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House set to take on $1.6B franchise tax refund, $400M repeal

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(The Center Square) – Discussions on a nearly $1.6 billion franchise tax refund and $400 million annual franchise tax cut are set to begin in Tennessee’s House of Representatives on Wednesday.

Bill sponsors have termed the $1.55 billion franchise tax refund fund as necessary for the state to avoid litigation. But the Lee administration proposal has not included which businesses will get those refunds nor if threats of litigation have been received.

House Bill 1893 is similar to the bill that passed the Senate last week but would require the businesses that receive a refund to have their name published on the Tennessee Department of Economic and Community Development website.

Sen. Jeff Yarbro, R-Nashville, pointed out during Senate discussions that there is not court precedent showing states having to pay back prior taxes if a law is deemed unconstitutional.

Bill Bradley, former administration director of Tennessee Division of Budget, Department of Finance and Administration, this week has questioned if the refund itself is unconstitutional. His opinion was in a guest column published by The Tennessean.

“If these are refunds that are not owed and the state is appropriating funds for reimbursement anyhow, then the appropriation is for private benefit, which is unconstitutional,” Bradley wrote.

House discussion will begin in the Finance, Ways and Means Subcommittee.

The bill’s fiscal note says it will result in nearly $400 million less in tax collections next fiscal year before it becomes $405 million annually thereafter.

Gov. Bill Lee’s budget proposal included $1.2 billion for the fund and $410 million in decreased annual state tax collections.

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