2020 Tennessee Code
Title 67 - Taxes and Licenses
Chapter 4 - Privilege and Excise Taxes
Part 20 - Excise Tax Law of 1999
§ 67-4-2009. Credits

The tax imposed by this part shall be in addition to all other taxes and there shall be no credit allowed upon it except the following:

1. In accordance with § 56-4-217, there shall be credited upon the tax imposed by this part the net amount of gross premiums tax paid that is measured by a period that corresponds to the excise tax period on which the return is based, plus any amount used to offset payment to the Tennessee guaranty association that has not otherwise been recovered, but not including the gross premiums receipts tax paid by fire insurance companies for the purpose of executing the fire marshal law;
2. When an audit of an excise tax return for any year not barred by the statute of limitations discloses a change in the amount of tax due, there may be applied upon it as a credit any amount that the taxpayer is otherwise entitled to receive either as a credit under part 4 or 5 of this chapter for excise taxes paid, or as a refund thereof under § 67-1-1802. This tax credit allowance may be applied notwithstanding the statute of limitations or the requirement for approval of certain refunds by the commissioner and the attorney general and reporter if such was made under § 67-1-1802, and also any statutory or regulatory requirement under various items of part 4 or 5 of this chapter that the excise tax be paid prior to the allowance of any credit;
3. 1. There shall be allowed against the sum total of the taxes imposed by the Franchise Tax Law of 1999, compiled in part 21 of this chapter, and by this part, a credit equal to one percent (1%) of the purchase price of industrial machinery purchased during the tax period covered by the return and located in this state. For purposes of this section, “industrial machinery” means:
      1. “Industrial machinery” as defined by § 67-6-102; or
      2. “Computer,” “computer network,” “computer software,” or “computer system” as defined by § 39-14-601, and any peripheral devices, including, but not limited to, hardware, such as printers, plotters, external disc drives, modems, and telephone units, purchased by a taxpayer in the process of making the required capital investment in Tennessee described in § 67-4-2109(a), if as a result of making such purchase and meeting the other requirements set forth in § 67-4-2109(b), the taxpayer qualifies for the job tax credit provided therein;
   2. The industrial machinery credit taken on any franchise and excise tax return, however, shall not exceed fifty percent (50%) of the combined franchise and excise tax liability shown by the return before the credit is taken;
   3. 1. Any unused credit may be carried forward in any tax period until the credit is taken; however, the credit may not be carried forward for more than fifteen (15) years;
      2. If the taxpayer qualifies for the credit provided in subdivision (3)(I)(i), the fifteen-year limitation otherwise applicable to the carry-forward of unused credit shall not apply; provided, that the commissioner of economic and community development and the commissioner of revenue have determined that the allowance of the additional carry-forward is in the best interest of the state;
      3. Subdivision (3)(C)(ii) shall apply only to applications received and approved by the commissioner of revenue and the commissioner of economic and community development on or before January 1, 2011;
   4. If the industrial machinery, for the purchase of which a tax credit has been allowed, is sold or removed from this state during its useful life according to the depreciation guidelines in effect for excise tax purposes, the department shall be entitled to recapture a portion of the credit allowed by increasing the franchise and/or excise tax liability of any taxpayer, for the taxable period during which the machinery was sold or removed, in an amount equal to the percentage of useful life remaining on the industrial machinery at the time of sale or removal times the total credit taken on the purchase of the machinery;
   5. For purposes of the allowance of the credit against franchise and excise taxes under this section, any taxpayer who is a lessee of new industrial machinery and the original user of the industrial machinery, including a lessee from an industrial development corporation as defined by title 7, chapter 53, or other tax exempt entity, shall be treated as having purchased the machinery during the tax period in which it is placed in service by the lessee, at an amount equal to its purchase price;
   6. If industrial machinery is leased for a period that constitutes less than eighty percent (80%) of its useful life, then the lessee shall be deemed to have purchased only a portion of the machinery, at an amount determined by multiplying the actual purchase price of the machinery by a fraction, the numerator of which is the lease term, and the denominator of which is the useful life of the leased machinery;

      [Expired July 1, 2015; see (3)(G)(ii)]

