UPDATE: Annual Reports and Franchise and Excise Taxes in Tennessee Affected by Covid-19
Coronavirus Update: The recent pandemic caused by the outbreak of a novel corona virus, Covid-19, has caused a significant disruption to the national economy and resulted in much uncertainty for businesses. The following bold portions of this blog have been updated according to information gathered from the Tennessee Secretary of State and Department of Revenue.
Our firm contacted the Tennessee Secretary of State, Division of Business Services to inquire whether the annual report filing deadline has been extended due to the impact of Covid-19, and, as of today, the current deadline remains. Thus, if your company’s fiscal year is based on the calendar year, your annual report is still due by April 1, 2020. Please contact us if you have questions about filing your company’s annual report.
As of today, the Tennessee Department of Revenue has not issued a notice detailing whether the deadline for paying applicable franchise and excise taxes has been extended due to the impact of Covid-19. The Department of Revenue has ceased accepting walk-in customers at its regional and downtown offices, and taxpayers are encouraged to seek assistance by phone at the Taxpayer Assistance Hotline 615-253-0600. However, consistent with the IRS’s decision to extend federal deadlines for those businesses located in a designated disaster area, the Department of Revenue has extended the franchise and excise tax and Hall income tax filing and payment deadlines to July 15, 2020. This extension applies to all taxpayers located in any disaster area designated by the Federal Emergency Management Agency (FEMA), which currently includes Davidson, Putnam, and Wilson counties. Read more on the Tennessee Department of Revenue’s Natural Disaster Tax Relief Notice here.
Tennessee requires that most companies doing business within the state file an annual report and pay applicable franchise and excise taxes. These ongoing compliance requirements must be fulfilled in order for your company to remain in good standing with the state and to avoid any penalties.
1) Annual Report
All corporations (for-profits and nonprofits) incorporated in Tennessee as well as foreign corporations doing business in Tennessee must file an annual report with the TN Secretary of State on or before the 1st day of the 4th month following the close of the corporation’s fiscal year. Corporations may choose to file their annual reports and pay the annual report filing fee online.
Annual reports keep the state updated as to information about the corporation. This includes changes in principal officers, board of directors, address, registered agent and/or office, etc. The annual report filing fee for a Tennessee corporation and non-profit corporation is $20.
Limited liability companies formed, or doing business as a foreign entity, in Tennessee are also required to file an annual report.
All domestic and foreign LLCs formed or registered in Tennessee are required to pay an annual report fee that is based on the number of members each LLC has. The minimum fee payable at the time of filing an LLC’s annual report is $300. The maximum is $3,000. The minimum $300 fee increases $50 per member for each member over six that an LLC has.
2) Franchise and Excise Taxes
If you are a corporation, limited partnership, limited liability company, or business trust chartered/organized in Tennessee or doing business in the state, then you must register for and pay franchise and excise taxes. The franchise and excise taxes are imposed on most business entities. Although nonprofits with income related to their nonprofit status are not taxed on their exempt function income, they are subject to tax on activities that are not related to the reason that they were granted nonprofit status.
Generally, any taxpayer that is liable for either excise tax or franchise tax is liable for both taxes. The law does include a number of exemptions. For example, general partnerships and sole proprietorships are not subject to these taxes.
The franchise tax is based on the greater of net worth or the book value of real or tangible personal property owned or used in Tennessee. The franchise tax is computed based on 0.25% of the greater of net worth or real and tangible property in Tennessee. The minimum franchise tax is $100. The excise tax is based on net earnings or income for the tax year. The excise tax is computed based on 6.5% of the net earnings from business done in Tennessee for the fiscal year.
Summing it up
Make sure your business does not neglect its ongoing legal requirements for the state(s) it is operating in. Compliance with these regulations keeps your business in good standing and goes a long way in keeping those pesky tax deficiency letters at bay.
Contact us today with any questions you have concerning annual reports or franchise and excise taxes!
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*The material and information in this blog is for general informational purposes only. In no way is this information to be construed as legal advice for a particular situation.*