DOR explains franchise and excise (F&E) tax basics, filing deadlines and extension rules

Tennessee Department of Revenue staff briefed corporate and pass-through business owners on franchise and excise (F&E) tax fundamentals, filing schedules and extension and estimated-payment rules.

Katie Julian explained that franchise tax is now computed on net worth and excise tax on net income: "Franchise tax is computed on your your net worth. Simple as that. Your net worth," she said during the presentation. The session covered registration, filing deadlines, automatic extensions, and penalties for late filing or payment.

Why this matters: corporations and most limited liability companies that do business in Tennessee must register for F&E and file returns. The tax has different bases (franchise on net worth; excise on net income) and distinct timing and payment rules that can lead to estimated payment obligations and penalties if not followed.

Key points from the workshop

- Who must file: Corporations, most LLCs, limited partnerships, real estate investment trusts and business trusts generally must register and file F&E from the date of formation or when they begin doing business in Tennessee. Certain entities (industrial development corporations, Masonic lodges and other enumerated organizations) were listed as exempt.

- Computation and rates: Julian summarized the basic computation rules: franchise tax is 25 cents per $100 of value (computed on net worth under the post-2023 law) and excise tax is 6.5% of net income. Current-year losses may be carried forward; the session noted there is no short-period proration rule for certain short tax periods.

- Filing timeline and extensions: The regular due date is the 15th day of the fourth month after fiscal-year end (April 15 for calendar-year taxpayers). A seven-month extension may be granted if one of several payment tests is met (for example, paying 90% of the current-year liability or 100% of the prior-year liability by the original due date). If the extension conditions are met and the extension is used, only interest may be due on additional tax; if the extension is invalid or not filed, penalty and interest apply.

- Estimated payments and minimum filings: Taxpayers with a combined tax liability of $5,000 or more are required to make estimated payments on set dates during the year. Inactive entities or accounts with no income must still file a minimum $100 return until formally terminated.

Resources and compliance guidance

The Department pointed participants to the franchise and excise tax manual and a planned webinar on how to file F&E returns. Staff recommended early preparation of returns and, if needed, contacting the Department for account setup or questions about net-worth computation. The presenters also noted a formal clearance process is required when an entity seeks termination or withdrawal with the Secretary of State.