   7. 1. Notwithstanding any law to the contrary, the industrial machinery franchise and excise tax credit provided in this subdivision (3) may be computed by a general partnership that operates a call center in this state that is placed in service by the general partnership on or after June 30, 2003, and that would otherwise qualify for the credit provided in § 67-4-2109(b)(3)(H). The industrial machinery franchise and excise tax credit shall be computed as if the general partnership were subject to franchise and excise tax. With respect to the general partnership tax year during which a credit is so computed, a partner in the general partnership that is subject to franchise and excise tax and that directly holds a first tier ownership interest in the general partnership may take a percentage of the credit that equals the total amount of the credit for the general partnership multiplied by the partner's percentage interest in the general partnership on the last day of the general partnership tax year against the partner's franchise and excise tax liability for the partner's tax year that includes the last day. The industrial machinery franchise and excise tax credit passed through from the general partnership to the first tier partner under this section shall, in the hands of the first tier partner, be subject to applicable provisions and limitations otherwise provided by this section, including carry forward provisions; provided, that in no case shall the credit or a carryover of a credit be taken by a business entity, unless it was a partner in the general partnership and subject to franchise and excise tax at the time the credit was earned by the general partnership;
      2. This subdivision (3)(G) shall expire on July 1, 2015; provided, that any taxpayer that has filed a business plan with the department prior to July 1, 2015, shall continue to be eligible for the credit;
   8. Notwithstanding any provision to the contrary, a taxpayer that has established its international, national, or regional headquarters in this state and has met the requirements to qualify for the credit provided in § 67-6-224, or a taxpayer that has established an international, national, or regional warehousing or distribution hub in this state and has met the requirements to be a qualified new or expanded warehouse or distribution facility, shall be allowed to offset up to one hundred percent (100%) of its franchise and/or excise tax liability by the industrial machinery credit provided in this subdivision (3), or any carryforward of the industrial machinery credit, if the commissioner of revenue and the commissioner of economic and community development determine that increasing the percentage of offset above that allowed by subdivision (3)(B) is in the best interests of the state. For purposes of this subdivision (3)(H), “best interests of the state” means a determination that the taxpayer established its headquarters or a warehousing or distribution hub in this state, or converted a regional headquarters or regional warehousing or distribution hub in this state into its national or international headquarters or a national or international warehousing or distribution hub, as a result of such action. The commissioner of revenue and the commissioner of economic and community development shall determine the percentage of franchise and/or excise tax liability allowed to be offset, above that otherwise allowed by subdivision (3)(B), and the period during which the increased offset shall continue;
   9. 1. If the taxpayer makes a required capital investment in excess of one billion dollars ($1,000,000,000) during the investment period, the credit allowed in subdivision (3)(A) shall be equal to ten percent (10%) of the purchase price of industrial machinery located in this state and purchased in the process of making the required capital investment. The credit shall be subject to subdivisions (3)(A)-(H), except that a taxpayer making the required capital investment for purposes of this subdivision (3)(I) shall be entitled to the credit for the items listed in subdivision (3)(A)(ii) regardless of whether the taxpayer meets any of the requirements of, or qualifies for, the job tax credit provided in § 67-4-2109(b);
      2. If the taxpayer makes a required capital investment in excess of five hundred million dollars ($500,000,000) during the investment period, the credit allowed in subdivision (3)(A) shall be equal to seven percent (7%) of the purchase price of industrial machinery located in this state and purchased in the process of making the required capital investment. The credit shall be subject to subdivisions (3)(A)-(H), except that a taxpayer making the required capital investment for purposes of this subdivision (3)(I) shall be entitled to the credit for the items listed in subdivision (3)(A)(ii) regardless of whether the taxpayer meets any of the requirements of, or qualifies for, the job tax credit provided in § 67-4-2109(b);
      3. If the taxpayer makes a required capital investment in excess of two hundred fifty million dollars ($250,000,000) during the investment period, the credit allowed in subdivision (3)(A) shall be equal to five percent (5%) of the purchase price of industrial machinery located in this state and purchased in the process of making the required capital investment. The credit shall be subject to subdivisions (3)(A)-(H), except that a taxpayer making the required capital investment for purposes of this subdivision (3)(I) shall be entitled to the credit for the items listed in subdivision (3)(A)(ii) regardless of whether the taxpayer meets any of the requirements of, or qualifies for, the job tax credit provided in § 67-4-2109(b);
      4. If the taxpayer makes a capital investment in excess of one hundred million dollars ($100,000,000) during the investment period, the credit allowed in subdivision (3)(A) shall be equal to three percent (3%) of the purchase price of industrial machinery located in this state and purchased in the process of making the required capital investment. The credit shall be subject to subdivisions (3)(A)-(H), except that a taxpayer making the required capital investment for purposes of this subdivision (3)(I) shall be entitled to the credit for the items listed in subdivision (3)(A)(ii) regardless of whether the taxpayer meets any of the requirements of, or qualifies for, the job tax credit provided in § 67-4-2109(b);
      5. The taxpayer shall file a business plan with the commissioner of revenue in order to qualify for the credit provided in this subdivision (3)(I). The business plan shall be filed on or before the last day of the first fiscal year in which the investment is made and shall describe the investment. The commissioner of revenue has the authority to conduct audits or require the filing of additional information necessary to substantiate or adjust the findings contained within the business plan and to determine that the taxpayer has complied with all statutory requirements so as to be entitled to the credit in this subdivision (3)(I);
      6. The credit in this subdivision (3)(I) shall begin to apply in the first year of the investment period; however, if the required capital investment is not met during the investment period, the taxpayer shall be subject to an assessment equal to the amount of any credit taken under this subdivision (3)(I) for which the taxpayer failed to qualify, plus interest;
      7. For purposes of this subdivision (3)(I), unless the context otherwise requires:

