Tennessee State Tax Protest — Franchise & Excise Tax / Business Tax

TENNESSEE STATE TAX PROTEST — FRANCHISE & EXCISE TAX / BUSINESS TAX

TABLE OF CONTENTS

1. Cover and Filing Information
2. Identification of Taxpayer and Assessment
3. Request for Informal Conference
4. Statement of Disputed Issues
5. Substantive Grounds for Protest
6. Computation of Correct Tax
7. Documentary Evidence
8. Relief Requested
9. Reservation of Rights
10. Verification
11. Certificate of Service
12. Tennessee Practice Notes
13. Sources and References

1. COVER AND FILING INFORMATION

TENNESSEE DEPARTMENT OF REVENUE — HEARING OFFICE

500 Deaderick Street

Nashville, Tennessee 37242

Telephone: (615) 741-3810

Email: [email protected]

Re: Notice of Proposed Assessment No. [________________________________]

Tax Type: ☐ Excise Tax ☐ Franchise Tax ☐ Business Tax ☐ Other: [____________]

Tax Period(s): [__/__/____] through [__/__/____]

Date of Notice: [__/__/____]

Date of This Protest: [__/__/____]

2. IDENTIFICATION OF TAXPAYER AND ASSESSMENT

2.1. Taxpayer Name: [________________________________]

2.2. Trade Name / d/b/a (if any): [________________________________]

2.3. Tennessee Account Number: [________________________________]

2.4. FEIN / SSN: [________________________________]

2.5. Entity Form: ☐ C-Corporation ☐ S-Corporation ☐ LLC (single-member) ☐ LLC (multi-member) ☐ Limited Partnership ☐ General Partnership ☐ Sole Proprietor ☐ Other: [____________]

2.6. Principal Office Address: [________________________________]

2.7. Tennessee Mailing Address (if different): [________________________________]

2.8. Taxpayer's Authorized Representative:

• Name: [________________________________]
• Firm: [________________________________]
• Tennessee Bar No. / CPA License No.: [____________]
• Address: [________________________________]
• Telephone: [____________]
• Email: [________________________________]
• Power of Attorney (Form RV-F0103801) attached: ☐ Yes ☐ No

2.9. Assessment Summary as Issued by Department:

2.10. Amount Disputed: $[____________] (☐ entire assessment / ☐ partial — see Section 4)

3. REQUEST FOR INFORMAL CONFERENCE

Pursuant to T.C.A. § 67-1-1438 and the Tennessee Taxpayer Bill of Rights at T.C.A. § 67-1-110, the above-named Taxpayer respectfully requests an Informal Conference with the Commissioner of Revenue or the Commissioner's designated Hearing Officer to review the Notice of Proposed Assessment identified above.

This request is made in writing within thirty (30) days of the date of the Notice of Proposed Assessment.

3.1. Format Preference: ☐ In person at 500 Deaderick Street, Nashville ☐ Telephone ☐ Videoconference ☐ Written submission only

3.2. Estimated Length: [____] hours

3.3. Witnesses to Be Presented: [________________________________]

3.4. Interpreter Required: ☐ No ☐ Yes — Language: [____________]

4. STATEMENT OF DISPUTED ISSUES

The Taxpayer disputes the Proposed Assessment on the following grounds (check all that apply):

Franchise & Excise Tax Issues:

• ☐ Nexus — Taxpayer lacks substantial nexus with Tennessee under Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), and the Commerce Clause.
• ☐ Apportionment — The Department's apportionment factors (property, payroll, receipts) are incorrect under T.C.A. § 67-4-2012.
• ☐ Net Earnings / Net Worth Base — The franchise-tax base under T.C.A. § 67-4-2106 is overstated; or the excise-tax base under T.C.A. § 67-4-2006 is overstated.
• ☐ Federal-Income Conformity — Tennessee starting point (federal taxable income) is incorrectly computed.
• ☐ Add-backs / Deductions — Disputed item: [________________________________]
• ☐ Family-Owned Non-Corporate Entity (FONCE) exemption (T.C.A. § 67-4-2008(a)(11)).
• ☐ Obligated Member Entity (OME) exemption / disregarded-entity treatment.
• ☐ Manufacturer / industrial-machinery credit (T.C.A. § 67-4-2009).
• ☐ Job tax credit (T.C.A. § 67-4-2109).
• ☐ Statute of limitations — assessment is barred by T.C.A. § 67-1-1501.
• ☐ Penalty abatement under T.C.A. § 67-1-803 (reasonable cause).

Business Tax Issues:

• ☐ Misclassification — Taxpayer's dominant business activity falls in a different classification under T.C.A. § 67-4-708.
• ☐ Wholesale vs. retail rate determination — T.C.A. § 67-4-709.
• ☐ Deductions — disputed item: [________________________________] (T.C.A. § 67-4-711).
• ☐ Local business-tax computation — T.C.A. § 67-4-704.
• ☐ Exempt receipts wrongly included.
• ☐ Minimum tax / standard-deduction calculation.

