Covid-19 Tax Related Updates

Guidance on Tennessee Corporate Income Tax and Taxability of payments from the Tennessee Business Relief Program.

The state of Tennessee announces information regarding federal taxation of certain funding for businesses.  Payments received under the Tennessee Business Relief Program (BRP) or the Supplemental Employer Recovery Grant (SERG) Program are subject to franchise and excise tax. However, the funding from these programs is not subject to Tennessee business tax (also known as a business license), which is based on gross receipts of the business.

Tennessee established the Tennessee Business Relief Program (BRP) and the Supplemental Employer Recovery Grant  (SERG) program utilizing federal CARES Act funds.  The IRS has announced that if a state government establishes an economic relief program, such as BRP and SERG, to support businesses using CARES Act funds, the funding received by a business from such a program is included in federal taxable income.

Because the starting point for determining a Tennessee franchise and excise tax liability is federal taxable income, these payments will be subject to franchise and excise tax. These payments are not included in gross receipts for Tennessee business tax purposes and are not subject to the business tax.

For further guidance, please contact your ATA representative for more information.