1. “Good cause” means a determination by the commissioner of economic and community development that the capital investment is a result of the credit provided in this subdivision (3)(I);
2. “Investment period” means a period not to exceed three (3) years from the filing of the business plan related to the required capital investment, during which the required capital investment must be made. The three-year period for making the required capital investment may, for good cause shown, be extended by the commissioner of economic and community development for a reasonable period not to exceed four (4) years for a taxpayer that meets the requirements of subdivision (3)(I)(i) and not to exceed two (2) years for any other taxpayer; and
3. “Required capital investment” means an increase of a business investment in real property, tangible personal property or computer software owned or leased in this state valued in accordance with generally accepted accounting principles. A capital investment shall be deemed to have been made as of the date of payment or the date the taxpayer enters into a legally binding commitment or contract for purchase or construction; and

   [Expired July 1, 2015; see (3)(J)(vi)]

(i)  In addition to the credit provided in subdivision (3)(A), the owner of a qualifying environmental project shall be entitled to a one-time credit in the amount of one and three-fourths percent (1.75%) of the investment in the qualifying environmental project, and such credit shall have the same carry-forward features, limitations and other attributes as are applicable to job tax credits under §67-4-2109(b)(1). The owner of a qualifying environmental project shall also be provided six (6) annual credits in the amount of one and three-fourths percent (1.75%) of the investment in the qualifying project, and such credits shall have the same carry-forward features, limitations and other attributes as are applicable to enhanced job tax credits under §67-4-2109(b)(2)(B)(iii), and the entire investment in the qualifying environmental project shall be treated as exempt required capital investment for purposes of §67-4-2108(a)(6)(G);

For purposes of this subdivision (3)(J), a “qualifying environmental project” means a project in which the taxpayer makes an investment in excess of one hundred million dollars ($100,000,000) to eliminate mercury from the manufacturing process and operations of one (1) or more existing chlor-alkali manufacturing and ancillary facilities and equipment in the state;

The maximum investment in a qualifying environmental project that is eligible for the credits provided under this subdivision (3)(J) is one hundred million dollars ($100,000,000), inclusive of all capital investment and other direct and indirect costs of the project. To be eligible for the credits provided under this subdivision (3)(J), construction of the qualifying environmental project must have commenced on or after January 1, 2011, and construction of the qualifying environmental project must be substantially complete on or before January 1, 2014. The credits provided under this subdivision (3)(J) shall first be available in the later of the year in which the qualifying environmental project is substantially complete or July 1, 2013;

