When a company expands its Tennessee headquarters with more than $10 million invested and 100+ new high-wage headquarters jobs, can it claim the enhanced $5,000-per-job tax credit, what jobs count, and how much of its franchise and excise tax can it wipe out?

Plain-English summary

Tennessee gives companies a job tax credit against their franchise and excise (F&E) tax for creating qualified jobs tied to a capital investment. This ruling addresses the enhanced version of that credit — the "additional annual" credit under Tenn. Code Ann. § 67-4-2109(b)(2)(B)(v), available to large headquarters projects.

The Taxpayer expanded and remodeled its Tennessee corporate headquarters, investing more than $10 million and forecasting 100+ new full-time headquarters jobs paying at least 150% of the state's average occupational wage. The Department answered six questions:

1. Is it eligible for the enhanced credit? Yes — provided it actually hits the $10 million investment threshold and creates the required 100 qualified jobs described in § 67-4-2109(b)(2)(B)(v), it earns the additional annual credit of $5,000 per job.

2. Which jobs count? Executive, administrative, and professional workers at the headquarters who perform (or supervise) headquarters functions are "headquarters staff employees" as defined in § 67-6-224(b)(5). As long as those jobs pay at least 150% of the state's average occupational wage for the January of the year they're created, they're "qualified jobs."

3. From when does it count jobs? The company counts headquarters-staff jobs added from the beginning of the investment period set in its approved business plan, to determine the number of qualified jobs created during that period.

4. What's the pay requirement? Each qualifying job must pay at least 150% of Tennessee's average occupational wage for the month of January of the year in which that job is created.

5. When can it start claiming? It can begin taking the $5,000 "basic" job tax credit (the $4,500 credit, bumped to $5,000 because it qualifies for the enhanced credit) in the taxable year it makes the required capital investment and creates 25 qualified jobs — provided both happen within 12 months of the business plan's effective date. The additional annual $5,000 credit then runs for three years beginning with the first tax year after the initial credit is created.

6. How much F&E tax can it offset? This is the key asymmetry. The basic job tax credit can offset only up to 50% of the company's combined franchise and excise tax liability for the year, but any unused amount carries forward up to 15 years. The additional annual credit can offset up to 100% of F&E liability, but cannot be carried forward at all — unused amounts are simply lost. Because of that, the company should use the additional annual credit first.

What this means for you

Companies planning a large Tennessee headquarters or capital project

The headline number is the enhanced $5,000-per-job credit, but the real planning lesson is in the offset rules. The enhanced "additional annual" credit can erase your entire F&E bill for the year — but it evaporates if you can't use it that year. Sequence your credits so you burn the no-carryforward enhanced credit first and preserve the 15-year basic credit for later years.

Accountants and tax professionals

This ruling is the F&E job-tax-credit companion to LR 11-08 (same data-center/headquarters cluster), and pairs with the sales/use-side headquarters credit in LR 11-06, LR 11-07, and LR 11-16. Watch the two definitional cross-references: "qualified job" (§ 67-4-2109(a)(6)) sets the permanent/full-time/health-care/90-day-new criteria, and "headquarters staff employees" (§ 67-6-224(b)(5)) is borrowed from the sales-tax headquarters statute. The 150%-of-average-wage test is measured against January of the creation year of each individual job, not a single snapshot.

Common questions

Q: What's the difference between the "basic" and "enhanced" job tax credit here?
A: The basic credit is $4,500 (raised to $5,000 when the enhanced credit qualifies) and offsets up to 50% of F&E liability with a 15-year carryforward. The enhanced "additional annual" credit is an extra $5,000 per job for three years, offsets up to 100% of F&E liability, but has no carryforward.

Q: Do the 100 jobs have to be created all at once?
A: They must be created within the business plan's investment period (generally up to three years from the plan's effective date), and each must pay at least 150% of the state's average occupational wage for the January of the year it's created.

Q: Why use the additional annual credit before the basic credit?
A: Because the additional annual credit cannot be carried forward — if you don't use it in the year it arises, it's gone. The basic credit carries forward up to 15 years, so it's safer to defer.

Q: Can another company rely on this letter ruling?
A: No. A Tennessee letter ruling binds the Department only as to the specific taxpayer and facts it was issued to. This summary is informational only, not legal or tax advice.

