The word on Capitol Hill: FONCE

Proposals to change, close or leave alone 'family owned non-corporate entities' are all the rage in the state legislature

Email | Print By Ken Whitehouse

The budget battle on Capitol Hill is getting extremely intense and FONCEs are at the center of it all.

FONCEs are "Family Owned Non-Corporate Entities" and they have been the focus of maneuvering and discussions between lobbyists, legislators and administration officials as a means to fill in part of the hole of the state's budget shortfall.

In the overall plan to address the state's financial troubles proposed by Governor Bredesen, a tax break – or loophole, depending on where you stand – that was created during the year 2000 would be closed. FONCEs were created as a mechanism where families pool their resources and purchase commercial property and receive passive income.

Changes in the current tax structure would mean that such entities would be treated essentially the same as non-family owned entities and thus lose their tax benefit.

In the last 24 hours, the FONCEs proposal has been repeatedly pronounced dead, then barely alive, then dead again. There is now talk of a revised FONCEs that would be "tiered" so that some families at the lower end of the financial spectrum would still see the tax benefit but "families of significant means" would not get the same break. This talk could all change in five minutes, as everything else on the issue has seemed to change quickly and repeatedly.

What will likely soon become part of the FONCE debate is a "technical correction" that any FONCE that invests in a venture capital fund would lose its FONCE status and thus the tax break.

Talk that we can confirm is dead is a rumor that had Democratic Majority Leader Gary Odom leading a fight to replace the estimated $15 million that would be generated by closing the FONCEs hole with a proposal that would have made Wal-Mart and other out-of-state corporations fill the gap.

This morning, while that rumor was circulating widely among lobbyists, NashvillePost.com asked Odom if it was true. Odom responded that it wasn't and that he was looking for ways to cut other things out of the state budget, not create new taxes for any person or business.