Tennessee Lawmakers Are Adjourning Their Session After Passing a $1.9 Billion Tax Cut and Rebate for Businesses

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NASHVILLE, Tenn. (AP) — Tennessee’s GOP-controlled General Assembly adjourned for the year on Thursday, ending months of tense political infighting that doomed Republican Gov. Bill Lee’s push for universal school vouchers. But a bill that would allow some teachers to carry firearms in public schools and one that would provide a nearly $2 billion tax cut and rebate for corporations received last-minute approval.

For months, Lee made passing universal school vouchers his top priority for the legislative session. At the same time, he warned that lawmakers must pass the sweeping corporate tax cut and rebate to avoid a potential lawsuit, as critics claimed the state had violated the U.S. Constitution.

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The ambitious proposals targeted a Legislature that still harbored deep resentments over the past year, when inaction on gun control and security measures led to deep divisions between the Senate and House. Meanwhile, the explosive attention generated by the expulsions of two young black Democratic lawmakers led to retaliatory measures that restricted the speaking time of certain House members during legislative debates and restricted seating in the public galleries.

“This was a session of the good, the bad and the ugly,” said Democratic Senator Raumesh Akbari. “Unfortunately, some really, really bad bills ended up getting passed.”

While Lee failed to reach consensus on his voucher offer – an initiative he planned to extend next year – he was able to secure a last-minute deal on the stunning $1.9 billion tax cut and rebate for businesses. The amount is nearly 4% of the $52.8 billion state budget, which provides largely no tax relief for most Tennesseans.

At issue is concerns that the state’s 90-year-old franchise tax violates the U.S. Constitution’s Commerce Clause, which prohibits states from passing laws that burden interstate commerce. The law has not been formally challenged, but late last year some companies sent a letter to lawmakers urging lawmakers to fix the law or risk litigation.

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“The bottom line is that Tennessee pays its bills,” said Republican Sen. Rusty Crowe. “The state of Tennessee wrongfully took this money and we will pay it back to these companies.”

House and Senate leaders have disagreed for months over details of how to resolve the legal questions surrounding the franchise tax. On the final day of the meeting, both sides agreed to offer companies the opportunity to seek retroactive refunds for the past three years in exchange for temporarily disclosing the names of the companies requesting refunds and the amounts of the refunds – a first in Tennessee history.

However, the names of the companies will only be published publicly by the Ministry of Finance for 30 days in June 2025. Companies must apply for the refund this year.

“These transparency provisions are a joke,” said Democratic Sen. Jeff Yarbro, arguing that more could be done to disclose accurate amounts, even as Republicans countered that the agreed-upon disclosure was unprecedented.

Funding the refunds for three years is expected to cost taxpayers $1.5 billion. The ongoing franchise tax relief will cost an additional $400 million annually.

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The final week of Tennessee’s nearly four-month legislative session also saw emotionally charged debates over arming public school teachers and staff, with hundreds of protesters flocking to the Capitol to shout “blood on your hands” at Republicans who passed chant the bill.

The legislation specifically prohibits parents and other teachers from knowing who is armed on school grounds. If Lee signs the bill, it would be the largest expansion of gun access in the state following last year’s deadly shooting at a private elementary school in Nashville.

With a Republican supermajority, Democratic members were unable to oppose a long list of bills targeting the LGBTQ+ community. They ranged from requiring public school employees to release transgender students to their parents to allowing LGBTQ+ foster children to be placed with families who hold anti-LGBTQ+ beliefs.

According to the Human Rights Campaign, Tennessee has passed more anti-LGBTQ+ laws than any other state since 2015, identifying more than 20 bills that have passed the Legislature in recent months.

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Republicans and Gov. Lee also agreed to repeal police traffic stop reforms implemented in Memphis following the fatal beating of Tire Nichols by officers in January 2023, despite Nichols’ parents asking that they be given a chance to compromise.

Around the same time, lawmakers fired the trustees of Tennessee’s only publicly funded, historically black university after Republicans argued it was necessary because of mismanagement found in audits. Democrats and others have countered that the increased scrutiny is largely because Tennessee State University has been chronically underfunded by an estimated $2.1 billion over the past three decades.

As the fallout from the removals grew, House Democrats strengthened legislation that would have banned local governments from paying for studies or spending money on slavery reparations. A rare rejection of a bill supported by the Republican Party.

On abortion, lawmakers agreed to criminalize adults who provide abortions to minors without parental consent. That bill is currently awaiting Lee’s expected signature after he already signed a law requiring public school students to watch a video about fetal development produced by an anti-abortion group.

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