Tennessee Senate Bill SB2694

Tennessee 2023-2024 Regular Session

• Introduced: 1/31/24

Caption

AN ACT to amend Tennessee Code Annotated, Title 67, Chapter 4, Part 20 and Title 67, Chapter 4, Part 21, relative to taxation of federal employee retention credits.

Impact

The passage of SB2694 reflects a proactive approach by Tennessee to align state tax regulations with federal provisions, particularly those aimed at mitigating the fiscal impacts of the COVID-19 pandemic. By retroactively allowing these expenses to be considered in net earnings or loss, the bill provides immediate relief for businesses that have been affected by the pandemic, enhancing their financial recovery efforts. The bill's retroactive application to tax returns filed on or after January 1, 2020, underscores Tennessee's commitment to supporting economic stability in the aftermath of the crisis.

Summary

Senate Bill 2694 amends the Tennessee Code Annotated to address the taxation of federal employee retention credits. Specifically, it introduces a new provision that allows for the inclusion of expenses associated with employee retention credits against federal payroll tax as allowable deductions in Tennessee's tax laws. This provision is tied to the federal CARES Act, which was designed to assist businesses in retaining employees during the economic downturn caused by the COVID-19 pandemic. The intent of the bill is to ensure that businesses can benefit from these credits without facing additional state tax burdens that could otherwise negate the federal benefits.

Contention

While the bill is primarily aimed at providing tax relief for businesses, there may be concerns regarding the overall impact on state tax revenues. Some critics may argue that the amendments could lead to reduced income for the state due to the increased allowances for deductions related to the employee retention credits. Additionally, the incorporation of federal provisions into state law can sometimes lead to complexities in compliance and administration. As such, stakeholders in the legislative process may debate the balance between providing necessary support to businesses and maintaining sufficient state revenue streams.