ET-7 - Payments Received under the Tennessee Business Relief Program or the Supplemental Employer Recovery Grant Program [Updated April 13, 2021]

 

Governor Lee signed new legislation into law (SB775/HB776), that changed the Tennessee excise tax treatment of payments received under the Tennessee Business Relief Program (“BRP”) and the Supplemental Employer Recovery Grant (“SERG”) program. Therefore, the Department has updated ET-7 to reflect this law change.

Relief payments received under the BRP and SERG program may be deducted from Tennessee excise tax and are not subject to Tennessee business tax.

Tennessee established BRP and SERG with federal CARES Act funds. The Internal Revenue Service stated if a state government establishes an economic relief program (such as BRP and SERG) to support businesses using CARES Act funds, the relief payments are subject to federal income tax. Because the starting point for determining a Tennessee excise tax is federal taxable income, these payments would ordinarily be subject to excise tax as well.

However, the General Assembly recently passed legislation that creates an excise tax deduction for Tennessee businesses that received such relief payments in 2020 or 2021. Businesses that received payments from either program should deduct them on FAE170 Schedule J, Line 25. Businesses should deduct eligible payments on the return that covers the payment period. For example, calendar year taxpayers should deduct payments received in 2020 on the 2020 franchise and excise tax return and payments received in 2021 on the 2021 return.

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

Please note this legislation also deducts from excise tax payments received under other state programs established using coronavirus relief funds under the CARES Act, including:

  • Coronavirus Agricultural and Forestry Business Fund
  • Hospital Staffing Assistance Program
  • Emergency Medical Services Ambulance Assistance Program
  • Tennessee Small and Rural Hospital Readiness Grants Program
  • Child Care and Development Block Grants

Please see Important Notice 21-03 for additional information.  

Reference: Tenn. Code Ann. § 67-4-2006(b)(2).

PREVIOUS ET-7 - NO LONGER APPLICABLE DUE TO LAW CHANGE

Payments received under the Tennessee Business Relief Program (“BRP”) or the Supplemental Employer Recovery Grant Program (“SERG”) are subject to Tennessee franchise and excise tax but are not subject to Tennessee business tax.

Tennessee established the BRP and the SERG programs 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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