(a) A taxpayer that constructs, expands, or remodels a headquarters facility in this state through a minimum capital investment of at least ten million dollars ($10,000,000) and creates at least one hundred (100) new full-time employee jobs in conjunction with the construction, expansion, or remodeling of such facility shall be eligible for a credit of all state sales or use taxes paid to the state of Tennessee, except tax at the rate of one-half percent (0.5%), on the sale or use of qualified tangible personal property that is directly related to the creation of the new full-time employee jobs.
Terms Used In Tennessee Code 67-6-224
Business: includes occasional and isolated sales or transactions of aircraft, vessels, or motor vehicles between corporations and their members or stockholders and also includes such transactions caused by the merger, consolidation, or reorganization of corporations. See Tennessee Code 67-6-102
Commissioner: means and includes the commissioner of revenue or the commissioner's duly authorized assistants. See Tennessee Code 67-6-102
Computer: means an electronic device that accepts information in digital or similar form and manipulates it for a result based on a sequence of instructions. See Tennessee Code 67-6-102
Computer software: means a set of coded instructions designed to cause a computer or automatic data processing equipment to perform a task. See Tennessee Code 67-6-102
Direct pay permit: means special written permission granted to a taxpayer by the commissioner to make all purchases free of the sales or use tax and report all sales or use tax due directly to the department. See Tennessee Code 67-6-102
full-time employee job: means a permanent, rather than seasonal or part-time employment position for at least twelve (12) consecutive months to a person for at least thirty-seven and one-half (37 ½. See Tennessee Code 67-6-102
Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
Person: includes any individual, firm, co-partnership, joint venture, association, corporation, estate, trust, business trust, receiver, syndicate, any governmental agency whose services are essentially a private commercial concern, or other group or combination acting as a unit, in the plural as well as the singular number. See Tennessee Code 67-6-102
Personal property: All property that is not real property.
Personal property: includes money, goods, chattels, things in action, and evidences of debt. See Tennessee Code 1-3-105
State: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
Statute: A law passed by a legislature.
Statute of limitations: A law that sets the time within which parties must take action to enforce their rights.
Tangible personal property: includes electricity, water, gas, steam, and prewritten computer software. See Tennessee Code 67-6-102
Use: means and includes the exercise of any right or power over tangible personal property incident to the ownership thereof, except that it does not include the sale at retail of that property in the regular course of business. See Tennessee Code 67-6-102
Use tax: includes the "use" "consumption" "distribution" and "storage" as defined in this section. See Tennessee Code 67-6-102
written: includes printing, typewriting, engraving, lithography, and any other mode of representing words and letters. See Tennessee Code 1-3-105
(b) For purposes of this section, the following definitions shall apply:
(1) “Facility” means a building or buildings, either newly constructed, expanded, or remodeled, housing headquarters staff employees and located in a county or metropolitan statistical area in this state. A facility may include parking facilities exclusively for the use of headquarters staff employees and visitors; provided, that the parking facilities are built in conjunction with the newly constructed, expanded, or remodeled building or buildings. An expansion of a headquarters facility may be connected to or separate from a headquarters facility or other facilities located in a county or metropolitan statistical area in this state. The facility must be utilized as a headquarters facility for a period of at least ten (10) years from the end of the investment period;(2) “Full-time employee job” means a permanent, rather than seasonal or part-time, employment position that provides employment as a headquarters staff employee to a person for at least thirty-seven and one-half (37.5) hours per week with minimum health care, as described in title 56, chapter 7, part 22, and that pays at least one hundred fifty percent (150%) of the state’s average occupational wage, as defined in § 67-4-2004, for the month of January of the year in which the full-time employee job was created;(3) “Headquarters facility” means a facility in this state that houses the international or national headquarters of a taxpayer, where headquarters staff employees are located and employed, and where the primary headquarters-related functions and services are performed; provided, that any taxpayer that has filed an application and business plan as a regional headquarters with the department prior to July 1, 2015, shall continue to be eligible for the credit described in subsection (a);(4) “Headquarters-related functions and services” means those functions involving administrative, planning, research and development, marketing, personnel, legal, computer, or