Category Archives: Taxes

Nashville, Chattanooga companies lead in TN corporate welfare

Companies bases in Nashville and Chattanooga are leading beneficiaries of “taxpayer handouts to big businesses in Tennessee,” according to Beacon Center of Tennessee statewide listing of incentives and tax breaks.

The new Beacon website, Endcorporatehandouts.com, “is the start of a large public awareness effort on corporate favoritism the Beacon Center will run over the next couple of years,” says a news release.

Further: “The website features an interactive map that tracks which businesses received handouts from the state and local governments. Nashville, Chattanooga, Clarksville, Memphis, and Charleston round out the top five areas for private businesses receiving taxpayer money. The site also features a brand new video on corporate favoritism and a ticker with the Tennessee businesses that have received the most taxpayer money over the past decade.

“…”This is a really exciting start in our effort to educate the public on the unfair and unethical practice of giving the tax dollars of hard-working Tennesseans to multi-million dollar corporations. Ending corporate handouts is an issue that those on both sides of the aisle can come together to support. This isn’t an issue of right and left, it’s an issue of right and wrong.”

The site says $3 billion in “corporate welfare” has been provided to 470 companies since 2005, about 3 percent of the state’s 170,000 companies.

The Commercial Appeal has story on the report. An excerpt: Continue reading

Memphis refunds $2.38M in ‘jock tax’ collections

As the clock runs out this week on Tennessee’s infamous “jock tax,” the city of Memphis is about to turn over $2.38 million to more than 900 professional basketball players as part of a 2015 settlement, according to the Commercial Appeal.

The city will return its portion of the money — a third of the $7.27 million it’s collected since Tennessee’s professional privilege tax was approved in 2009 — within the next three or four weeks, said Brian Collins, the city’s chief financial officer.

“(The money) was reserved a long time ago, and it won’t have an impact on the city’s budget this year or any year,” Collins said. The city set the funds aside in fiscal year 2015.

The flat tax of $2,500 per game up to $7,500 for NBA and NHL players was widely criticized for eating up most — and in some cases all — of the income lower-paid athletes received from basketball games in Memphis and hockey games in Nashville.

Gary Kohlman, general counsel for the National Basketball Players Association (NBPA), which sued the state over the tax, said “dozens” of players earning the legal minimum paid more in the tax than they earned from the games.

“That was not an isolated event,” he said.

A spokesman for the National Hockey League Players’ Association (NHLPA), which also sued the state, said its players lost money playing against the Nashville Predators too.

Kohlman said some NBA players were also charged the tax just because they were on the team’s roster — even if they didn’t play.

The Tennessee General Assembly voted in 2014 to repeal the tax, effective immediately for hockey players and June 1, 2016, for basketball players.

Legislature votes to repeal Hall tax on investment income

The House and Senate voted Friday to repeal the state’s Hall tax on investment income, now at 6 percent, over a period the next six years at the rate of 1 percent per year.

From Richard Locker’s report:

Gov. Bill Haslam said later he would have preferred a bill with just a one-time tax cut, from the current 6 percent to 5 percent, leaving any additional cuts to future legislatures depending on the state’s fiscal condition at the time. But he stopped short of saying whether he will sign it into law or veto it.

“I would have been much more comfortable with having something that just did it this year, where we know what the state’s fiscal situation is every time we make that decision. But the General Assembly felt like it was good to put in a point certain (to totally repeal the tax) by 2022,” the governor said during a post-session news conference with legislative leaders.

“Like everything else, we will take it and study it and over the course of time will come back with a response,” he said.

…If Haslam approves the Hall tax bill, the tax rate drops from 6 to 5 percent effective with tax year 2016 on tax returns due by April 15, 2017. It also declares that “the legislative intent” is for the tax be reduced by 1 percentage point annually starting next year. The tax would be eliminated starting with tax year 2022.

The state Department of Revenue says 204,944 taxpayers filed Hall income tax returns for tax year 2014. (Returns for 2015 were due Monday and have not been fully compiled.) The average liability per 2014 return was $1,446. “However, it’s worth noting that the median liability per return was $266, which means that half of the returns filed had a liability of $266 or less,” said Revenue Department spokeswoman Kelly Nolan Cortesi.

Taxpayers 65 and older are exempt from the Hall tax if their total income from all sources is $68,000 or less for joint filers and $37,000 or less for single filers. In addition, the first $1,250 in taxable dividend and interest earnings for all single filers and the first $2,500 for all joint filers is tax-exempt.

