General Assembly adjourns, finalizes $2B tax cut

NASHVILLE — Tennessee’s GOPcontrolled General Assembly on Thursday adjourned for the year, concluding months of tense political infighting that doomed Republican Gov. Bill Lee’s universal school voucher push. But a bill allowing some teachers to carry firearms in public schools and one adding a nearly $2 billion tax cut and refund for businesses received last-minute approval.

For months, Lee declared enacting universal school vouchers his top priority for the legislative session. At the same time, he warned that lawmakers must pass the major tax cut and refund for businesses to prevent a potential lawsuit as critics alleged the state violated the U.S. Constitution.

The ambitious pitches were made to a legislative body still harboring deep resentments from the past year, where inaction on gun control and safety measures had left deep divides between the Senate and House. Meanwhile, the explosive attention from the expulsions of two young Black Democratic lawmakers resulted in retaliatory restrictions on how long certain House members could speak during legislative debates and limitations on seating inside the public galleries.

“This was a session of good, bad and ugly,” said Democratic Sen. Raumesh Akbari. “Unfortunately some really really bad bills ended up passing.”

While Lee was unable to find consensus on his voucher pitch — an initiative that he vowed to renew next year — he was able to secure a last-minute deal on the eye-popping $1.9 billion tax cut and refund for businesses. The amount is almost 4% of the state’s $52.8 billion budget, which largely does not contain tax breaks for most Tennesseans.

At issue are concerns that the state’s 90-year-old franchise tax violates the U.S. Constitution’s Commerce Clause, which bans states from passing laws that burden interstate commerce. The statute hasn’t been formally challenged, but late last year, a handful of companies sent a letter to lawmakers demanding the Legislature fix the law or risk a legal battle.

“Bottom line, Tennessee pays its bills,” said Republican Sen. Rusty Crowe. “The state of Tennessee wrongly took this money and we’re going to pay these companies back.”

House and Senate leaders disagreed for months over details on how to resolve the legal questions surrounding the franchise tax. On the last day of the session, both sides conceded to offer businesses to apply for retroactive refunds for the past three years in exchange for temporarily disclosing the names of businesses that sought a refund and the ranges of refund amounts — a first in Tennessee history.

Yet the names of the businesses will only be posted by the Department of Revenue publicly for 30 days in June 2025. Companies will have to apply for the refund this year.

“These transparency stipulations are a joke,” said Democratic Sen. Jeff Yarbro, arguing that more could be done to disclose exact amounts even as Republicans countered that the agreed disclosure was unprecedented.

Funding for three years of refunds is expected to cost taxpayers $1.5 billion. It will cost another $400 million annually for the ongoing franchise tax break.