Citations and references

Tennessee statutes (Tenn. Code Ann.):

• § 67-4-2109(b)(1)(A), (C), (D) (the "basic" $4,500 job tax credit; 25-job/12-month threshold; 50% F&E cap and 15-year carryforward)
• § 67-4-2109(b)(2)(B)(v), (vi), (vii) (enhanced additional annual $5,000 credit; >$10M + 100 headquarters-staff jobs at 150% wage; 100% F&E offset with no carryforward; three-year investment window)
• § 67-4-2109(b)(3)(A) (basic per-job credit raised from $4,500 to $5,000 when the enhanced credit qualifies)
• § 67-4-2109(a)(4) (definition of "investment period"); § 67-4-2109(a)(6) (definition of "qualified job")
• § 67-6-224(b)(5) (definition of "headquarters staff employees")
• § 67-4-2004(37) (definition of "person"); § 67-4-2007(a) (excise tax); §§ 67-4-2105(a), 67-4-2106(a) (franchise tax); § 67-4-2108(a)(1), (3) (franchise tax minimum measure)

Source

• Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
• Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/fae/11-17fe.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
LETTER RULING # 11-17
Letter Rulings are binding on the Department only with respect to the
individual taxpayer being addressed in the ruling. This presentation of the
ruling in a redacted form is informational only. Rulings are made in response
to particular facts presented and are not intended necessarily as statements of
Department policy.
SUBJECT
The application of the job tax credit provisions under TENN. CODE ANN. § 67-4-2109(b) (Supp.
2010).
SCOPE
This letter ruling is an interpretation and application of the tax law as it relates to a specific set of
existing facts furnished to the Department by the taxpayer. The rulings herein are binding upon
the Department, and are applicable only to the individual taxpayer being addressed.
This letter ruling may be revoked or modified by the Commissioner at any time. Such revocation
or modification shall be effective retroactively unless the following conditions are met, in which
case the revocation shall be prospective only:
(A) The taxpayer must not have misstated or omitted material facts involved in
the transaction;
(B) Facts that develop later must not be materially different from the facts upon
which the ruling was based;
(C) The applicable law must not have been changed or amended;
(D) The ruling must have been issued originally with respect to a prospective or
proposed transaction; and
(E) The taxpayer directly involved must have acted in good faith in relying upon
the ruling; and a retroactive revocation of the ruling must inure to the taxpayer’s
detriment.
FACTS
[TAXPAYER] is headquartered and bases its [REDACTED] operations in [CITY], Tennessee.
[REDACTED]. At its Tennessee headquarters, the Taxpayer conducts [DESCRIPTION OF
ACTIVITIES].
In [YEAR], the Taxpayer began increasing its Tennessee presence through an expansion and
remodeling of its corporate headquarters facility (the “Headquarters”). [REDACTED]. As part of
this expansion, the Taxpayer filed a business plan on [DATE], and applied for the enhanced job
tax credit.

The Taxpayer’s total investment has exceeded $10 million with respect to the expansion and
remodeling of its corporate headquarters facility. The Taxpayer forecasts that in [YEAR], it will
have met the requirement for 100 additional new, full-time headquarters jobs that meet or exceed
150% of Tennessee’s average occupational wage. The jobs added in connection with the
qualified headquarters facility are full-time jobs in [EXAMPLES]. [REDACTED].
The Taxpayer’s business plan was approved by the Department on [DATE], and provides for an
investment period of [DATE], through [DATE].
QUESTIONS

