TSCPA’s State Tax Committee met with representatives from the Tennessee Department of Revenue (DOR) and the Tennessee Department of Labor & Workforce Development (DOL) at the State Tax Liaison meeting on Dec. 4, 2024. The State Tax Committee meets semi-annually with officials to stay up to date on tax trends and regulatory changes and discuss issues impacting Tennessee CPAs.
Department of Revenue Update
The DOR opened the meeting by providing an update on department leadership. Amanda McGraw, who has been CFO of the DOR for eight years, now serves as deputy commissioner and CFO. Christine Lapps remains deputy commissioner as well.
The next topic discussed by the DOR was Schedule G refunds. The deadline for these to be postmarked was Dec. 2, 2024. Through Dec. 20, 2024, there have been 66,799 returns and over $1.2 billion in refund claims submitted out of an estimated $1.6 billion available to be claimed. The DOR noted that these totals will change, as they continue to process claims that were filed in the final days of the claim period. Specifically, the total amount paid through Dec. 20 does not correspond to the total number of claims filed. Also, additional claims are anticipated from taxpayers impacted by Hurricane Helene. Taxpayers located in eight East Tennessee counties impacted by Hurricane Helene have until May 1, 2025, to submit claims. There are approximately 2,700 eligible taxpayers in this population, representing a total of up to $11 million in potential refund payments.
The DOR closed its update by providing an overview of the department’s top priorities for 2025. The priorities include upgrading the call center, adding sales tax exemption applications in TNTAP, exploring text message reminders, and improving the exchange of tax information and documents in TNTAP.
TNTAP Update
The next division to present an update was TNTAP. Regarding the business tax return, there is a new sequence of questions to help guide the taxpayer through the filing process in light of the Tennessee Works Tax Act’s changes in dollar thresholds.
Director Greer Allison then reviewed how a taxpayer impacted by Hurricane Helene can file a claim for a sales tax refund on expenses related to the natural disaster. Individuals who receive FEMA assistance for the repair or replacement of their primary residence may be eligible. Taxpayers are limited to filing only one claim, which will be automatically capped at $2,500. At least one expense document must be added, but the taxpayer can add as many as they like.
Regarding updates coming to TNTAP, sales tax exemptions will soon be added as well as a sitemap of TNTAP.
Audit Update
Assistant Commissioner Stacy Gibson next presented an update from the Audit Division. Regarding natural disaster claims, Gibson noted that this follows the normal refund claim statute, and the natural disaster claims can still be processed once logged in. Those filing should be sure to follow the natural disaster refund claim requirements of including the FEMA claim number and receipts and only filing one claim per taxpayer. She said this may be the best solution for CPAs.
Information can be exchanged securely from within TNTAP via an Audit Communication Letter. After logging in, users should navigate to the “More” tab. Within the “Letters” module, users can select “Respond to an Audit Communication Letter” to upload work items in response to an audit request identified by a Letter ID.
Gibson also touched on updates about several tax credits and reports:
- The annual tax credit report would be provided to the Finance, Ways, and Means Committee by Jan. 1. It is posted on the DOR’s website.
- The results of the business tax credit study, conducted every four years with the Tennessee Department of Economic and Community Development (ECD), would be presented to officials by Jan. 15. It is available on the ECD’s website.
- The DOR is working with the Tennessee Department of Environment and Conservation to develop an application for the addition to the brownfield tax credit related to remediation costs.
- A comptroller report released in October shared that an estimated $300 million in sales tax revenues have been voluntarily remitted by retailers over the past 11 years to avoid being identified as noncompliant by the Retail Accountability Program.
There have been several audit issues the division has been dealing with recently. There have been a number of leads focused on unreported sales, tax comparisons and identifying suspicious filing patterns, which aligns with many of the trends seen in audit results. Gibson also noted they have been seeing issues with Montana LLCs being used to purchase a vehicle in another state to avoid Tennessee’s sales tax.
Taxpayer Services Update
Taxpayer Services was the next division to give an update. Assistant Commissioner John Duncan shared that Taxpayer Services has received funding for upgrades to its call center. Among other things, the upgrades will include a predictive dialer, the ability to batch calls for a variety of scenarios (e.g., a refund going into dormant status), and the ability to record calls.
For issues regarding natural disaster relief, contact revenue.disasterextension@tn.gov. Be sure to provide the business name, entity ID or Tennessee account number, business location, and a brief description of the impact.
There are several common questions and issues the division has come across recently. Regarding the business tax, taxpayers have been using incorrect classifications when setting up accounts. The group discussed the current classifications and the process currently in place to identify them, and a decision tree was proposed to help identify the correct SIC code and business tax classification. Commissioner David Gerregano committed to taking this issue back for further discussion.
Legal Office Update
The Legal Office was next to present an update. There have been several changes in the Legal Office. Mitch Porcello is now deputy general counsel, and Phil FitzGerald has moved to the Hearing Office.
Since the last liaison meeting, the DOR completed Rulings 24-04, 24-05, 24-06, 24-07 and a couple of others pending publication. There are currently 23 rulings pending and approximately 70 cases open in various stages. The Legal Office is committed to reviewing ruling requests in a timely manner. Contact mitchell.porcello@tn.gov with any questions or issues regarding rulings.
The case of SAP v. Gerregano has been appealed by the DOR. If the appeal is denied, the DOR will work toward providing guidance on any related changes. The Toyota Motors case is still pending.
Department of Labor Update
The DOL presented the final update of the meeting. The DOL’s UI benefits website launched in February 2024, and the new UI tax system is projected to go live in May 2025. Benefits of the new tax system will include an online application, expanded account access/information, more self-service options, fast access to new clients and expanded customer service. Additionally, everything will be located in one place. TSCPA is working with the DOL to provide input and test the new system.
The next State Tax Liaison meeting will be held in the summer of 2025. TSCPA members who have questions or issues that they would like the State Tax Committee to address should send a detailed account of the question or issue to tscpa@tscpa.com.
This article was originally published in the January/February 2025 Tennessee CPA Journal.
