2016 Legislative Summaries

Administration

Local Government Access to Tax Information

Public Chapter 705 authorizes local government officials, upon written request, to review tax information to determine whether allocations from state levied taxes are being distributed to the correct unit of local government. The bill clarifies that this information should not include the taxpayer's returns, receipts, income, tax liability, tax payments or other financial information.

Effective: April 6, 2016

Collection of 911 Surcharges

Public Chapter 1047 provides that all 911 surcharges collected by dealers of communications services will be paid to the Department of Revenue, instead of the Tennessee Emergency Communications Board, for tax periods beginning July 1, 2017. The Department will establish registration and payment procedures for these dealers that coincide with the registration and payment procedures that apply under the Retailers' Sales Tax Act. Dealers are entitled to retain an administrative fee equal to two percent (2%) of their collections.

The Department of Revenue will pay all remitted 911 surcharges to the Tennessee Emergency Communications Board within 30 days of receipt and may deduct an administration fee of 1.125% of the collected charges.

Effective: July 1, 2017

Alcohol

Labeling of Wine Made from Apples

Public Chapter 687 allows licensed wineries and farm wine producers to label and advertise wine made from apples as cider, apple cider or hard cider.

Effective: May 1, 2016

Self-Distribution Permits for Farm Wine Permit Holders

Public Chapter 857 authorizes self-distribution permits for farm wine permit holders with the following restrictions:

  • Total annual wine production by permit holders must not exceed 50,000 gallons
  • The farm wine permit holder must not have a distribution contract with a wholesaler if the terms of the contract includes distribution rights for a county that is located within 100 miles of the licensed winery where the wine being distributed has been manufactured, produced or bottled
  • The permit holder may distribute no more than 3,000 cases of wine on the winery's premises to any licensee holder located within 100 mile of the winery's premises;
  • The farm wine permit holder is responsible for all taxes and records imposed.

 

Effective: July 1, 2016

Manufacturers of Intoxicating Liquors

Public Chapter 976 authorizes manufacturers of intoxicating liquors to utilize items related to or incidental to the tasting of alcoholic beverages anywhere that tastings are permitted. It also authorizes manufacturers to rent or lease any portion of their premises for any event, with or without charge, and requires a special occasion license in order to hold an event. The public chapter clarifies that owners, officers and employees are considered representatives of a manufacturer, rectifier or importer for purposes of requiring a permit.

Effective: April 27, 2016

Sale and Delivery of Wine and Alcoholic Beverages

Public Chapter 1068 prohibits alcoholic beverages or wine from being sold or delivered to a retailer unless those beverages have been stored at a wholesaler's premises for at least 24 hours. It also deletes the provision that prohibits issuance of a retail food store wine license within 500 feet of a retail establishment selling alcoholic beverages and beer.

Effective: May 20, 2016

Sale of Wine at Retail Food Stores

Public Chapter 787 permits businesses applying for retail food store wine licenses to receive certificates of compliance prior to July 1, 2016. It also allows wholesalers to solicit orders and sell and deliver wine to any retail food store, and it authorizes retail food stores to stock wine so long as the public is notified that none will be sold before July 1, 2016. This legislation establishes that liquor retailers can have no more than two retail licenses, except for those who hold more than two licenses prior to the effective date of this act.

Effective: April 12, 2016

Franchise & Excise Tax

Job Tax Credits for Part-Time and Seasonal Adventure Tourism Jobs

Public Chapter 759 authorizes franchise and excise tax (F&E) job tax credits for part-time and seasonal adventure tourism jobs created in adventure tourism districts on or after July 1, 2017. The legislation establishes that these jobs will count as one-half of a job of the purpose of calculating the number of jobs that a qualified business has created. "Part-time" employment and "seasonal" employment are defined in the public chapter.

Effective: Applies to jobs created on or after July 1, 2017 and applications submitted on or after July 1, 2017.

Rural Economic Opportunity Act of 2016

Public Chapter 1019 enacts the "Rural Economic Opportunity Act of 2016." This act reduces the number of qualified jobs that must be created in order to receive a job tax credit from 25 to 20 for an enterprise located in a "Tier 3 Enhancement County" and from 25 to 10 for an enterprise located in a "Tier 4 Enhancement County."

The public chapter extends the additional annual credit of $4,500 per qualified job to an enterprise located in a "Tier 4 Enhancement County" for a period of five years, beginning with the first tax year in which the qualified business enterprise applies the credit. Likewise, the act extends the additional tax credit to an enterprise located in an area designated as an adventure tourism district that is located in a "Tier 4 Enhancement County" for a period of five years, beginning with the first tax year in which the enterprise applies the credit.