1. Is the Taxpayer eligible for the enhanced job tax credit available under TENN. CODE ANN.
   § 67-4-2109(b)(2)(B)(v) (Supp. 2010)?
2. Will the jobs of Headquarters staff employees, including those employees at the
   Headquarters who perform [EXAMPLES OF EMPLOYMENT FUNCTIONS], qualify as
   “net new full-time jobs” eligible for the enhanced job tax credit available under TENN. CODE
   ANN. § 67-4-2109(b)(2)(B)(v) (Supp. 2010)?
3. Will the Taxpayer be able to use the headcount of Headquarters staff employees added from
   [DATE – BEGINNING OF INVESTMENT PERIOD], to determine the number of “net new
   full-time jobs” added in Tennessee during the investment period for purposes of TENN. CODE
   ANN. § 67-4-2109(b)(2)(B)(v) (Supp. 2010)?
4. What is the compensation requirement that must be met for each job created in connection
   with the qualified headquarters facility and contributing to the required 100 net new full-time
   jobs for the job tax credit, and at what point in time must the average salary requirements be
   met?
5. When will the Taxpayer be eligible to begin taking the $5,000 per new full-time job tax
   credit provided by TENN. CODE ANN. § 67-4-2109(b) (Supp. 2010), related to the new
   investment?
6. What percentage of Tennessee franchise and excise taxes will the Taxpayer be permitted to
   offset in connection with its qualified headquarters investment?
   RULINGS
7. Provided that the Taxpayer meets the capital investment threshold and creates the requisite
   number of qualified jobs described under TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) (Supp.
   2010), the Taxpayer will be eligible for the additional annual job tax credit of $5,000 per job
   available under TENN. CODE ANN. § 67-4-2109(b)(2).
8. Executive, administrative, or professional workers at the Taxpayer’s Headquarters who
   perform [EXAMPLES OF EMPLOYMENT FUNCTIONS] in support of all business
   operations are “headquarters staff employees” as defined under TENN. CODE ANN. § 67-6224(b)(5) (Supp. 2010). Executive, administrative, or professional workers involved in the
   management or supervision of [EXAMPLES OF EMPLOYMENT FUNCTIONS] are
   “headquarters staff employees” if the workers are assigned to the Headquarters. Provided that
   2

these jobs pay at least 150% of the state’s average occupational wage for the month of
January of the year in which they are created, such jobs will qualify as “qualified jobs” for
purposes of the additional annual job tax credit under TENN. CODE ANN. § 67-42109(b)(2)(B)(v) (Supp. 2010).

3. The Taxpayer should count the Headquarters staff jobs added beginning [DATE –
   BEGINNING OF INVESTMENT PERIOD], to determine the number of “qualified jobs”
   created in Tennessee during the investment period for purposes of TENN. CODE ANN. § 67-42109(b)(2)(B)(v) (Supp. 2010).
4. The compensation requirement for each qualified job created by the Taxpayer for purposes of
   the additional annual job tax credit under TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) (Supp.
   2010) is at least 150% of Tennessee’s average occupational wage for the month of January of
   the year in which the job is created. [REDACTED].
5. The Taxpayer will be eligible to begin claiming the $5,000 “basic” job tax credit under
   TENN. CODE ANN. § 67-4-2109(b)(1) (Supp. 2010) (as enhanced by TENN. CODE ANN. § 674-2109(b)(3)(A)) in the taxable year in which it made the required capital investment and
   created a total of 25 qualified jobs, provided that such investment is made and such jobs are
   created within twelve months of the effective date of the business plan. Provided that the
   Taxpayer has met the statutory requirements, the Taxpayer shall be allowed to claim the
   $5,000 additional annual job tax credit under TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) for
   a period of three years beginning with the first tax year after the initial job tax credit is
   created.
6. The “basic” job tax credit cannot exceed 50% of the Taxpayer’s combined Tennessee
   franchise and excise tax liability shown on the return before any credit is taken. However, the
   additional annual job tax credit may be used to offset up to 100% of the Taxpayer’s
   Tennessee franchise and excise tax liability for that year.
   ANALYSIS
   Tennessee imposes an excise tax on all persons, as defined under TENN. CODE ANN. § 67-42004(37) (Supp. 2010), doing business within Tennessee. TENN. CODE ANN. § 67-4-2007(a)
   (Supp. 2010). Tennessee also imposes a franchise tax at the rate of $0.25 per $100, or major
   fraction thereof, on the net worth of a taxpayer doing business in Tennessee, pursuant to TENN.
   CODE ANN. §§ 67-4-2105(a) (Supp. 2010) and 67-4-2106(a) (2006).1 Persons subject to the
   Tennessee franchise and excise taxes include, but are not limited to, corporations such as the
   Taxpayer. TENN. CODE ANN. § 67-4-2004(37).
   TENN. CODE ANN. § 67-4-2109(b)(1)(A) (Supp. 2010) generally provides that, if certain
   conditions are met, a taxpayer may take a job tax credit (referred to for purposes of this letter

1

Note that, under TENN. CODE ANN. § 67-4-2108(a)(1) (Supp. 2010), the franchise tax base “shall in no case be less
than the actual value of the real or tangible property owned or used in Tennessee, excluding exempt inventory and
exempt required capital investments.” For purposes of this section, “property” is to be “valued at cost less
accumulated depreciation in accordance with generally accepted accounting principles.” TENN. CODE ANN. § 67-42108(a)(3).

