(The Center Square) – The Tennessee Senate passed a bill that would end a franchise tax on business property in the state along with refunding as much as $1.6 billion to businesses that previously paid the tax.

Senate Bill 2103 passed with a 25-6 vote in the Senate and companion House Bill 1893 is set to be heard onWednesday in the House 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 each year after.

The $1.55 billion franchise tax refund fund will only be fully used if every eligible business requests and are granted the refund.

Refund requests must be filed between May 1, 2024 and February 3, 2025, for taxes filed on or after Jan. 1, 2021, covering a tax period that ended on or after March 31, 2020.

The remaining balance of the fund reverts to Tennessee’s general fund July 1, 2025.

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

Tennessee Department of Revenue Commissioner David Gerregano previously said that Tennessee is the only state that he could find that taxes business property in the state and the fund was setup to help avoid litigation if the businesses challenged the constitutionality of the tax.

Gerregano said the current tax discourages businesses that operate in multiple states from holding property in Tennessee.