Are payments received under the Tennessee Business Relief Program or the Supplemental Employer Recovery Grant Program subject to franchise and excise tax and/or business tax in Tennessee?

Payments are subject to Tennessee franchise and excise tax but are not subject to Tennessee business tax.

Tennessee established the Tennessee Business Relief Program (BRP) and the Supplemental Employer Recovery Grant (SERG) program utilizing federal CARES Act funds. The Internal Revenue Service has stated that if a state government establishes an economic relief program (such as BRP and SERG) to support businesses using CARES Act funds, the receipt of payments by a business from such a program is included in federal taxable income and subject to federal taxation. Because the starting point for determining a Tennessee franchise and excise tax liability is federal taxable income, these payments will be subject to franchise and excise tax.

These payments are not included in gross receipts for Tennessee business tax purposes and are not subject to the business tax.

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