Other Issues:

• ☐ Mathematical / clerical error in the assessment.
• ☐ Department failed to credit prior payments.
• ☐ Notice and due-process defects.
• ☐ Other: [________________________________]

5. SUBSTANTIVE GROUNDS FOR PROTEST

5.1. Factual Background

5.1.1. Taxpayer is a [________________________________] organized under the laws of [____________] on [__/__/____].

5.1.2. Taxpayer's principal business activity is [________________________________].

5.1.3. During the tax periods at issue, Taxpayer's Tennessee activity consisted of [________________________________].

5.1.4. Taxpayer timely filed Tennessee [☐ Form FAE 170 / ☐ Form BUS 415 / ☐ Other [______]] returns reporting [________________________________].

5.1.5. The Department conducted an audit beginning [__/__/____] resulting in the Notice of Proposed Assessment dated [__/__/____].

5.2. Legal Argument

5.2.1. Statutory Authority Limits the Assessment. T.C.A. § 67-4-2007 imposes the excise tax only on entities "doing business" in Tennessee. T.C.A. § 67-4-2105 imposes franchise tax only on entities exercising the corporate franchise or doing business in Tennessee. The Department bears the burden of establishing nexus before assessment. J.C. Penney National Bank v. Johnson, 19 S.W.3d 831 (Tenn. Ct. App. 1999).

5.2.2. Apportionment Must Fairly Reflect Tennessee Activity. Under T.C.A. § 67-4-2012, the standard three-factor formula (property, payroll, receipts triple-weighted) must fairly reflect the taxpayer's business in Tennessee. Hartman v. Stanton Indus., 568 S.W.2d 821 (Tenn. 1978). Distortion permits relief under § 67-4-2014.

5.2.3. Conformity to Federal Computation. Net earnings for excise-tax purposes start with federal taxable income before NOL and special deductions. T.C.A. § 67-4-2006(a). The Department's adjustments to [________________________________] are not authorized add-backs and must be removed.

5.2.4. Statutory Exemption Applies. [Identify exemption — e.g., FONCE under T.C.A. § 67-4-2008(a)(11)]. Taxpayer satisfies each element of the exemption because [________________________________].

5.2.5. Business-Tax Classification Determined by Dominant Activity. T.C.A. § 67-4-708 requires classification according to the "dominant business activity" — the major and principal source of taxable gross sales. T.C.A. § 67-4-702(a). Taxpayer's gross sales were derived [____]% from [activity A] and [____]% from [activity B], placing Taxpayer in Classification [__] rather than Classification [__].

5.2.6. Penalty Should Be Abated for Reasonable Cause. T.C.A. § 67-1-803 authorizes the Commissioner to waive penalties upon a showing of reasonable cause and the absence of willful neglect. Taxpayer's reliance on [________________________________] establishes reasonable cause.

5.2.7. Statute of Limitations Bars Portions of the Assessment. T.C.A. § 67-1-1501 generally bars assessment more than three (3) years after the return was filed (six years for substantial underreporting; unlimited for fraud). The Department's assessment for [period] was issued on [date], more than [____] years after the return was filed, and is time-barred.

6. COMPUTATION OF CORRECT TAX

6.1. Workpapers Supporting Correct Computation: See Exhibit [____].

6.2. Apportionment Recalculation (if applicable): See Exhibit [____].

7. DOCUMENTARY EVIDENCE

The following documents are submitted in support of this Protest and incorporated by reference:

• ☐ Exhibit A — Notice of Proposed Assessment dated [__/__/____].
• ☐ Exhibit B — Tennessee Form FAE 170 / BUS 415 (as filed) for periods at issue.
• ☐ Exhibit C — Federal Form 1120 / 1120-S / 1065 with all schedules.
• ☐ Exhibit D — Apportionment workpapers (property, payroll, receipts).
• ☐ Exhibit E — Audit workpapers and IDR responses.
• ☐ Exhibit F — Articles of Organization / Charter / Operating Agreement.
• ☐ Exhibit G — Power of Attorney (Form RV-F0103801).
• ☐ Exhibit H — Computation of correct tax with supporting schedules.
• ☐ Exhibit I — Letter Ruling(s) / Important Notices relied upon.
• ☐ Exhibit J — Affidavits of [________________________________].
• ☐ Exhibit K — Other: [________________________________].

8. RELIEF REQUESTED

WHEREFORE, the Taxpayer respectfully requests that the Commissioner:

• A. Schedule an Informal Conference at the earliest convenient date;
• B. Withdraw the Notice of Proposed Assessment in its entirety, or in the alternative, abate the disputed portion in the amount of $[____________];
• C. Abate all penalties on the ground of reasonable cause under T.C.A. § 67-1-803;
• D. Issue a written determination consistent with the relief sought; and
• E. Grant such further relief as is just and proper under T.C.A. § 67-1-110 and § 67-1-1438.

9. RESERVATION OF RIGHTS

9.1. Taxpayer reserves the right to supplement this Protest, to assert additional grounds, to submit additional documentary evidence, and to call additional witnesses at or before the Informal Conference.