telecommunications services performed by headquarters staff employees on an international or national basis. “Headquarters-related functions and services” does not include functions involving manufacturing, processing, warehousing, distribution, wholesaling, or operating a call center; provided, that any taxpayer that has filed an application and business plan as a regional headquarters with the department prior to July 1, 2015, shall continue to be eligible for the credit described in subsection (a);(5) “Headquarters staff employees” means executive, administrative, or professional workers performing headquarters-related functions and services. An executive employee is a full-time employee who is primarily engaged in the management of all or part of the enterprise. An administrative employee is a full-time employee who is not primarily involved in manual work and whose work is directly related to management policies or general headquarters operations. A professional employee is an employee whose primary duty is work requiring knowledge of an advanced type in a field of science or learning. This knowledge is characterized by a prolonged course of specialized study;(6) “Investment period” means that the investment must be made during the period beginning one (1) year prior to the start of the construction, expansion, or remodeling and ending one (1) year after substantial completion of the construction, expansion, or remodeling of the facility. However, in no event shall the investment period exceed six (6) years;(7) “Minimum capital investment” means an investment by the taxpayer and the lessor to the taxpayer of ten million dollars ($10,000,000), during the investment period, in a building or buildings, either newly constructed, expanded, or remodeled. The minimum capital investment may include, but is not limited to, the purchase price of an existing building and the cost of building materials, labor, equipment, furniture, fixtures, computer software, parking facilities and landscaping, but shall not include land or inventory;(8) “New full-time employee job” means full-time headquarters staff employee jobs that are new to this state, that increase net employment of the taxpayer above the level of employment in existence immediately prior to the beginning of the investment period, and that, for at least ninety (90) days, did not exist in Tennessee as a job position of the taxpayer or of another business entity. The new full-time employee jobs must be created and filled within the investment period. An employee in a new full-time employee job may be employed at a temporary location in this state, pending completion of construction, expansion, or remodeling work at the qualified headquarters facility;(9) “Qualified headquarters facility” means a headquarters facility where the taxpayer has made the minimum capital investment and has created the required number of new full-time employee jobs to be entitled to the credit provided by this section; and(10) “Qualified tangible personal property” means building materials, machinery, equipment, furniture and fixtures used exclusively in the qualified headquarters facility and purchased or leased during the investment period and computer software used primarily in the qualified headquarters facility and purchased or leased during the investment period; provided, however, that “qualified tangible personal property” only includes such property that is directly related to the creation of the new full-time employee jobs. “Qualified tangible personal property” does not include supplies or repair parts. “Qualified tangible personal property” does not include any payments with respect to leases of qualifying tangible personal property that extend beyond the investment period. “Qualified tangible personal property” does not include any materials, machinery, equipment, furniture, or fixtures that replace tangible personal property that previously generated a credit under this section.(c) A taxpayer qualifying for this credit must be subject to the taxes imposed by chapter 4, parts 20 and 21 of this title or be an insurance company as defined in § 56-1-102 or be a general partnership that is entitled to compute a job tax credit pursuant to § 67-4-2109(b)(3)(G). The taxpayer shall not be permitted to take advantage of any additional sales tax or other state tax credits, exemptions, or reduced rates that would otherwise be valuable as a result of the same purchases or minimum investment, except the tax credits provided under §§ 67-4-2009(1) and (3)(A)(ii) and 67-4-2109(b) and (c). A taxpayer qualifying for this reduced rate shall also not be permitted to utilize the credits available to hospital companies under § 67-4-2009.(d)(1) A taxpayer seeking this credit shall first submit to the commissioner of revenue an application to qualify as a headquarters facility, together with a plan describing the investment to be made, the number of new full-time employee jobs to be created, and a description of such jobs. In the case of a leased facility, the lessor shall also file an application and plan, if any taxes paid by the lessor are to be claimed as part of the credit provided in subsection (a). The application and plan shall be submitted on forms prescribed by the commissioner and shall demonstrate that the requirements of the law will be met.