Taxes, Exemption and Credits

Plain English Breakdown

The bill summary does not provide specific details on how many charities will be approved or what impact this tax credit will have on state revenue, leaving these points uncertain.

Tax Credit for Business Donations to Charities

This bill allows businesses in Tennessee to get a tax credit of up to $5,000 per year when they donate money to certain charities.

What This Bill Does

• Businesses can receive a tax credit equal to half the amount they give to approved charities, but not more than $5,000 each year.
• Charities must be approved by the governor's office and meet specific criteria like serving mostly Tennessee residents.
• The bill sets limits on how much money businesses can donate to one charity or total number of charities.
• Businesses need to apply for the tax credit with the state revenue department, providing details about their donations.

Who It Names or Affects

• Tennessee businesses that pay excise or franchise taxes
• Charities approved by the governor's office

Terms To Know

Qualified Business

A business in Tennessee that pays certain state taxes and is approved for this tax credit.

Eligible Charitable Organization

A charity that meets specific requirements set by the governor's office to receive donations from businesses.

Limits and Unknowns

• The bill only applies for five years, starting in 2027.
• It is not clear how many charities will be approved or what impact this tax credit will have on state revenue.

Official Summary Text

For tax years beginning on or after January 1, 2027, but prior to January 1, 2032, this bill provides that there is allowed a credit of 50% of a monetary contribution made by a qualified business to an eligible charitable organization against the taxes i
mposed pursuant to the Excise Tax Law of 1999 and the Franchise Tax Law of 1999 in the tax year in which the contribution is made. However, such credit must not exceed $5,000 per qualified business for each contribution made to an eligible charitable org
an
ization in a tax year.

"QUALIFIED BUSINESS" AND "ELIGIBLE CHARITABLE ORGANIZATION" DEFINED

As used in this bill, a "qualified business" means a taxpayer subject to tax under the Excise Tax Law of 1999 and the Franchise Tax Law of 1999, including a C corporation, S corporation, limited liability company, or limited liability partnership, that i
s approved by the department of revenue for the tax credit in this bill.

As used in this bill, an "eligible charitable organization" means an organization that is approved by the governor's office of faith-based and community initiatives ("office") as meeting the eligibility criteria established in this bill, and that meet al
l of the following criteria:



Is exempt from federal income taxation.


Is a nonprofit organization.


Has residents of this state comprising at least 50% of the organization's beneficiaries, clients, or users.


Has residents of a tier 3 or tier 4 enhancement county, as defined in the Franchise Tax Law of 1999, comprising at least 25% of the organization's beneficiaries, clients, or users.

LIMITATIONS ON CONTRIBUTIONS

For credits allocated during a tax year from contributions to eligible charitable organizations, this bill provides that no more than 20% of the credits may be allocated for contributions to a single eligible charitable organization, and no more than 10
eligible charitable organizations may be approved by the office.

APPLICATION TO OFFICE

In order to be approved as an eligible charitable organization, this bill requires the organization to submit an application to the office that describes its specific projects and how the contributions made to the organization are to be used for each pro
ject, and that demonstrates that the organization's projects expand this state's values of volunteerism and human flourishing, as determined by the office. The application must be accompanied by a written certification, signed by an officer of the organi
za
tion under penalty of perjury, confirming the organization's eligibility under this bill.

This bill requires the office to review each submitted application to determine whether the organization meets all the criteria to be considered an eligible charitable organization and to notify the organization of its determination. The organization mus
t notify the office within 60 days of any changes that may adversely affect the organization's eligibility status. An organization approved by the office in a tax year must reapply to be approved in a subsequent tax year, and must not be approved for mor
e
than three consecutive tax years.

APPLICATION TO COMMISSIONER OF REVENUE

To claim a credit, this bill requires the taxpayer to file an application with the commissioner of revenue ("commissioner"). The taxpayer must provide the name of the eligible charitable organization receiving funds from the taxpayer and the amount of t
he contribution. In the application, the taxpayer must certify to the department of revenue ("department") the dollar amount of the contributions made to the eligible charitable organization during the tax year and provide evidence of the contributions a
s
required by the department.

AUDITS AND ADDITIONAL FILINGS

This bill authorizes the commissioner to conduct audits or require the filing of additional information necessary to substantiate or adjust the amount of the credit allowed by this section and to determine that the taxpayer has complied with all statutor
y requirements for the credit.

NOTICE TO TAXPAYER

This bill requires the commissioner to review the documentation submitted by the taxpayer and to notify the taxpayer of the approved credit.

UNUSED CREDITS CARRIED FORWARD

This bill authorizes unused credit to be carried forward in any tax period until the credit is taken. However, the credit must not be carried forward for more than 25 years.