Effective: Tax provisions apply to tax years ending on or after July 1, 2016

Estimated Payment Reform

Public Chapter 881 makes various reforms to Tennessee's franchise and excise tax estimated payment requirements. It reduces the penalty rate for delinquent and deficient estimated payments to two percent (2%) per month up to a maximum of twenty-four percent (24%), and it establishes that a taxpayer's previous deficient payments may still be considered timely for the purpose of evaluating a two-year filing history.

This legislation also lowers the required minimum quarterly payment to the lesser of one hundred percent (100%) of the prior year's liability or eighty percent (80%) of the current year's liability, and it provides that only those taxpayers with a liability of more than $5,000 for two consecutive tax years will be required to make estimated payments.

Effective: Applies to tax years beginning January 1, 2016.

Tennessee Tourism & Development Act

Public Chapter 845 enacts the Tennessee Tourism & Development Act, which redirects responsibilities originally required of the Department of Economic and Community Development under the Tennessee Adventure Tourism and Rural Development Act to the Department of Tourist Development. This legislation authorizes the Department of Tourist Development to promulgate rules and regulations in order to effectuate the purposes of the act, approve what constitutes the best interests of the state when implementing programs developed by the act, approve the creation of adventure tourism districts, allocate existing resources to adventure tourism districts for promotional support, and provide assistance to encourage the development of adventure tourism within regions of the state where these programs are suitable and high unemployment exists.

Effective: April 19, 2016

Fuel Tax

Petroleum Products Sold to Government Agencies

Public Chapter 646 extends, from March 31 to June 30, the deadline for a licensed wholesaler, importer or supplier to apply for a refund of taxes or fees paid on any petroleum products subsequently sold free of tax to a governmental agency holding an exemption permit. This applies to any exempt sales made during the previous calendar year on which a claim for refund has not previously been made. The bill removes a requirement that, in order to qualify for a tax exemption, a governmental agency must purchase petroleum products in lots of at least 500 gallons and complete the delivery of these products within 72 hours following commencement of the delivery.

Effective: March 23, 2016

Taxation of Compressed Natural Gas

Public Chapter 1070 exempts compressed natural gas from sales tax in the same manner that present law exempts motor fuel and liquefied natural gas from sales tax.

Effective: July 1, 2016

Hall Income Tax

Reduction of the Hall Income Tax

Public Chapter 1064 reduces the Hall income tax from six percent (6%) to five percent (5%) beginning with tax year 2016. The bill establishes the legislative intent that the tax be reduced through annual reductions of one percent (1%) made by enactments of general bills beginning with the first annual session of the 110th General Assembly. It eliminates the tax on January 1, 2022.

Effective: May 20, 2016

"Angel Investor" Tax Credit

Public Chapter 1055 establishes a Hall Income Tax credit equal to thirty-three percent (33%) of the value of an investment by an "angel investor" in an innovative small business. Angel investors making investment in companies located in Tier 4 counties will be allowed a credit of fifty percent (50%). This law requires that the investment be at least $15,000 and represent no more than forty percent (40%) of the capitalization of the company at the time of the investment.

The credit is limited to $50,000 per angel investor in any tax year, and the total amount of awarded credits is capped at: $3,000,000 for tax years beginning January 1, 2017; $4,000,000 for tax years beginning January 1, 2018; and $5,000,000 for tax years beginning January 1, 2019, and thereafter.

Any unused credit can be carried forward for five years.

Certificates of qualification for the credit will be issued by the Tennessee technology development corporation ("Launch Tennessee") on a first-come, first-served basis.

Effective: Applies to tax years beginning on or after January 1, 2017.

Miscellaneous

Fantasy Sports Act

Public Chapter 978 imposes a six percent (6%) tax on all adjusted revenues of an online fantasy sports contest offered by a fantasy sport operator to Tennessee consumers. It requires the Department of Revenue to collect such taxes, which are due and payable quarterly.

The legislation requires sixty percent (60%) of the taxes, from July 1, 2016 to June 30, 2017, to be allocated to the general fund, with this amount increasing to sixty-eight percent (68%) beginning July 1, 2017. It allocates twenty percent (20%) of the taxes to the counties of the state and ten percent (10%) to the fantasy sports fund established by T.C.A. § 47-18-5607. Remaining collections are allocated to the Department of Revenue for administration of the tax.

Effective: July 1, 2016 for taxing provisions

Tax on Barrels of Beer and Bottles of Soft Drinks

Public Chapter 704 extends until July 1, 2022, the temporary "litter" tax on bottles of soft drinks and barrels of beer to fund programs for the prevention and collection of litter.