3

ruling as the “basic” job tax credit) against its Tennessee franchise and excise tax liability in the
amount of $4,500 for each qualified job2 created during the investment period.3 TENN. CODE
ANN. § 67-4-2109(b)(3)(A) provides that the $4,500 credit allowed under TENN. CODE ANN.
§ 67-4-2109(b)(1) will be increased to $5,000 per job if the taxpayer qualifies for the additional
annual credit allowed in TENN. CODE ANN. § 67-4-2109(b)(2)(B). In order to qualify for the
credit, the qualified business enterprise must, within twelve months of the effective date of the
business plan, make the required capital investment and create at least 25 qualified jobs. TENN.
CODE ANN. § 67-4-2109(b)(1)(C).
Under certain circumstances, an additional annual job tax credit is allowed under TENN. CODE
ANN. § 67-4-2109(b)(2). For example, TENN. CODE ANN. § 67-4-2109(b)(2)(B)(vi) states that an
additional annual credit of $5,000 per job will be allowed with respect to jobs described in TENN.
CODE ANN. § 67-4-2109(b)(2)(B)(i)-(v).4 In particular, TENN. CODE ANN. § 67-42109(b)(2)(B)(v) provides that if “the investment exceeds ten million dollars ($10,000,000) and
at least one hundred (100) qualified jobs are created that also meet the definition of headquarters
staff employees under TENN. CODE ANN. § 67-6-2245 and pay at least one hundred fifty percent
(150%) of the state’s average occupational wage for the month of January of the year in which
the jobs are created, the additional annual credit shall be allowed for a period of three (3) years
beginning with the first tax year after the initial job tax credit is created.”
1.

Enhanced job tax credit

Provided that the Taxpayer meets the capital investment threshold and creates the requisite
number of qualified jobs described under TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) (Supp.
2010), the Taxpayer will be eligible for the additional annual job tax credit of $5,000 per job
available under TENN. CODE ANN. § 67-4-2109(b)(2).

2

TENN. CODE ANN. § 67-4-2109(a)(6) provides that “qualified job” means “a job that meets all of the following
criteria: A) The job position is a permanent, rather than seasonal or part-time, employment position providing
employment in a qualified business enterprise for at least twelve (12) consecutive months to a person for at least
thirty-seven and one half (37 1/2) hours per week with minimum health care, as described in title 56, chapter 7, part
22; (B) The job position is newly created in this state and, for at least ninety (90) days prior to being filled by the
taxpayer, did not exist in this state as a job position of the taxpayer or of another business entity; (C) The job
position is filled; provided, however, that a position will be deemed filled if it subsequently becomes vacant but is
refilled within a period of not more than ninety (90) days; and (D) The job position is filled prior to January 1,
2016.”
3

“Investment period” means “the period during which qualified jobs are created as a result of the required capital
investment; provided, however, that the period shall not exceed three (3) years from the effective date of the
business plan.” TENN. CODE ANN. § 67-4-2109(a)(4).
4

Note that the jobs must remain filled during the year in which the additional annual credit is being taken. TENN.
CODE ANN. § 67-4-2109(b)(2)(B)(vi).
5

TENN. CODE ANN. § 67-6-224(b)(5) (Supp. 2010) provides that “‘headquarters staff employees’ means executive,
administrative, or professional workers performing headquarters-related functions and services. An executive
employee is a full-time employee who is primarily engaged in the management of all or part of the enterprise. An
administrative employee is a full-time employee who is not primarily involved in manual work and whose work is
directly related to management policies or general headquarters operations. A professional employee is an employee
whose primary duty is work requiring knowledge of an advanced type in a field of science or learning. This
knowledge is characterized by a prolonged course of specialized study.”

