Senate committee advances broad tax-code overhaul in House Bill 757; amendment rolled into bill

The Senate Appropriations and Revenue Committee adopted a committee amendment and rolled Senate Committee Substitute 1 into House Bill 757 after a roll-call vote Thursday, advancing a wide-ranging package of tax, fee and administrative changes. The measure passed the committee with a favorable expression: 11 ayes, no nays and one pass.

Chair McDaniel summarized the substitute and amendment on the floor, saying the package removes the 200-transaction threshold that had defined sales-and-use tax nexus, authorizes the Department of Revenue to issue refunds for estimated-tax payment mistakes without requiring a new return, updates reporting related to the Tennessee Valley Authority, and sunsets the state’s participation in tax-increment financing (TIF) programs going forward. "First of all, we remove the 200 transaction threshold to redefine sales and use tax nexus," Chair McDaniel said during his summary.

Why it matters: The substitute touches a broad array of taxes and programs that affect businesses, local governments and state revenues, including new excise taxes, adjusted tax-credit allocations, and administrative changes to auditing and fee collection. Several provisions also limit or sunset incentives and local taxing authority, which could affect municipal revenue streams and development incentives.

Key provisions and impacts: Chair McDaniel listed dozens of changes in the substitute. Among the provisions he highlighted were: creation of a fantasy-contest excise tax that disallows participants under 21 and is effective Jan. 1, 2027; application of sales and use taxes to data-brokering services and payphones; extension of a new tire-fee sunset date; allowing regional industrial taxing districts to impose an occupational license tax (with rates tied to the county of residence and city choices on which municipal rate to apply); adding fluorspar to the severance-tax base; lengthening the inheritance-tax filing deadline from 18 to 24 months and extending the early-payment discount window to 14 months; and a 14.25% excise on prediction-market operators’ transaction fees. Chair McDaniel also said the certified rehabilitation credit cap would be allocated 15% to owner-occupied residential property and 85% to other property, and the bill would define "affordable" and "workforce" housing for related credits.

Questions and clarifications: Senators sought clarifications on several items. Senator Chambers-Armstrong asked for more detail on language affecting boards of education and their taxing authority; Chair McDaniel said the bill restricts boards from implementing a new occupational tax after Jan. 1, 2027, and disallows creation of a personal-property tax by a board of education as of Jan. 1, 2027 (a correction to 2028 was noted during the exchange). Chambers-Armstrong also asked whether electric-vehicle charging stations would face a $100-per-charger annual fee regardless of whether charging is offered commercially; Chair McDaniel replied that the fee would be charged to the license holder and that funds would be used for regular inspections.

TIFs and evaluation: Senator Neal asked whether already-approved TIFs would be affected; Chair McDaniel answered that existing, approved TIFs are not affected and offered to provide an evaluation document later.

Roll-call and procedural notes: During the roll-call vote to roll the committee amendment into HB 757, Senator Chambers-Armstrong first voted aye and then asked to change her vote to a pass, explaining she had not had time to review all pages and had concerns about school-board provisions. Several senators provided brief explanations for their aye votes, citing the need to move the process forward, prior commitments on TIFs, or the bill's attention to housing and tax refinements.

Next steps: With the committee’s favorable expression, the substitute as amended advances out of the Senate Appropriations and Revenue Committee. Chair McDaniel and committee staff said they would provide additional materials requested by members (including the TIF evaluation referenced in questions). No final floor action by the full Senate is recorded in this transcript.

Quotes: "First of all, we remove the 200 transaction threshold to redefine sales and use tax nexus," Chair McDaniel said in his summary of the substitute. Senator Chambers-Armstrong said during the roll-call that she would like to "change my aye vote to a pass vote" to allow more time to review provisions affecting school boards.

Ending: The committee passed the measure with favorable expression (11 ayes, no nays, one pass) and signaled staff would supply requested background materials to members who sought further detail.