Effective: June 1, 2016.

Privilege Tax

Study of the Professional Privilege Tax

Public Chapter 1024 directs the Tennessee Advisory Commission on Intergovernmental Relations (TACIR) to conduct a study of the professional privilege tax and to report this study to the Speakers of the Senate and House of Representatives, and the Chairs of the Finance, Ways and Means Committees of both houses by January 1, 2017. The study will examine: (1) The history of the professional privilege tax in this state; (2) the intent of the professional privilege tax; (3) other states' laws imposing a professional privilege tax or similar tax; and (4) alternatives for eliminating or phasing out the professional privilege tax.

Effective: April 28, 2016

Notification of Privilege Tax Due

Public Chapter 1010 requires the Department of Revenue to notify taxpayers by mail or e-mail of the amount of professional privilege tax owed, the due date and any electronic filing or payment requirements. This notification must be made on or before May 1 of each year.

Effective: July 1, 2016

Sales and Use Tax

Retail Accountability Improvement Act

Public Chapter 907 codifies a number of administrative improvements made to the Department of Revenue's Retail Accountability Program. It restricts the types of product sales that wholesalers must report to beer, tobacco, candy, nonalcoholic beverages and certain non-perishable food items, and it provides that sales may be reported by the wholesaler quarterly. In addition, all non-beer and non-tobacco products may be reported as a single product type (one category).

The public chapter exempts wholesalers making less than $500,000 in sales of candy, food and nonalcoholic beverages during the prior calendar year from reporting these sales to the Department. In addition, wholesalers making sales of candy, food and nonalcoholic beverages to an affiliate(s) are also exempt from reporting these sales. It clarifies that electronic information reports will not be required from wholesalers who do not keep records electronically in the ordinary course of business.

Finally, the legislation establishes that an initial inquiry letter will be issued to retailers prior to the issuance of a proposed and/or final assessment.

Effective: April 27, 2016; reporting requirements for candy, food, and nonalcoholic beverages will sunset on July 1, 2019.

Taxation of Compressed Natural Gas

Public Chapter 1070 exempts compressed natural gas from sales tax in the same manner that present law exempts motor fuel and liquefied natural gas from sales tax.

Effective: July 1, 2016

Sales Tax Holiday Date

Public Chapter 1048 changes the date for the annual sales tax holiday from the weekend of the first Friday in August to weekend of the last Friday in July of each year.

Effective: April 28, 2016

Qualified Data Center Requirements

Public Chapter 1001 decreases the capital investment and job creation requirements for a "qualified data center" from $250,000,000 to $100,000,000 and 25 to 15, respectively. The bill also exempts from sales and use tax cooling equipment or backup power infrastructure when sold to or used by a qualified data center.

The public chapter also provides that in order to qualify for franchise, excise job tax credits, the qualified data center must certify on its business plan that it has not, in the last 12 months, been in violation of the WARN Act, FLSA or federal immigration law.

Effective: Applies to tax years ending on or after July 1, 2016

Collection of 911 Surcharges

Public Chapter 1047 provides that all 911 surcharges collected by dealers of communications services must be remitted to the Department of Revenue, instead of the Tennessee Emergency Communications Board, for tax periods beginning July 1, 2017. The Department will establish registration and payment procedures for these dealers, which coincide with the registration and payment procedures that apply under the Retailers' Sales Tax Act. Dealers are entitled to retain an administrative fee equal to two percent (2%) of their collections.

The Department of Revenue shall pay all remitted 911 surcharges to the Tennessee Emergency Communications Board within 30 days of receipt, and it may deduct an administration fee of 1.125% of the collected charges.

Effective: July 1, 2017

Title and Registration

Disabled Driver Decals

Public Chapter 840 requires the Department of Revenue to provide a free disabled driver decal to any disabled driver who applies for and receives a registration license plate in a category identified under Tenn. Code Ann. § 55-4- 202(a). This includes all specialty and new specialty plate types.

Effective: April 19, 2016

Amateur Radio License Plate Eligibility

Public Chapter 702 expands eligibility for the issuance of an Amateur Radio license plate without the required $25additional fee to registrants who provide emergency services as part of a squad and whose qualifications are approved by a county emergency management director.

Effective: April 6, 2016

Annual Accounting of Nonprofit Organizations

Public Chapter 655 requires all nonprofit organizations that receive funds from the sale of special license plates to submit an annual accounting to the Comptroller and to be in good standing with the Secretary of State's office. The legislation provides that funds shall be withheld and a plate deemed obsolete if the nonprofit organization does not comply with these requirements.

