The starting place in computing the excise tax is the net income before loss carryover and special deductions as reported on the federal income tax return, such as, federal form 1065, 1120, 1120S, 990 T and more. If the federal return is prepared on a consolidated basis, a pro-forma single entity return is generally needed to compute the TN excise tax. From that starting point adjustments are made to arrive at Tennessee taxable income. Adjustments that are specific to an entity type are reported on FAE170 Schedule J-1, J-2. J-3 or J-4. Adjustments that apply to all entity types are made on Schedule J. Multistate businesses with the right to apportion will apportion their income and any prior year loss carryover is deducted before the tax rate of 6.5% is applied. Qualified net operating losses may be carried forward for no more than 15 years; but, are never carried back.
Reference: Tenn. Code Ann. § 67-4-2001 et seq.