Tennessee Credits and Incentives

As we mentioned last month, our Georgia clients frequently ask us to investigate potential credits and incentives in other states where they have operations, potential acquisitions or strong relationships with customers or vendors. In addition, private equity groups ask us about potential $$ for their portfolio companies.

We were recently asked about credits and incentives in Tennessee. I spoke with Reggie Mudd of the Tennessee Dept. of Economic and Community Development and learned some of their details (DECD site click here).

Tennessee’s main tax credits and incentives cover new capital investments, new jobs, industrial machinery, and workforce training.  Local incentives can include property tax abatement.  Incentives and credits are available to a fairly wide range of targeted industries that include manufacturing, processing, warehousing, R&D, computer services, call centers, data centers, headquarters facilities, and others.

Tennessee’s credits and incentives are not as complicated as many states and are generally straightforward. 

  • Jobs Tax Credits are blended with capital investments (usually $500,000) and are tied to threshold levels determined by a county tier system.  These credits can can offset 50%-100% of combined Franchise and Excise (F&E) taxes, depending on location and amounts, and have generous carryforwards up to 15 years.
  • Industrial Machinery Tax Credits offset up to 50% of F&E tax liability.  Also includes computers, software, and devices.  Percentages depend on amount invested.
  • Headquarters Tax Credits offer a variety of inducements for companies locating and expanding headquarters facilities.  Very large credits per job, sales and use tax credits, and relocation expense credits are available.  With prior approval, companies can even convert unused net operating losses to credits against F&E liabilities!
  • Other F&E and Sales and Use credits are available for certain very large projects.
  • FastTrack Job Training Assistance Program (FJTAP) offers comprehensive job training programs and grants (click here).
  • Local property and sales tax abatements are very generous and widely available, but negotiated locally.

Compared to Georgia, Tennessee has:

  • Different corporate taxes:  Franchise and exise taxes instead of income taxes.  No personal state income taxes.
  • broader range of companies eligible for most credits, and a narrower range for training incentives.   
  • Fairly straightforward approach when planning company qualifying activities
  • Many credits can be taken after the fact and on amended F&E returns.They don’t normally require pre-approval for the activity, just pre-approval for claiming the credits.

To summarize, Tennessee is very competitive for new and expanding businesses.  Representatives at the state and local level are eager to help — one official took my call while he was on vacation!

Do any of your clients have Tennessee connections?  If so, Tennessee economic developers will be very helpful in finding incentives.  But make sure you review your clients’ potential qualifying activities early to maximize their $$ benefits!!