4

As noted above, TENN. CODE ANN. § 67-4-2109(b)(2)(B)(vi) states that an additional annual
credit of $5,000 per job will be allowed with respect to jobs described in TENN. CODE ANN. § 674-2109(b)(2)(B)(i)-(v).6 In particular, TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) provides that if
“the investment exceeds ten million dollars ($10,000,000) and at least one hundred (100)
qualified jobs are created that also meet the definition of headquarters staff employees under
§ 67-6-224 and pay at least one hundred fifty percent (150%) of the state’s average occupational
wage for the month of January of the year in which the jobs are created, the additional annual
credit shall be allowed for a period of three (3) years beginning with the first tax year after the
initial job tax credit is created.”
Thus, for the Taxpayer to be eligible for the additional annual job tax credit available under
TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v), the following requirements must be met: 1) the
Taxpayer’s investment must exceed $10 million; 2) the Taxpayer must create at least 100
qualified jobs; 2) the qualified jobs must also meet the definition of “headquarters staff
employees” under TENN. CODE ANN. § 67-6-224; and 3) the qualified jobs must pay at least
150% of the state’s average occupational wage for the month of January of the year in which the
jobs are created.
The Taxpayer has indicated that its investment has exceeded $10 million with respect to the
expansion and remodeling of its corporate headquarters facility. The Taxpayer forecasts that in
[YEAR], it will have met the requirement for 100 additional new, full-time headquarters jobs
that meet or exceed 150% of Tennessee’s average occupational wage. The Taxpayer has stated
that the jobs added in connection with the qualified headquarters facility are full-time jobs in
administration, research and development, sales, information technology, and other corporate
areas.7
Provided that the Taxpayer has in fact exceeded the $10 million investment threshold and has
created the requisite number of qualified jobs described under TENN. CODE ANN. § 67-42109(b)(2)(B)(v), the Taxpayer will be eligible for the additional annual job tax credit of $5,000
per job available under TENN. CODE ANN. § 67-4-2109(b)(2).
2.

Qualified jobs

Executive, administrative, or professional workers at the Taxpayer’s Headquarters who perform
[EXAMPLES OF EMPLOYMENT FUNCTIONS] in support of all business operations are
“headquarters staff employees” as defined under TENN. CODE ANN. § 67-6-224(b)(5) (Supp.
2010). Executive, administrative, or professional workers involved in the management or
supervision of [EXAMPLES OF EMPLOYMENT FUNCTIONS] are “headquarters staff
employees” if the workers are assigned to the Headquarters. Provided that these jobs pay at least
150% of the state’s average occupational wage for the month of January of the year in which
they are created, such jobs will qualify as “qualified jobs” for purposes of the additional annual
job tax credit under TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) (Supp. 2010).

6

For a taxpayer to be eligible for the additional annual job tax credit, TENN. CODE ANN. § 67-4-2109(b)(2) requires
that the Taxpayer meet the requirements for the “basic” job tax credit set forth under TENN. CODE ANN. § 67-42109(b)(1).
7

[REDACTED].