As a condition to receiving credits under this subdivision (3)(J), the owner of a qualifying environmental project shall agree to maintain an annual average of at least three hundred fifty (350) jobs in the state that meet the requirements set forth in §67-4-2109(a)(6)(A) for a period of six (6) years after substantial completion of the qualifying environmental project. In the event the owner does not maintain the required number of qualified jobs in a specific year, the annual credit provided under this subdivision (3)(J) for that year shall be reduced in proportion to the percentage of the shortfall;

As a further condition to receiving credits under this subdivision (3)(J), the owner of a qualifying environmental project shall agree to forego any and all claims for credits that may be available to the owner pursuant to §67-4-2109(b)(1) and (2) in connection with the qualifying environmental project;

This subdivision (3)(J) shall expire on July 1, 2015; provided, that any taxpayer that has filed a business plan with the department prior to July 1, 2015, shall continue to be eligible for the credit;

A hospital company filing a franchise/excise tax return on a combined basis as required in §67-4-2014(e), together with all other members of its combined group filing with it, shall be allowed as a credit against the combined annual franchise/excise tax imposed an amount equal to the lesser of the franchise tax or excise tax so that the combined annual franchise/excise tax of the combined group shall be limited to the greater of the two (2) of them; provided, that this credit shall not apply to tax years beginning on or after January 1, 2007;

A hospital company filing a franchise/excise tax return on a combined basis as described in §67-4-2014(e), together with all members of its combined group filing with it, shall be allowed as a further credit against the combined annual franchise/excise tax imposed on the group remaining after application of the credit allowed under subdivision (4) an amount equal to four percent (4%) of the cost of medical supplies and medical equipment used by or placed in service by the members of the controlled group in this state during the tax year; provided, that the aggregate amount of the credit allowed to a taxpayer under subdivision (4), together with the credit allowed to a taxpayer under this subdivision (5), shall not exceed nine million dollars ($9,000,000) in any one (1) tax year; and provided, further, that the credit allowed under this subdivision (5) shall not apply to tax years beginning on or after January 1, 2007. A corporation or other entity shall be deemed to have used or placed in service medical supplies and medical equipment used or placed in service by a partnership or limited liability company of which it is a partner or member that would be a hospital company, as defined in §67-4-2004, if it were a corporation or other entity upon which tax is imposed under this part and part 21 of this chapter, and would be a member of its same controlled group, as defined in § 267(f)(1) of the Internal Revenue Code of 1986, codified in 26 U.S.C. § 267(f)(1), if it were a corporation and its partners or members were shareholders. The amount of the cost of such medical supplies and medical equipment that is attributed to and deemed to have been used or placed in service by such corporation or other entity shall be equal to the pro rata portion of the cost of medical supplies and medical equipment used or placed in service by the partnership or limited liability company in the tax year. Such pro rata portion shall be determined based upon the corporation's or other entity's percentage of the profits and losses of such partnership or limited liability company during such tax year. As used in this subdivision (5), “medical equipment” has the same meaning as “major medical equipment” as set forth in §68-11-102(10) [repealed], but without the limitation therein as to the cost thereof; and “medical supplies” means all apparatus, consumable products, appliances, and other tangible personal property, except drugs and medicines, used in provision of patient health care services, including all recordkeeping and documentation in connection with such services;

(A)  Except for unitary groups of financial institutions, each taxpayer is considered a separate entity; therefore, in the case of mergers, consolidations, and like transactions, no tax credit incurred by the predecessor taxpayer shall be allowed as a credit on the tax return filed by the successor taxpayer. With the exception set forth in subdivision (6)(B), a credit carryforward may be taken only by the taxpayer that generated it;

Notwithstanding the provisions contained in subdivision (6)(A), when a taxpayer merges out of existence and into a successor taxpayer that has no income, expenses, assets, liabilities, equity or net worth, any qualified Tennessee credit carryover of the predecessor that merged out of existence shall be available for carryover on the return of the surviving successor; provided, that the time limitations for the carryover have not expired;

