Gov. Bill Lee, front, flanked by House Speaker Cameron Sexton, left, and Lt. Gov. Randy McNally, right. (Photo: John Partipilo)
As Tennessee faces a tighter budget in 2024, Gov. Bill Lee’s administration plans to move forward with a significant tax cut and refund for businesses, selling it as a “necessary legislative fix” to avoid a legal challenge.
But not everyone agrees it’s necessary.
Peter Enrich, a state and local tax policy expert at Northeastern University’s School of Law, said Tennessee could implement a change to its business tax — officially known as the franchise tax — and doesn’t need to give out over $1 billion in refunds to some of the state’s largest businesses before a suit is filed.
“I don’t know of any example where, by merely uttering the threat to litigate, you should be able to collect everything you could possibly claim,” Enrich said. “It seems like a corporate giveaway by another name.”
Revenue department officials in Lee’s administration are telling the public they must implement the business tax cut because the way Tennessee collects it could violate a U.S. Commerce Clause provision, which the U.S. Supreme Court interpreted to ban states from discriminating against interstate businesses by subjecting them to the burden of multiple taxation on their income.