ONE-TIME REPORT

On or before January 1, 2027, this bill requires the department to submit a one-time report to the finance, ways and means committee of the senate and the committee of the house of representatives having jurisdiction over finance matters, setting forth t
he clear, relevant, and ascertainable metrics and data requirements that the department will track under this bill in order to allow the general assembly to measure the effectiveness of the tax expenditure.

RULEMAKING

This bill authorizes the commissioner to promulgate rules to effectuate this bill.

Current Bill Text

SENATE BILL 1596
By Haile

HOUSE BILL 1494
By Slater
HB1494
008805
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 4;
Title 56 and Title 67, Chapter 4, relative to tax
credits.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 67, Chapter 4, Part 20, is amended by
adding the following as a new section:
67-4-2024.
(a) As used in this section:
(1) "Eligible charitable organization" means an organization that is
approved by the office as meeting the eligibility criteria established in subsection
(e), and that:
(A) Is exempt from federal income taxation under § 501(c)(3) of
the Internal Revenue Code (26 U.S.C. § 501(c)(3));
(B) Is a nonprofit organization formed under title 48;
(C) Has residents of this state comprising at least fifty percent
(50%) of the organization's beneficiaries, clients, or users; and
(D) Has residents of a tier 3 or tier 4 enhancement county, as
defined in § 67-4-2109(a)(2)(C), comprising at least twenty-five percent
(25%) of the organization's beneficiaries, clients, or users;
(2) "Office" means the governor's office of faith-based and community
initiatives established pursuant to title 4, chapter 32; and
(3) "Qualified business" means a taxpayer subject to tax under this part
and part 21 of this chapter, including a C corporation, S corporation, limited

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liability company, or limited liability partnership, that is approved by the
department for the tax credit in this section.
(b) For tax years beginning on or after January 1, 2027, but prior to January 1,
2032, there is allowed a credit of fifty percent (50%) of a monetary contribution made by
a qualified business to an eligible charitable organization against the taxes imposed
pursuant to this part and part 21 of this chapter in the tax year in which the contribution
is made.
(c) The credit allowed under subsection (b) must not exceed five thousand
dollars ($5,000) per qualified business for each contribution made to an eligible
charitable organization in a tax year.
(d) For credits allocated during a tax year from contributions to eligible charitable
organizations, no more than twenty percent (20%) of the credits may be allocated for
contributions to a single eligible charitable organization, and no more than ten (10)
eligible charitable organizations may be approved by the office.
(e) To be approved as an eligible charitable organization, the organization must
submit an application to the office that describes its specific projects and how the
contributions made to the organization are to be used for each project, and that
demonstrates that the organization's projects expand this state's values of volunteerism
and human flourishing, as determined by the office. The application must be
accompanied by a written certification, signed by an officer of the organization under
penalty of perjury, confirming the organization's eligibility under the criteria established in
subdivisions (a)(1)(A)-(D) and this subsection (e).
(f) The office shall review each application submitted by an organization
pursuant to subsection (e) and determine whether the organization meets all the criteria
to be considered an eligible charitable organization and notify the organization of its

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determination. The organization shall notify the office within sixty (60) days of any
changes that may adversely affect the organization's eligibility status. An organization
approved by the office in a tax year must reapply to be approved in a subsequent tax
year, and must not be approved for more than three (3) consecutive tax years.
(g) To claim a credit, the taxpayer shall file an application with the commissioner
on a form prescribed by the commissioner. The taxpayer shall provide the name of the
eligible charitable organization receiving funds from the taxpayer and the amount of the
contribution. In the application, the taxpayer shall certify to the department the dollar
amount of the contributions made to the eligible charitable organization during the tax
year and provide evidence of the contributions as required by the department.
(h) The commissioner may conduct audits or require the filing of additional
information necessary to substantiate or adjust the amount of the credit allowed by this
section and to determine that the taxpayer has complied with all statutory requirements
for the credit.
(i) The commissioner shall review the documentation submitted by the taxpayer
and notify the taxpayer of the approved credit.
(j) Unused credit may be carried forward in any tax period until the credit is
taken; provided, however, that the credit must not be carried forward for more than
twenty-five (25) years.
(k) The commissioner is authorized to promulgate rules to effectuate the
purposes of this section. The rules must be promulgated in accordance with the Uniform
Administrative Procedures Act, compiled in title 4, chapter 5.
(l) On or before January 1, 2027, the department shall submit a one-time report
to the finance, ways and means committee of the senate and the committee of the
house of representatives having jurisdiction over finance matters, setting forth the clear,

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relevant, and ascertainable metrics and data requirements that the department will track
under this section in order to allow the general assembly to measure the effectiveness of
the tax expenditure allowed in this section.
SECTION 2. For purposes of promulgating forms, this act takes effect upon becoming a
law, the public welfare requiring it. For all other purposes, this act takes effect July 1, 2026, the
public welfare requiring it.