A unitary group of financial institutions may take any qualified credit that was generated by any group member that is in existence as a member of the group at the end of the group's tax year; provided, that such credit has not previously been taken by the member itself before it joined the group or by another unitary group of financial institutions at the time the financial institution generating the credit was a member of that group; and provided, further, that the credit carryover shall be subject to the limitations set forth in this subdivision (6);

A credit shall be allowed against the tax imposed by this part in an amount equal to the tax imposed by chapter 2 of this title paid by the taxpayer;

(A)  There shall be allowed against the sum total of the taxes imposed by the Franchise Tax Law of 1999, and by this part, a credit equal to fifty percent (50%) of the purchase price of brownfield property purchased in this state during the tax period covered by the return for the purpose of a qualified development project;

For the purposes of this subdivision (8), unless the context otherwise requires:

“Brownfield property” means real property that is the subject of an investigation or remediation as a brownfield project under a voluntary agreement or consent order pursuant to §68-212-224;

“Capital investment” means an investment in real property, tangible personal property or computer software owned or leased in this state valued in accordance with generally accepted accounting principles. A capital investment shall be deemed to have been made as of the date of payment or the date the taxpayer enters into a legally binding commitment or contract for purchase or construction of the real or personal property;

“Investment period” means a period not to exceed five (5) years from the filing of the business plan related to the required capital investment, during which the required capital investment must be made;

[Deleted by 2020 amendment.]

“Qualified development project” means a project consisting of a capital investment of at least twenty-five million dollars ($25,000,000), located on a brownfield property, and having a business plan approved by the commissioner of revenue in accordance with the applicable provisions of subdivision (8)(E);

The credit allowed pursuant to this subdivision (8) shall apply against the excise tax imposed by this part and the Franchise Tax Law of 1999; provided, however, that such credit, together with any carry-forward thereof, taken on any franchise and excise tax return shall not exceed fifty percent (50%) of the combined franchise and excise tax liability shown by the return before any credit is taken. Any credit authorized under this subdivision (8)(C) that is unused may be carried forward in any tax period until the credit is taken; provided, that the credit may not be carried forward for more than fifteen (15) years;

[Deleted by 2020 amendment.]

(i)  The taxpayer shall file a business plan for the development project with the commissioner of revenue in order to qualify for the credit provided in subdivision (8)(A). The plan must describe the capital investment to be made toward the qualified development project within the investment period and also include a determination by the commissioner of finance and administration, the commissioner of revenue, and the commissioner of economic and community development pursuant to subdivision (8)(H) that the credit is in the best interest of the state;

[Deleted by 2020 amendment.]

Qualifying plans shall be approved by the commissioner of revenue. At such time, an approval letter authorizing the credit, the value of the credit and the terms of the credit shall be issued. A copy of the approval letter shall be filed by the taxpayer with the department of revenue in any year in which the taxpayer utilizes the credit;

The commissioner of revenue has the authority to conduct audits or require the filing of additional information necessary to substantiate or adjust the findings contained within the business plan and to determine that the taxpayer has complied with all statutory requirements so as to be entitled to the credit in this subdivision (8);

In order to receive the credit, the taxpayer must submit a claim for the credit, along with documentation as required by the commissioner showing that the capital investment was made toward the qualified development project during the investment period. The taxpayer shall not be eligible to receive the credit until the minimum capital investment required by subdivision (8)(B)(v) has been met;

The commissioner shall review the claim for the credit and notify the taxpayer of the approved tax credit amount. The taxpayer may not take the credit until the commissioner has notified the taxpayer of the approved amount;

Notwithstanding any provision of this subdivision (8) to the contrary, no credit shall be allowed unless the commissioner of finance and administration, the commissioner of revenue, and the commissioner of economic and community development determine, in their sole discretion, that the credit is in the best interest of the state. For purposes of this subdivision (8)(H), “best interest of the state” means a determination by the commissioner of finance and administration, the commissioner of revenue, and the commissioner of economic and community development that the qualified development project is a result of the credit provided in subdivision (8)(A) and that the economic benefits to this state resulting from the qualified development project outweigh the anticipated amount of the credit; and

For a qualified development project in which the taxpayer receives the brownfield property from a county, municipality, or industrial development board as defined in §7-53-101 for a sale price of less than one dollar ($1.00), the amount of any credit authorized under this subdivision (8) is fifty percent (50%) of the most recent purchase price of the brownfield property that was paid by the county, municipality, or industrial development board; and