The tax isn’t levied on interest earnned on savings accounts, certificates of deposit, government bonds, credit unions, bank money-market accounts and dividends from bank stock, insurance companies, credit unions and other sources.

The Hall tax, enacted in 1929, generated total revenue of $303.4 million in fiscal year 2014-15 — $197.9 million to the state and $105.5 to cities and counties. Under the law, 62.5 percent of its revenue is retained by the state and 37.5 percent is sent to the municipality where the taxpayer resides — or to the county if the taxpayer lives in an unincorporated area.

Cities and counties that receive the most money opposed the absence of a provision for replacing the lost tax revenue.

Memphis received $14.8 million in Hall tax revenue in fiscal year 2015, Nashville $14.6 million, Knoxville $10 million, Knox County $3.3 million, Germantown $3.1 million, Belle Meade $2.1 million, Shelby County $1.5 million, Collierville $1.2 million and Williamson County $1.2 million, according to the Revenue Department.

Governor favors letting local governments tax gas

NASHVILLE, Tenn. (AP) — Republican Gov. Bill Haslam said Monday that he supports giving cities and counties the power to levy their own gas taxes to help pay for transportation needs.

The governor has been making his case for increasing the state’s gas tax for the first time since 1989 as a way to help cover a $6 billion backlog in transportation project funding.

“Roads cost three times as much to build as the last time we passed a road plan, and yet your car gets twice as good mileage as it used to,” Haslam said. “That won’t work.”

But lawmakers have been reluctant to take up the measure in an election year, and the governor has acknowledged that a gas tax is unlikely to be considered this year.

Given that impasse, Haslam was asked at a Tennessee Municipal League conference whether he would support allowing local governments to raise their own transportation money from a gas tax increase.

“Would I be in favor of some sort of local option? I would,” Haslam said. “You all realize the danger in that is that if you’re at X-cents per gallon, and the next county and next municipality is not, then it’s easy to chase business away.

“But that’s the stuff that I figure locals know,” he said. “They have the ability to weigh the impact on themselves.”

Criticism of proposed ban on tax funding for bike, walking trails

Proposed state legislation to block the state and local governments from using fuel tax money for bicycle and pedestrian projects drew criticism as at a legislative briefing sponsored by the Knoxville Chamber, reports Georgiana Vines.

A leading critic of the proposal (HB1650) was Knoxville City Councilman Marshall Stair.

“I am disappointed to learn some members of the Legislature are looking to cut funding for bike lanes and sidewalks rather than developing a long-term solution to address all transportation needs. Biking and walking are effective tools for reducing obesity, decreasing traffic and recruiting businesses. The state should be promoting and encouraging alternative transportation, unfortunately this bill takes us in the wrong direction,” he said in a statement issued immediately afterward.

Susan Richardson Williams, panel moderator, said she didn’t think the bill was a good idea at a time when bike and pedestrian trails are being planned in parks. If a tax isn’t used to fund them, how should they be funded, she asked.

Turns out Knoxville Mayor Madeline Rogero is aware of the bill, and she and the other Big Four mayors strongly oppose it, city spokesman Eric Vreeland said later. Rogero has discussed the bill with the governor, state legislative leaders and members of the Knox County delegation, he said.

The city has a bicycle facilities plan that provides a blueprint for developing a system of connected bike corridors. It features 100 prioritized, recommended projects totaling more than $35 million, with most being locally funded. The current city budget allocates $1 million for bicycle infrastructure.

…At Friday’s meeting, state Rep. Jimmy Matlock, R-Lenoir City, who chairs the House Transportation Committee, said the “push back” on state funds for bike corridors came from Chattanooga representatives.

“It will be highly debated,” he said.

Rep. Eddie Smith, R-Knoxville, also on the transportation committee, said the issue is a lack of revenue being generated by bicyclists or bike trails. Maybe a wheel tax could be instituted, he said. Smith said he’s opposed to taking away state money for bike trails.

Note: The bill, sponsored by Rep. Mike Carter and Sen. Todd Gardenhire, is on notice for its first vote Wednesday in the House Transportation Subcommittee.

Bills would boost road fund via tire sales, electric cars

While Gov. Bill Haslam continues to mull over the possibility of pushing for a gas tax increase in 2016, legislators have recently filed two bills that would add new money to the state’s highway construction and maintenance fund.

