Family Owned Non-Corporate Entity Exemption (FONCE) - Franchise and Excise Tax

You can read frequently asked questions about the Family Owned Non-Corporate Entity Exemption (FONCE) exemption for franchise and excise tax here.

• Can my entity qualify as a FONCE if it has not generated any income?
• Can an S corporation qualify for the FONCE exemption, since the income passes through to my individual return for federal tax purposes?
• Can I qualify for the FONCE exemption if my LLC has only a single-member owner (SMLLC)?
• What if I received a Disclosure of Activity form for an entity that is not a FONCE, but is otherwise exempt from franchise and excise tax?
• What is considered to be residential property for purposes of the FONCE exemption?
• What is considered farming for purposes of the FONCE exemption?
• What is considered to be farm property for purposes of the FONCE exemption?
• Are rents from a tenant in common interest in commercial property in which there is no active participation “passive investment income?”
• What is considered to be industrial and commercial property for purposes of the FONCE exemption?
• Does the Department construe "rents" as always passive investment income, or are there exceptions as under federal law?
• Do gains from the sale of real or tangible personal property qualify as passive investment income?
• Can a family owned non-corporate entity qualify for the FONCE exemption if it owns more than four separately deeded residential properties?
• What is non-passive income?
• What is passive investment income?
• Do I report all of the gross receipts shown on the federal return filed by the FONCE?
• For the purposes of the FONCE exemption, what relationships are considered family-members?
• Will I have to apply for a FONCE exemption every year?
• What will happen if I fail to file the franchise and excise tax Application for Exemption/Annual Exemption Renewal (FAE183)?
• What will the Department of Revenue do with the information I provide for the FONCE exemption?
• Where in Tennessee law can the FONCE exemption be found?
• What are the qualifications for the FONCE exemption?