AI-assisted research summary: The section sets a privilege tax rate of 25 cents per $100 of net worth for all taxpayers and requires most taxpayers to file on a separate-entity basis.
The privilege tax imposed on all taxpayers shall be a tax of twenty-five cents (25¢) per one hundred dollars ($100), or major fraction thereof, of a taxpayer's net worth, determined in accordance with subsection (b), at the close of the tax year covered by the required return. For purposes of this section, for taxpayer's filing on a separate entity basis, “net worth” is defined as the difference between a taxpayer's total assets less its total liabilities computed in accordance with generally accepted accounting principles. However, if the taxpayer does not maintain its books and records in accordance with generally accepted accounting principles, net worth shall be computed in accordance with the accounting method used by the taxpayer for federal tax purposes, so long as the method fairly reflects the taxpayer's net worth for purposes of the tax levied by this part. For taxpayers required by this part to file as a unitary group on a combined basis, “net worth” is defined as the difference between each unitary groups' taxpayers' total assets less its total liabilities computed in accordance with generally accepted accounting principles. For a taxpayer electing to compute its net worth on a consolidated basis, net worth is defined as the difference between the total assets less the total liabilities of the affiliated group at the close of business on the last day of the tax year, as shown by a pro forma consolidated balance sheet including all members of the group. The pro forma consolidated balance sheet shall be prepared in accordance with generally accepted accounting principles wherein transactions and holdings between members of the group and holdings in non-domestic persons have been eliminated. For a captive REIT affiliated group, “net worth” is defined as the difference between the total assets less the total liabilities of the affiliated group at the close of business on the last day of the tax year, as shown by a pro forma consolidated balance sheet including all members of the group. The pro forma consolidated balance sheet shall be prepared in accordance with generally accepted accounting principles wherein transactions and holdings between members of the group and holdings in non-domestic persons have been eliminated. For purposes of the franchise tax levied by this part, a business entity shall be classified as a corporation, partnership, or other type business entity, consistent with the way the entity is classified for federal income tax purposes, and subject to tax in accordance with this part 21. Notwithstanding any law to the contrary, entities that are disregarded for federal income tax purposes, except for limited liability companies whose single member is a corporation, shall not be disregarded for Tennessee franchise tax purposes. Except for unitary groups of financial institutions, captive REIT affiliated groups, and business entities that have been required or permitted to file franchise tax returns on a combined, consolidated or separate accounting basis under § 67-4-2112, each taxpayer shall be considered a separate and single business entity for Tennessee franchise tax purposes and shall file its Tennessee franchise tax return on a separate entity basis reflecting only its own business activities even though it may have filed a consolidated federal income tax return with other members of its unitary group.