(A)  Notwithstanding subdivision (8), there shall be allowed against the sum total of the taxes imposed by the Franchise Tax Law of 1999 and by this part, a credit equal to seventy-five percent (75%) of the purchase price of brownfield property purchased in a tier 3 or tier 4 enhancement county in this state during the tax period covered by the return for the purpose of a qualified development project;

For the purposes of this subdivision (9), unless the context otherwise requires:

“Brownfield property” means real property that is the subject of an investigation or remediation as a brownfield project under a voluntary agreement or consent order pursuant to §68-212-224;

“Capital investment” means an investment in real property, tangible personal property, or computer software owned or leased in this state valued in accordance with generally accepted accounting principles. A capital investment shall be deemed to have been made as of the earlier of the date of payment or the date the taxpayer enters into a legally binding commitment or contract for lease, purchase, or construction of the real or personal property;

“Investment period” means a period not to exceed five (5) years from the filing of the business plan related to the required capital investment, during which the required capital investment must be made; and

“Qualified development project” means a project consisting of a capital investment of at least five million dollars ($5,000,000), located on a brownfield property, and having a business plan approved by the commissioner of revenue in accordance with the applicable provisions of subdivision (9)(D);

The credit allowed pursuant to this subdivision (9) shall apply against the excise tax imposed by this part and the Franchise Tax Law of 1999; provided, however, that such credit, together with any carry-forward thereof, taken on any franchise and excise tax return shall not exceed seventy-five percent (75%) of the combined franchise and excise tax liability shown on the return before any credit is taken. Any credit authorized under this subdivision (9)(C) that is unused may be carried forward in any tax period until the credit is taken; provided, that the credit may not be carried forward for more than fifteen (15) years;

(i)  The taxpayer shall file a business plan for the qualified development project with the commissioner of revenue prior to the investment period in order to qualify for the credit provided in subdivision (9)(A). The plan shall describe the capital investment to be made toward the qualified development project within the investment period and shall also include a determination by the commissioner of finance and administration, the commissioner of revenue, and the commissioner of economic and community development pursuant to subdivision (9)(G) that the credit is in the best interest of the state;

Qualifying plans shall be approved by the commissioner of revenue. At such time, an approval letter authorizing the credit, the value of the credit, and the terms of the credit shall be issued. A copy of the approval letter must be filed by the taxpayer with the department of revenue in any year in which the taxpayer utilizes the credit; and

The commissioner of revenue has the authority to conduct audits or require the filing of additional information necessary to substantiate or adjust the information contained in the business plan and to determine that the taxpayer has complied with all statutory requirements so as to be entitled to the credit pursuant to this subdivision (9);

In order to receive the credit, the taxpayer must submit a claim for the credit, along with documentation as required by the commissioner showing that the capital investment was made toward the qualified development project during the investment period. The taxpayer shall not be eligible to receive the credit until the minimum capital investment required by subdivision (9)(B)(iv) has been met;

The commissioner shall review the claim for the credit and notify the taxpayer of the approved tax credit amount. The taxpayer may not take the credit until the commissioner has notified the taxpayer of the approved amount;

Notwithstanding any provision of this subdivision (9) to the contrary, no credit shall be allowed unless the commissioner of finance and administration, the commissioner of revenue, and the commissioner of economic and community development determine, in their sole discretion, that the credit is in the best interest of the state. For purposes of this subdivision (9)(G), “best interest of the state” means a determination by the commissioner of finance and administration, the commissioner of revenue, and the commissioner of economic and community development that the qualified development project is a result of the credit provided in subdivision (9)(A) and that the economic benefits to this state resulting from the qualified development project outweigh the anticipated amount of the credit; and

For a qualified development project in which the taxpayer receives the brownfield property from a county, municipality, or industrial development board as defined in §7-53-101 for a sale price of less than one dollar ($1.00), the amount of any credit authorized under this subdivision (9) is seventy-five percent (75%) of the most recent purchase price of the brownfield property that was paid by the county, municipality, or industrial development board.