013.

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Title and Registration

Title & Registration Modernization
Public Chapter 183 modernizes and updates Tennessee’s title and registration laws in a number of ways:

  • Authorizes license plates with seven alphanumeric characters;
  • Authorizes the Department to confirm the ownership status of semi-truck trailers that have been registered with permanent plates and to terminate the registration for trailers that are no longer owned by the registrant; It also allows new owners of trailers to be issued identical plates as were on the trailer when purchased;
  • Gives troops returning from overseas deployments 30 days, instead of 14, to renew their registrations;
  • Eliminates the requirement for OEM headquarters companies to have special logos on their license plates;
  • Allows dealer plates to be used for temporary purposes for 72, rather than 24, hours, as well as authorizing the use of dealer plates for vehicles in driver’s education programs and as loaner vehicles at dealerships;
  • Corrects a confidentiality statute, giving individuals protection equal to corporations and other legal entities.

Effective date: July 1, 2013.

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Special License Plates Omnibus Bill
Public Chapter 484 authorizes the following new special license plates (subject to minimum order requirements): Concerned Motorcyclists of Tennessee; Tennessee Tech University; Alpha Eta Rho Fraternity; Vanderbilt University Athletic Department; Harpeth River Watershed Association; Juvenile Diabetes Research Foundation; Tennessee Theatre; Adoption; Northwest Tennessee Disaster Services; Sons of the American Revolution; Suicide Prevention; and Safe Schools.

This public chapter also extends the time for meeting the minimum order requirement to July 1, 2014, for the following plates: Tennessee Federation of Garden Clubs; Autism Awareness; Tennessee Tennis; I Recycle; East Tennessee Children’s Hospital; Almost Home Animal Rescue; and Historic Collierville.

Finally, this public chapter authorizes the surviving spouse of a Mason or of an honorably discharged veteran to continue to receive and use the respective Mason or Honorably Discharged Veteran plate.

Effective date: The sections extending the time for meeting the minimum order requirements are effective May 20, 2013.  All other sections are effective July 1, 2013.

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VIN Advisory Committee
Public Chapter 481 creates an accurate vehicle identification number (VIN) reporting advisory committee to make recommendations on the creation of an automated, real-time system to assist private industries, law enforcement agencies, and the state in verifying the accuracy of VINs of motor vehicles purchased for parts, dismantling, or scrap. The committee will also study the cost and feasibility of making a system available for various state and local agencies as well as the industry. The committee must report its findings by April 1, 2014, and at that time, will cease to exist.

Effective date: May 20, 2013.

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Specialty Plate Renewals
Public Chapter 264 decreases the minimum order requirement for the renewal of cultural or new specially earmarked license plates, and for collegiate plates for four-year colleges and universities outside of Tennessee, from 1,000 to 800 plates.
 
Effective date: April 25, 2013.

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Special Event Plates
Public Chapter 117 creates a new “special event” license plate allowing dealers to operate special event vehicles without registering them with the Department of Revenue. A vehicle may only operate with the plate if it is rented to legal entities or political subdivisions of the state pursuant to a rental agreement, only travels in Tennessee during the rental period, can hold 15 or more passengers, and has fewer than 2,500 miles on the odometer. The fee for a special event plate must be more than $152.63, and no dealer may purchase more than 100 special event plates during a registration year.

Effective date: April 12, 2013.

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Military Plates
Public Chapter 318 creates the requirement for most military medal recipient license plates that the Department review DD214 forms and a copy of the orders (or just a copy of orders for active military members) awarding such medal before issuing the plate. The Department may also accept a verification letter from the Department of Veteran’s Affairs in lieu of DD214 forms and/or a copy of orders.

This public chapter also converts the Air Medal plate into a military cultural plate with the attending fees for such plates. Current Air Medal plate holders may retain their plate, but must pay the renewal fee on their first renewal on or after July 1, 2014.

Effective date: May 13, 2013.

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Golf Carts Allowed on Roads
Public Chapter 219 revises provisions allowing golf carts on certain public roads. Until January 1, 2014, the governing bodies in Niota, Gainesboro, Jamestown, Livingston, and Morristown may authorize and regulate the operation of golf carts on any road within such municipality not a part of the county, state, interstate, or national defense highway systems upon adopting an ordinance by a two-thirds vote specifying each road open for golf cart use.

Effective date: April 23, 2013.

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Native American Indian Association Special License Plate
Public Chapter 303 authorizes the issuance of a Native American Indian Association special license plate (subject to minimum order requirements), with collections from the sales of such plates allocated to the Native American Indian Association of Tennessee, Inc., to be used exclusively for the association’s emergency assistance and education program.

Effective date: May 7, 2013.

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Motor Vehicles, Titling and Registration
Public Chapter 376 allows a clerk to deny an application for renewal of motor vehicle registration when the applicant owes registration fees to the office of the county clerk, until the applicant pays the amount owed in full, plus an additional fee of 10% of the amount due.

Effective date: May 6, 2013.

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Nonrefundable Gift Vouchers Redeemable Motor Vehicle Registration Plates
Public Chapter 392 directs the Department of Revenue to study the establishment of a program to authorize the sale of nonrefundable gift vouchers that may be redeemed by any person toward the purchase of cultural and new specialty earmarked motor vehicle registration plates. A written report must be filed with the house and senate transportation committees by December 31, 2013.

Effective date: May 14, 2013.

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