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Revenue subcommittee backs bill to decouple Tennessee excise tax from federal bonus depreciation
Summary
The Tennessee Senate Revenue Subcommittee gave Senate Bill 32 a positive recommendation to decouple state excise tax treatment of bonus depreciation from federal law, advancing the measure to the full finance committee by a 4-1 vote.
At a meeting of the Tennessee Senate Revenue Subcommittee, members voted to give Senate Bill 32 a positive recommendation to the full finance committee. The motion for a positive recommendation, made by Senator Wally and seconded by Senator Powers, passed 4–1, with Senator Yarbrough voting no.
Senate Bill 32, as explained by Chairman Bailey, would decouple Tennessee’s treatment of bonus depreciation from the federal phase-out scheduled under federal law and the Tax Cuts and Jobs Act of 2017. Bailey told the committee that the state’s earlier policy, the Tennessee Works Tax Act, aligned with the federal full-expensing rule and that the federal provision is phasing down and is scheduled to expire in 2026.
Bailey and other supporters said the amendment to SB 32 would prevent Tennessee businesses from losing the full-expensing treatment on state excise tax returns if the federal provision is not renewed. As Bailey described the bill’s intent, it would “decouple from the federal tax law to prevent another phase out of the deduction.”
Committee staff told members that “under this legislation as a result of Tennessee's current depreciation schedule in the event the federal government's depreciation rate is not set at a % the proposed legislation will have no significant impact to state excise tax revenue.” The staff also noted that the fiscal estimate shown on the dashboard applied to the unamended version of the bill and that the unamended bill’s estimate indicated more significant short-term costs.
The committee first approved an amendment (motion by Senator Hale, seconded by the chair) by voice vote. After consideration of the amended bill, the committee took the roll for a positive recommendation. The recorded votes were: Senator Hale, aye; Senator Powers, aye; Senator Wally, aye; Senator Yarbrough, no; Chairman Hensley, aye. Chairman Bailey said the bill would go to full finance with a positive recommendation.
The measure’s supporters framed the change as a competitiveness and investment incentive for Tennessee businesses; opponents raised concerns about potential revenue effects if federal action altered depreciation rules. The committee record does not specify any binding projected state revenue change under the amended bill beyond the staff statement quoted above.
The bill now moves to the full finance committee for further consideration.