State Sen. Mark Green, R-Clarksville, proposes in SB1451 raising to $150 to the state’s registration fee for electric cars and to $75 the fee for hybrid cars.

Electric vehicles now avoid the state’s 21-cents-per-gallon gas tax entirely while hybrid vehicles use a mix of gas and electricity, reducing the amount of fuel tax paid, but not eliminating it. The state Department of Transportation estimates the average Tennessee vehicle operator pays about $300 per year in fuel taxes (state and federal combined) at current rates.

State Rep. Mark Pody, R-Lebanon, proposes in HB1445 to divert the state’s 7 percent sales tax revenue collected from the sale of tires into the highway fund. That money now goes into the state’s general fund. Legislative staff have not yet prepared a fiscal note estimating how much money would be transferred, and a spokeswoman for the state Department of Revenue said the department currently has no breakdown on statewide tire sales to provide an estimate.
Continue reading

Battle lines form in city-county dispute over tax revenue

Chattanooga Mayor Andy Berke told state legislators that he doesn’t like a proposal, pushed by Hamilton County Mayor Jim Coppinger, to change the way sales tax revenue is distributed to local governments, reports the Times-Free Press.

Currently, some of the money raised from the sales tax goes back to all of the cities in the state, based on their population. Coppinger has proposed changing that to include people who live outside incorporated areas, as well, by counting them as though they were in a city and giving that share of the sales tax revenues to the county to spend.

That could cost the city as much as $5.4 million, Berke said, in an interview after the luncheon. He warned that smaller towns, which don’t have much budget flexibility, could be crippled by the possible budget shortfalls.

Berke said most of the sales tax in the metro area is collected in its largest cities, and those cities have big infrastructure needs — roads, bridges, sewer systems, police and fire departments, e.g. — that support the businesses that generate the tax revenues.

… Interviewed after the luncheon, (Sen. Todd) Gardenhire said he believed some form of Coppinger’s sales tax legislation would pass the General Assembly, but would probably guarantee cities their current level of revenues and add a share of any increased revenues to county coffers based on their unincorporated population.

Gardenhire also indicated that Gov. Bill Haslam may be getting some traction on his push to raise the state’s gasoline tax to pay for road and bridge improvements. At least 44 bridges need replacement or repair in his district alone, Gardenhire said, and he estimated that it would take $500 million to $750 million to pay for all of the needed road and bridge work in the Chattanooga metro area. He conceded that many lawmakers had taken a “no tax increase” pledge, but indicated that he felt this might be the proper time to raise the gasoline tax given that gas prices are at historic lows.

Armstrong case: Lawyers argue over ‘vitriolic’ political climate

In the lawyer maneuvering prior to Rep. Joe Armstrong’s February trial on tax fraud charges, the News Sentinel reports his attorney has filed motions seeking to block testimony on the lawmaker’s role in the General Assembly approval of a 2007 cigarette tax increase.

In response, prosecutors contend that Armstrong, D-Knoxville, sought to deceive voters, not just the IRS, when he plotted with an accountant to hide his profiteering from a tax stamp price hike. That goes to motive, they say, and thus should be part of the trial.

Defense attorney Gregory Isaacs maintains that Armstrong committed no crime in pushing through a tax stamp hike from which he planned to personally profit and insists prosecutors should focus their case before the jury solely on the tax evasion allegations. The prosecutors are Charles Atchley and Frank Dale.

“(Armstrong’s) desire to suppress any discussion of his ethics violations is unsurprising,” the pair of prosecutors wrote. “He has served as state representative since being elected to the 96th Tennessee General Assembly. The public revelation that (Armstrong) abused his position of public trust, through his direct involvement in the enactment of a tax increase that would benefit him financially, is presumably a source of embarrassment to the defendant. For that same reason, however, it is extraordinarily relevant: It establishes a clear motive for the defendant’s offenses.”

Armstrong lobbied fellow legislators in 2007 to pass a hike in the cigarette tax stamp price from 20 cents to 42 cents while cutting a deal with Cox to buy 42 rolls of stamps at the 2006 price. When the hike passed, Tru Wholesale co-owner Roger Cox’s firm sold the stamps, bought at the lower price, for the new price, netting all involved in the deal a profit. There was nothing illegal about the transaction itself. Armstrong’s alleged crime was in hiding the profit from the IRS.