5

TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) provides that if “the investment exceeds ten million
dollars ($10,000,000) and at least one hundred (100) qualified jobs are created that also meet the
definition of headquarters staff employees under TENN. CODE ANN. § 67-6-224 and pay at least
one hundred fifty percent (150%) of the state’s average occupational wage for the month of
January of the year in which the jobs are created, the additional annual credit shall be allowed for
a period of three (3) years beginning with the first tax year after the initial job tax credit is
created.”
Thus, for the Taxpayer to be eligible for the additional annual job tax credit available under
TENN. CODE ANN. § 67-4-2109(b)(2)(B)(vi), the Taxpayer must create at least 100 qualified jobs,
which must meet the definition of “headquarters staff employees” under Tenn. Code Ann. § 676-224. Additionally, the qualified jobs must pay at least 150% of the state’s average occupational
wage for the month of January of the year in which the jobs are created.
TENN. CODE ANN. § 67-6-224(b)(5) (Supp. 2010) provides that “headquarters staff employees”
means “executive, administrative, or professional workers performing headquarters-related
functions and services.” TENN. CODE ANN. § 67-6-224(b)(5) further provides that an “executive
employee is a full-time employee who is primarily engaged in the management of all or part of
the enterprise. An administrative employee is a full-time employee who is not primarily involved
in manual work and whose work is directly related to management policies or general
headquarters operations. A professional employee is an employee whose primary duty is work
requiring knowledge of an advanced type in a field of science or learning. This knowledge is
characterized by a prolonged course of specialized study.”
The employees described by the Taxpayer are properly characterized as “headquarters staff
employees” under TENN. CODE ANN. § 67-6-224(b)(5). The Taxpayer has indicated that it has
created positions at its Headquarters in the areas of [EXAMPLES OF EMPLOYMENT
FUNCTIONS]. Such positions generally support all business operations. Specifically with
respect to workers who are involved in the management or supervision of [EXAMPLES OF
EMPLOYMENT FUNCTIONS], such positions are “headquarters staff employees” if the
workers are assigned to the Headquarters.
Therefore, provided that the jobs also pay at least 150% of Tennessee’s average occupational
wage for the month of January of the year in which they are created, such jobs will qualify as
“qualified jobs” for purposes of the additional annual job tax credit under TENN. CODE ANN.
§ 67-4-2109(b)(2)(B)(v).
3.

Determination of number of Headquarters staff jobs

The Taxpayer should count the Headquarters staff jobs added beginning [DATE – BEGINNING
OF INVESTMENT PERIOD], to determine the number of “qualified jobs” created in Tennessee
during the investment period for purposes of TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) (Supp.
2010).
TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) provides that if “the investment exceeds ten million
dollars ($10,000,000) and at least one hundred (100) qualified jobs are created that also meet the
definition of headquarters staff employees under TENN. CODE ANN. § 67-6-224 and pay at least
one hundred fifty percent (150%) of the state’s average occupational wage for the month of
6

January of the year in which the jobs are created, the additional annual credit shall be allowed for
a period of three (3) years beginning with the first tax year after the initial job tax credit is
created.”
In other words, the Taxpayer must determine the number of qualified jobs that meet the
requirements of TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) that were created during the
investment period. The term “investment period” means “the period during which qualified jobs
are created as a result of the required capital investment; provided, however, that the period shall
not exceed three (3) years from the effective date of the business plan.” TENN. CODE ANN. § 674-2109(a)(4). The taxpayer is also allowed a period not to exceed three years from the effective
date of the business plan in order to make the required capital investment necessary to qualify for
the additional annual credit. TENN. CODE ANN. § 67-4-2109(b)(2)(B)(vii). However, if
determined to be in the best interests of the state, the three-year period for making the required
investment may be extended by the Commissioner of Economic and Community Development
for a reasonable period not to exceed two additional years, or four additional years if the
investment exceeds one billion dollars. Id.
The Taxpayer’s business plan provides for an investment period of [DATE], through [DATE].
Thus, the Taxpayer should count the Headquarters staff jobs added beginning [DATE –
BEGINNING OF INVESTMENT PERIOD], to determine the number of “qualified jobs”
created in Tennessee during the investment period.
4.

Compensation requirements

The compensation requirement for each qualified job created by the Taxpayer for purposes of the
additional annual job tax credit under TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) is at least
150% of Tennessee’s average occupational wage for the month of January of the year in which
the job is created.
TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) provides that if “the investment exceeds ten million
dollars ($10,000,000) and at least one hundred (100) qualified jobs are created that also meet the
definition of headquarters staff employees under TENN. CODE ANN. § 67-6-224 and pay at least
one hundred fifty percent (150%) of the state’s average occupational wage for the month of
January of the year in which the jobs are created, the additional annual credit shall be allowed for
a period of three (3) years beginning with the first tax year after the initial job tax credit is
created.”
One must therefore determine Tennessee’s average occupational wage for the month of January
of the year in which a particular job is created. The job will count toward the creation of at least
100 jobs for purposes of TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) if it pays at least 150% of
Tennessee’s average occupational wage for the month of January of the year in which it was
created.
[REDACTED].
5.

