Revenue subcommittee issues negative recommendations on most tax bills; extends RAP program

The Tennessee Senate Revenue Subcommittee met for its final session and issued negative recommendations on most bills it considered while sending several measures to full Finance, Ways and Means. One notable exception: Leader Johnson’s bill to remove the sunset on the Tennessee Retail Accountability Program (RAP) received a positive recommendation from the subcommittee.

The subcommittee discussed a range of tax items, from a proposal to allow industrial machinery tax credits to be transferable (Senate Bill 430) to multiple proposals to remove sales tax from groceries, diapers and other personal-care items. Discussion on some bills included policy detail and fiscal notes; most measures, however, were referred out to Finance or received a negative recommendation from the subcommittee.

Why it matters: The panel’s recommendations shape which measures proceed to fuller committee review and help set the state’s tax priorities. Several proposals would change who pays which taxes (corporations, retailers, or families), and the fiscal notes attached to many bills—ranging into the hundreds of millions—were a recurring reason members recommended against further advancement.

Key outcomes and highlights

- Senate Bill 430 (industrial machinery tax credit transferability): Sponsor Senator Raves explained that the amendment on the bill would make industrial machinery tax credits transferable so companies that cannot use their credits could sell them to others. “According to the Department of Revenues, tax credits are utilized around 50% at best,” Senator Raves said, and the transferability is intended to “optimize the monetization of credits.” The subcommittee voted 5–0 for a negative recommendation on the bill as amended.

- Senate Bill 1293 (remove sunset on the Tennessee Retail Accountability Program, “RAP”): Leader Johnson told the committee that the RAP program has “significantly enhanced compliance, ensuring collection of an additional $336,000,000 in revenue since inception.” The subcommittee gave SB 1293 a positive recommendation (5–0).

- Grocery tax proposals (multiple bills, including Senate Bill 1367 and Senate Bill 2): Several bills proposing to remove the state sales tax on groceries were discussed. Chairman Watson’s bill (SB 1367) and Senator Oliver’s comprehensive grocery tax bill (SB 2, which the sponsor said would pair grocery-tax repeal with corporate tax changes) each faced fiscal notes above $800 million. Both measures received a negative recommendation; votes on the grocery-tax items were 4–1 in favor of negative recommendation, with Senator Yarbrough the recorded no vote on both.

- Consumer product tax proposals: Measures to exempt menstrual hygiene products (SB 1205), breast pumps and related supplies (SB 117 amendment), and infant diapers/wipes/formula (SB 872) were debated. Each of these bills carried fiscal notes. SB 1205 and SB 872 were given negative recommendations (4–1). Senator Hale’s bill (SB 117 as amended) to exempt breast pumps and certain supplies passed amendment consideration but ultimately was sent out with a negative recommendation on a 5–0 vote.

- Timeshare taxation (SB 526): An amendment would clarify that timeshare property interests be taxed as residential rather than commercial property, intended to overturn a court case. After amendment and discussion about fiscal impacts (notably revenue loss for Davidson and a projected gain to Sevier County once recent state budget actions are considered), the subcommittee issued a negative recommendation (5–0).

Other committee business

- The clerk announced multiple bills were referred out to Finance or given negative recommendations without floor debate at this meeting; those included: SB 1164 (negative recommendation), SB 1328 (negative recommendation), SB 405 (negative recommendation), SB 496 (negative recommendation), SB 1081 (negative recommendation), SB 1295 (negative recommendation). The clerk also noted SB 1091 had been sent to a general subcommittee and SB 397 was taken off notice.

Votes at a glance (motion outcome, tally)

- SB 430 (industrial machinery credit transferability) — negative recommendation — 5 ayes, 0 no (Senator Hale, Senator Powers, Senator Wally, Senator Arbro, Chairman Hensley recorded as aye) - SB 294 (vehicle tax exemption for qualifying guard members) — negative recommendation — 5 ayes, 0 no - SB 526 (timeshare property tax clarification) — negative recommendation — 5 ayes, 0 no - SB 1293 (remove sunset on RAP program) — positive recommendation — 5 ayes, 0 no - SB 1367 (remove grocery tax — Chairman Watson) — negative recommendation — 4 ayes, 1 no (Yarbrough no) - SB 1205 (remove sales tax on menstrual hygiene products) — negative recommendation — 4 ayes, 1 no (Yarbrough no) - SB 2 (comprehensive grocery tax repeal, Senator Oliver) — negative recommendation (sent to full finance for amendment opportunities) — 4 ayes, 1 no (Yarbrough no) - SB 177 (restore portion of shared sales tax to municipalities, Chairman Briggs) — negative recommendation — 3 ayes, 2 noes - SB 117 (exempt breast pumps/related supplies as amended, Senator Hale) — negative recommendation — 5 ayes, 0 no - SB 872 (exempt diapers/wipes/formula for infants) — negative recommendation — 4 ayes, 1 no - Administrative/clerical announcements: SB 1164, SB 1328, SB 405, SB 496, SB 1081, SB 1295 — negative recommendations (announced); SB 1091 referred to general subcommittee; SB 397 taken off notice.

What members emphasized

Sponsors repeatedly cited fiscal notes and distributional effects as central considerations. Sponsor statements and budget estimates were used by members to justify recommendations, and some sponsors said they would pursue refinements in committee or on the Finance calendar. Leader Johnson said RAP has produced measurable revenue gains and fairness for compliant retailers; Senator Raves framed transferability of industrial credits as a way to help large employers that cannot fully use earned credits and to make the credit more attractive to prospective employers.

Next steps

Bills that received positive or negative recommendations will proceed to the next step identified by the clerk: either the full Finance, Ways and Means Committee or further subcommittee work. Sponsors signaled intent in some cases to refine language or move amendments on the Finance calendar.