(2) After approval of the application and business plan, the commissioner shall issue a letter to the taxpayer stating that the taxpayer has tentatively met the requirements for the credit provided for in this section.(3) In order to receive the credit, the taxpayer must submit a claim for credit, along with documentation as required by the commissioner showing that Tennessee sales or use taxes have been paid to the state on qualified tangible personal property. The taxpayer’s claim for credit of sales or use taxes paid to Tennessee may include such taxes paid by the taxpayer, lessor, in the case of a leased facility, contractors, and subcontractors on sales or use of qualified tangible personal property. Documentation verifying that the minimum investment requirements have been met shall include, but are not limited to, employment records, invoices, bills of lading, lease agreements, contracts, and all other pertinent records and schedules as required by the commissioner.(4) In order to receive the credit, the taxpayer must also certify, on a form prescribed by the department, the number of new full-time employee jobs created and that the purchases of qualified tangible personal property for which the credit is claimed are directly related to the creation of such new full-time employee jobs.(5) The commissioner shall review the claim for credit, and notify the taxpayer of the approved tax credit amount and provide direction for taking the credit. The taxpayer may not take the credit until the commissioner has notified the taxpayer of the amount approved and provided direction to the taxpayer on the proper methodology for taking the credit. The credit may only be taken by the taxpayer making the minimum capital investment of at least ten million dollars ($10,000,000) and creating at least one hundred (100) new full-time employee jobs in conjunction with the construction, expansion, or remodeling of the qualified headquarters facility.(e) If the minimum investment requirements are not made within the investment period, or the terms of this section are not met, the taxpayer shall be subject to assessment for any sales or use tax, penalty, or interest that would otherwise have been due and for which credit was taken. The statute of limitations shall not begin to run on these assessments until December 31 of the final year of the ten-year period provided for in subdivision (b)(1).(f) Credits under this section shall not reduce the taxes earmarked and allocated to education, pursuant to § 67-6-103(c).(g) Nothing in this section shall require that the taxpayer establish its commercial domicile in this state in order to receive the credit.(h)(1) The commissioner may, in the commissioner’s sole discretion, enter into a managed compliance agreement with a taxpayer that is entitled to the credit provided in this section. The agreement may provide for:
(A) One (1) or more effective rates to be applied to a predetermined base of purchases subject to the credit provided in this section for a defined period;(B) A procedure under which the eligible taxpayer can use a direct pay permit issued by the commissioner to purchase tangible personal property without paying to its supplier the tax imposed by this chapter and to remit the tax due on the tangible personal property directly to the department;(C) A term not to exceed the investment period; provided, that nothing shall preclude the commissioner from entering into a subsequent agreement with the same taxpayer;(D) The conditions under which the agreement may require modification or termination;(E) A procedure to resolve disputes concerning the agreement; and(F) Any other provisions that the commissioner and the eligible taxpayer mutually agree upon to carry out the purposes of this section.(2) The commissioner may, in the commissioner’s sole discretion, terminate a managed compliance agreement and conduct an audit of an eligible taxpayer if the taxpayer fails to fulfill any of the terms of the agreement and the failure is materially adverse to the commissioner and the taxpayer fails to cure the failure not later than thirty (30) days after the mailing of written notice of such failure by the commissioner; provided, however, that no such notice need be given in the event the failure is not capable of being cured or the commissioner believes that the collection of any tax required to be collected and paid to the state or of any assessment will be jeopardized by delay.(3) Other than as authorized by this section and expressly agreed in the managed compliance agreement, nothing in this section shall abridge or alter any requirements, rights or obligations of an eligible taxpayer or the commissioner granted or imposed by statute or regulation.(4) For purposes of this subsection (h):
(A) “Eligible taxpayer” means any person that has qualified to receive the credit provided in this section and that, in the opinion of the commissioner, meets the following criteria:
(i) Demonstrates a willingness and ability to comply with the tax laws of this state;(ii) Maintains an acceptable system of internal controls and business records; and(iii) Cooperates with the state’s efforts to collect tax; and(B) “Managed compliance agreement” means an agreement between the commissioner and an eligible taxpayer that provides for an agreed upon method for calculating the credit due under this section.