…Isaacs argues jurors will be unfairly prejudiced against Armstrong if prosecutors depict him as a political opportunist, rather than a mere tax evader, because the public is fed up with elected leaders who put their own interests above those of the citizens they deserve.

But Atchley and Dale contend Armstrong was very much aware of such voter sentiment when he allegedly plotted with Kentucky accountant Charles Marshall Stivers to conceal his tax stamp profits from the IRS.

“No state representative who wished to preserve the trust of his peers and constituents would want this type of conduct to come to light, particularly in a ‘political climate’ that has led to an ‘attitude toward elected officials’ that (Isaacs) describes (in his motion) as ‘both volatile and vitriolic,’ ” the prosecutors wrote. “In that regard, the defendant’s observations buttress the probative nature of the evidence he wishes to keep the jury from hearing.”

Transfer of Morgan County land to TWRA protested

Morgan County Executive Don Edwards is opposing the planned transfer of 1,753 acres of land adjoining Catoosa Wildlife Management area from private ownership to the Tennessee Wildlife Resources
Agency, complaining the rural county already has too much tax-exempt property, reports the News Sentinel.

More than one of every five acres in Morgan County is already controlled by entities that don’t pay property taxes and it’s time to draw the line, he said. But the State Building Commission has already approved the transfer – a further irritation to Edwards.

“When the state is going to take land off the tax rolls, you’d think they’d notify county officials,” he said. “I would have been there, objecting to the deal.”

Two tracts of property owned by Betty Jane McCartt and Gener M. McCartt, on the property assessor’s books at a value totaling more than $3.2 million, are sought by TWRA.

The property is next to Catoosa and the Lone Mountain State Forest, and TWRA told the Building Commission the land purchase “will allow for conservation of wildlife and other recreation for the public.”

Edwards has a starkly different view. “There’s really no good reason why they (TWRA) wants it other than it’s next to their property and they can add to their dynastic holdings in Morgan County.”

“They want all the property they can get their hands on,” he said.
Morgan County “is a very rural county which lacks economic opportunity for its citizens,” Edwards wrote in a letter to Gov. Bill Haslam protesting the intended purchase. He said the land purchase by the state would “take another $7,000 away in property tax revenues from Morgan County tax payers which they will have to make up with an increase in their property tax rate.”

TWRA Executive Director Ed Carter last month responded to Edwards’ concerns and his letter to the governor, saying in a letter to the county executive that the McCartts “have indicated a clear desire to proceed with selling their property to the state.”

Carter’s missive states that the “McCartt family tried to sell their land on the open market for several years to no avail.”… The planned sale, at 75 percent of the land’s fair market value, “will alleviate their (the McCartts’) growing inheritance tax burden,” Carter wrote. He said TWRA can buy the property “entirely with federal Wildlife Restoration dollars.”

Tax break for electric utilities faces court fight

A Tennessee law granting state rural electric cooperatives a four-year property tax break on new investments, which has gone unnoticed for decades, is now likely to to face a court battle over its constitutionality, reports the Times-Free Press.

The State Board of Equalization, which hears property tax disputes, last week ruled against recent efforts by five nonprofit electric cooperative membership corporations to use the temporary exemption.

As near as anyone can figure, the provision became part of the state law on the co-ops back in a 1945 change to a 1939 law. But co-ops say they didn’t discover its existence until recently.

The board members’ decision was based on an October legal opinion issued by Tennessee Attorney General Herbert Slatery. The state’s chief lawyer said the provision violated the state Constitution, noted Hamilton County Property Assessor Bill Bennett, vice chairman of the equalization panel.

“They can still go on ahead and appeal it,” Bennett said of the co-ops, which distribute power to many rural areas of the state.

Kelsie Jones, the state board’s executive secretary, said the panel “decided to follow the advice of its attorney [Slatery] and direct the Office of State Assessed Properties to revise those assessments to remove the effect of the four-year exemption currently presently authorized by statute.”

He said the “practical effect is the assessments will go up for those companies, subject to their further legal action.”

Mike Knotts, director of government affairs for the Tennessee Electric Cooperative Association, said the co-ops intend to go to Davidson County Chancery Court for a resolution to the issue.

“We disagree with the decision that the board made as a matter of law but are happy that there is an avenue of judicial review to look at it further,” Knotts said.

He indicated that the attorney general’s opinion is just that, an opinion.

“We contend that only the courts have the ability to interpret what is constitutional and what is not,” Knotts said. “The board decided to do something different.”