Effective: March 29, 2016

Combat Action Plate and Decals

Public Chapter 825 creates a new specialty earmarked license plate for Combat Action. The public chapter requires each recipient of the Combat Action license plate to be issued a distinctive decal in the following design options: Combat Action Badge, Combat Action Medal, Combat Action Ribbon (Coast Guard), Combat Action Ribbon (Navy and Marine Corps), Combat Infantry Badge, and Combat Medical Badge.

The bill requires approval of the decals by the Commissioner of Veterans Services and authorizes the Department of Revenue to charge a fee for issuance of the decals in an amount sufficient to defray the administrative costs of producing the decals. The funds produced from the sale of Combat Action new specialty earmarked license plates will be allocated equally to Centerstone Military Services and SAFE: Soldiers and Families Embraced.

Effective: April 21, 2016

Certificate of Title Requirements for Motorcycles

Public Chapter 691 applies salvage, non-repairable, rebuilt and flood vehicle certificate of title requirements to motorcycles.

Effective: March 24, 2016

Definition of "Autocycle"

Public Chapter 1015 redefines "autocycle" to mean a three-wheeled motorcycle that is equipped with safety belts, steering wheel, and nonstraddle seating, and which is manufactured to comply with federal safety requirements for motorcycles.

Effective: July 1, 2016

Registration Classes for Off-Highway Vehicles

Public Chapter 790 creates a new registration class (H) for off-highway vehicles. It establishes definitions and fees for two off-highway vehicle types, Class I and Class II, and authorizes the Department of Revenue to design, issue and renew off-highway vehicle plates.

Effective: January 1, 2017

Special Purpose License Plate for Nonprofit Organizations

Public Chapter 902 authorizes a nonprofit organization to obtain a special purpose license plate, in lieu of registering the vehicle, for the following purposes: to transport the vehicle between a prior or subsequent owner and the organization; to transport the vehicle between the organization and a location where cleaning, repairing, or preparation is performed; or to test the vehicle within a 20-mile radius of the location where the cleaning, repairing, or preparation is performed. The bill imposes a fee of $47.30 for the first plate and $23.65 for each additional plate. It limits a nonprofit organization to a maximum of three plates each year.

Effective: July 1, 2016

Specialty License Plates Omnibus Bill

Public Chapter 879 authorizes the following new special license plates (subject to minimum order requirements):

  • VFW
  • Fairgrounds Nashville
  • Dollywood Foundation
  • Eastern Star
  • Pat Summitt Foundation
  • Historic Whitehaven
  • BE NICE
  • Prostate Cancer Awareness
  • Fallen Police and Firefighters
  • Justin P. Wilson Cumberland Trail State Scenic Trail State Park
  • Fallen Linemen
  • Nashville Parks Foundation
  • Tennessee School Nutrition Association
  • Down Syndrome Awareness
  • D.A.R.E.

 

The public chapter also extends the time for meeting the minimum order requirement to July 1, 2017, for the following plates:

  • Make-a-Wish Foundation
  • Tennessee Tech University
  • Historic Collierville
  • Ohio State University
  • Friends of Sycamore Shoals Historic Area, Inc.
  • Rotary International

 

This legislation also reflects a name change of the Harpeth River Watershed Association plate to the Protecting Rivers and Clean Water plate. Furthermore, it changes the name of the Vanderbilt Children's Hospital plate to the Monroe Carell Jr. Children's Hospital at Vanderbilt plate.

Effective: April 27, 2016

Vehicle Inspection Requirements

Public Chapter 1028 authorizes any county to exempt motor vehicles that are three or less model years old from motor vehicle inspection requirements. This exemption must be approved by an affirmative vote of a majority of the county's governing body. For the exemption to apply, the governing body must authorize the exemption on or before December 31, 2016, and the presiding officer of the governing body must furnish a certified copy of the approved resolution to the technical secretary of the Air Pollution Control Board on or before January 31, 2017. Additional provisions and requirements apply.

Effective: April 28, 2016

Definition of Autonomous Technology

Public Chapter 927 establishes a definition of "autonomous technology" to mean technology installed on a motor vehicle that has the capability to drive the vehicle on which the technology is installed in high or full automation mode, without any supervision by a human operator, and with specific driving mode performance by the automated driving system of all aspects of the dynamic driving task that can be managed by a human driver. This includes the ability to automatically bring the motor vehicle into a minimal risk condition in the event of a critical vehicle or system failure or other emergency event. The legislation also creates definitions of related terms to include various driving scenarios in which autonomous technology controls a vehicle.

Effective: July 1, 2016