As part of his 2012 legislative agenda, Tennessee Governor Bill Haslam proposed legislation on January 10 that, if passed, will require companies to file an application with the Department of Revenue seeking preapproval of a deduction for expenses paid to an affiliate for the use of intangible property. SB2234 / HB2372.
This proposal follows a November 2011 DOR notice announcing a compromise opportunity for taxpayers making payments to affiliated intangible companies that arguably may lack economic substance. The Department has compromised a number of Tennessee excise tax assessments against companies that deducted intangible expenses to affiliated intangible holding companies. Those negotiations culminated in a settlement offer in which the Department agreed to drop the assessments if the taxpayers agreed to pay a percentage of the amounts assessed. In the DOR notice, the Department expressed a willingness to extend similar settlement terms to taxpayers that had yet to be audited and/or assessed. Click December SALT Bulletin to read more about the notice.
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