[May 6 - 3:36 p.m.]
House passes effort to decouple state, federal depreciation schedules

Bill would remove $75 million tax reduction for businesses

Email | Print By Drew Ruble

05-06-2004 3:34 PM — A bill to decouple the state’s excise tax depreciation schedule from federal business tax depreciation laws passed the House Thursday by a vote of 58-to-35. The state Senate is set to vote on the bill Monday.

The bill’s supporters, mainly Democrats, argue that the measure prevents the loss of $75 million in state excise tax revenue. State officials contend that when federal tax cuts went into effect two years ago they made a drafting mistake that created a loophole allowing businesses to enjoy double depreciation. HB3529 closes that loophole. Bill sponsors argue failing to address the mistake means the state will start next fiscal year’s budget with a $75 million hole to fill.

Conservative commentators and organizations including the Tennessee Tax Revolt describe the measure as a $75 million stealth tax increase on small businesses, which would otherwise retain the tax revenue. The Tennessee Chapter of the National Federation of Independent Business also is strongly opposing the bill. Interestingly, the NFIB is the only business-lobbying group in Tennessee appearing to offer any opposition to the bill.

Business backers, still stinging from shouldering the burden of tax increases passed in 2002, point to the overcollection of tax revenues occurring this year and projections of overcollection next year as reasons to defeat the current decoupling legislation. They say the net effect of the bill is to take $75 million away annually from small businesses that could be used to pay for new equipment or create new jobs.

Sources close to the issue tell NashvillePost.com the Senate is expected to pass the bill when it comes up for discussion next week since it has 75 million reasons for taking that action