Year in which Taxpayer may claim job tax credits

The Taxpayer will be eligible to begin claiming the $5,000 “basic” job tax credit under TENN.
CODE ANN. § 67-4-2109(b)(1) (Supp. 2010) (as enhanced by TENN. CODE ANN. § 67-47

2109(b)(3)(A)) in the taxable year in which it made the required capital investment and created a
total of 25 qualified jobs, provided that such investment is made and such jobs are created within
twelve months of the effective date of the business plan. Provided that the Taxpayer has met the
statutory requirements, the Taxpayer shall be allowed to claim the $5,000 additional annual job
tax credit under TENN. CODE ANN. § 67-4-2109(b)(2)(B) for a period of three years beginning
with the first tax year after the initial job tax credit is created.
As noted above, TENN. CODE ANN. § 67-4-2109(b)(1)(A) generally provides that, if certain
conditions are met, a taxpayer may take a “basic” job tax credit against its Tennessee franchise
and excise tax liability in the amount of $4,500 for each qualified job created during the
investment period. TENN. CODE ANN. § 67-4-2109(b)(3)(A) provides that the $4,500 credit
allowed under TENN. CODE ANN. § 67-4-2109(b)(1) will be increased to $5,000 per job if the
taxpayer qualifies for the additional annual credit allowed in TENN. CODE ANN. § 67-42109(b)(2)(B). In order to qualify for the credit, the qualified business enterprise must, within
twelve months of the effective date of the business plan, make the required capital investment
and create at least 25 qualified jobs. TENN. CODE ANN. § 67-4-2109(b)(1)(C).
An additional annual job tax credit is allowed under TENN. CODE ANN. § 67-4-2109(b)(2). TENN.
CODE ANN. § 67-4-2109(b)(2)(B)(vi) states that an additional annual credit of $5,000 per job will
be allowed with respect to jobs described in TENN. CODE ANN. § 67-4-2109(b)(2)(B)(i)-(v). In
particular, TENN. CODE ANN. § 67-4-2109(b)(2)(B)(v) provides that if “the investment exceeds
ten million dollars ($10,000,000) and at least one hundred (100) qualified jobs are created that
also meet the definition of headquarters staff employees under § 67-6-224 and pay at least one
hundred fifty percent (150%) of the state’s average occupational wage for the month of January
of the year in which the jobs are created, the additional annual credit shall be allowed for a
period of three (3) years beginning with the first tax year after the initial job tax credit is
created.” Note that the qualified jobs must remain filled during the year in which the credit is
being taken. TENN. CODE ANN. § 67-4-2109(b)(2)(B)(vi).
6.

Percentage of job tax credit available

The “basic” job tax credit cannot exceed 50% of the Taxpayer’s combined Tennessee franchise
and excise tax liability shown on the return before any credit is taken. However, the additional
annual job tax credit may be used to offset up to 100% of the Taxpayer’s Tennessee franchise
and excise tax liability for that year.
TENN. CODE ANN. § 67-4-2109(b)(1)(D) (Supp. 2010) provides that the “basic” job tax credit
“shall apply against the franchise tax imposed by this part and the excise tax imposed by part 20
of this chapter; provided, however, that the credit, together with any carry-forward thereof, taken
on any franchise and excise tax return shall not exceed fifty percent (50%) of the combined
franchise and excise tax liability shown on the return before any credit is taken.” Any unused
“basic” job tax credit may be carried forward in any tax period until the credit is taken; provided,
however, that the credit may not be carried forward for more than fifteen years. TENN. CODE
ANN. § 67-4-2109(b)(1)(D).
TENN. CODE ANN. § 67-4-2109(b)(2)(B)(vi) provides that the “annual credit may be used to
offset up to one hundred percent (100%) of the taxpayer’s franchise and excise tax liability for

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that year.” Any unused additional annual job tax credit, however, shall not be carried forward
beyond the year in which the credit originated. TENN. CODE ANN. § 67-4-2109(b)(2)(B)(vi).
Because no carryforward is available with respect to the additional annual job tax credit, the
Taxpayer should utilize that credit first in the taxable years in which it is available.
[REDACTED].

Kristin Husat
Senior Tax Counsel

APPROVED:

Richard H. Roberts
Commissioner of Revenue

DATE:

June 6, 2011

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