How much money will Tennessee businesses get back after the state changes how they’re taxed? The state House and Senate can’t agree.

Tennessee wants to tax businesses differently — starting as soon as possible.

Right now, franchise taxes are based on a business’ property, but bills in both the Tennessee House and Senate would change that to be based on a business’ income.

What the two chambers are not seeing eye to eye on is how much the state should give back to businesses that have been paying their taxes under the current model. The House passed their measure and sent it over to the Senate to consider on Monday.

The plans

The House’s version makes $700 million available for tax rebates going back two years. The change comes after potential lawsuits the state could face over the way the existing model has taxed businesses.

The chamber’s bill differs from the Senate version, which would give businesses $1.5 billion for rebates going back three years.

The House also has a transparency clause in its bill that would publicly name businesses that choose to accept the rebate. House Majority Leader William Lamberth, R-Portland, says transparency is necessary. 

“If we’re going to grant taxpayer dollars back to a company that’s paid in, then the taxpayers are going to know,” Lamberth said. “They’re going to know the name of the company and how much they got.”

The House version also specifies that businesses accepting the new rebate would give up the right to sue the state over the issue.

It’s unclear if the Senate will agree to the differences. So far, Senate Speaker Randy McNally, R-Oak Ridge, has said they could agree on the transparency portion, but he’s unsure about shortening the time frame for rebates.

Why do officials feel the change is needed?

Attorney General Jonathan Skrmetti has garnered questions from a large group of businesses on the legality of Tennessee’s franchise tax. Officials told Skrmetti, if sued, the state could pay out a sum much higher than the $1.5 billion that the Senate is looking to set aside.

Following that estimate, Gov. Bill Lee suggested that lawmakers set aside $1.2 billion for businesses.

Who is opposed to this?

Republicans, defending the bill, say: When businesses get a tax break, it ultimately makes it down to the citizens through lower costs in products.

More: Legal worries have Tennessee considering changes to a long-running tax on businesses

But Democrats, in debate on the bill, called the measure “trickle down economics” and said that the idea doesn’t work.

Sen. Bo Watson, R-Hixson, is reluctantly supportive.

“Nobody likes this solution,” he said. “The governor doesn’t like this solution. Revenue doesn’t like this solution. The attorney general doesn’t like this solution, but the reality is this is the best solution.”

Democrats have scoffed at the idea of giving multi-million dollar companies tax breaks, when at the same time the state refuses to give citizens tax breaks by way of a grocery sales tax.