9.2. Nothing herein shall be construed as a waiver of any right to:

• File suit in the Chancery Court of Davidson County or in the appropriate county chancery court within ninety (90) days after any final assessment, pursuant to T.C.A. § 67-1-1801;
• File a refund claim under T.C.A. § 67-1-1802 within three (3) years from December 31 of the year in which payment was made;
• Petition for declaratory order under T.C.A. § 4-5-223; or
• Pursue any other administrative or judicial remedy now or hereafter available.

10. VERIFICATION

STATE OF TENNESSEE

COUNTY OF [____________]

I, [________________________________], being first duly sworn under penalties of perjury, depose and say that I am the [☐ Taxpayer / ☐ Officer / ☐ Member / ☐ Authorized Representative] of the Taxpayer named in this Protest; that I have read the foregoing Protest; and that the statements contained therein are true and correct to the best of my knowledge, information, and belief.

[________________________________]

[NAME], [TITLE]

Sworn to and subscribed before me this [____] day of [_______________], 20[____].

[________________________________]

Notary Public

My Commission Expires: [_______________]

11. CERTIFICATE OF SERVICE

I hereby certify that on the [____] day of [_______________], 20[____], a true and correct copy of the foregoing PROTEST AND REQUEST FOR INFORMAL CONFERENCE was served upon the Tennessee Department of Revenue by:

• ☐ Hand delivery to the Hearing Office, 500 Deaderick Street, Nashville, TN 37242;
• ☐ United States Postal Service, certified mail, return receipt requested, postage prepaid;
• ☐ Email to [email protected] (with read receipt);
• ☐ The Department's TNTAP electronic portal at tntap.tn.gov.

[________________________________]

[ATTORNEY / REPRESENTATIVE NAME]

12. TENNESSEE PRACTICE NOTES

• No general personal income tax. Tennessee has no broad-based personal income tax. The Hall Income Tax on dividends and interest (T.C.A. §§ 67-2-101 et seq.) was fully repealed for tax years beginning on or after January 1, 2021. Wage income has never been subject to a Tennessee state tax. Do not draft current-year personal-income-tax protests; redirect to F&E or BT as applicable.
• Franchise & Excise Tax framework. Excise tax (T.C.A. §§ 67-4-2001 et seq., Pt. 20) is a 6.5% tax on net earnings. Franchise tax (T.C.A. §§ 67-4-2101 et seq., Pt. 21) is a 0.25% tax on the greater of net worth or the book value of real and tangible personal property in Tennessee, with a $100 minimum. Both apply to corporations, LLCs, LPs, business trusts, and other limited-liability entities; general partnerships are excluded because they lack limited liability. The 2024 Tennessee Works Tax Act and 2024 Public Chapter 950 eliminated the property-base alternative going forward and authorized refunds for prior years; verify current-year base computation.
• Business Tax framework. The Business Tax (T.C.A. §§ 67-4-701 et seq., Pt. 7) is a state-administered, locally-shared gross-receipts tax with five classifications and separate wholesale/retail rates within each. Classification follows "dominant business activity" — the major source of taxable gross sales (T.C.A. § 67-4-702(a)(5)).
• Three-tier remedy structure. Tennessee tax controversies follow a defined sequence: (1) Notice of Proposed Assessment → (2) 30-day window to request Informal Conference under T.C.A. § 67-1-1438 → (3) written Commissioner's decision (final assessment) → (4) 90-day window to file suit in chancery court under T.C.A. § 67-1-1801, OR pay-and-refund route under § 67-1-1802 (3-year window from Dec. 31 of payment year).
• Informal conference is not a contested case. T.C.A. § 67-1-1438(d) expressly excludes the conference from the Uniform Administrative Procedures Act. There is no on-the-record hearing, no formal rules of evidence, and no automatic right of appeal within the Department. The Hearing Officer's role is reviewing — not deciding contested case under T.C.A. Title 4, Ch. 5.
• Burden of proof. Once an assessment is issued, the burden generally shifts to the taxpayer to establish error. T.C.A. § 67-1-1438(g). Build the record with workpapers, contracts, federal returns, and affidavits.
• Penalty abatement. T.C.A. § 67-1-803 permits waiver of penalty for reasonable cause; interest under T.C.A. § 67-1-801 is generally non-waivable.
• Statute of limitations. Three (3) years from filing under T.C.A. § 67-1-1501; six (6) years if 25% or more of tax is omitted; unlimited where fraud or no return.
• Voluntary Disclosure. Taxpayers with unfiled returns may pursue Voluntary Disclosure under Department procedures (Important Notice 17-19 and successors), generally limiting look-back to three years and waiving most penalties.
• TNTAP. The Tennessee Taxpayer Access Point (tntap.tn.gov) is the Department's electronic filing and protest portal. Many filings, payments, and the NOPA acknowledgment are processed through TNTAP.
• Chancery court venue. Suits under T.C.A. § 67-1-1801 may be filed in the chancery court of the county where the taxpayer resides or maintains its principal place of business in Tennessee, or in Davidson County.

13. SOURCES AND REFERENCES

• T.C.A. Title 67 (Taxes and Licenses) — https://www.capitol.tn.gov/
• T.C.A. § 67-1-110 (Taxpayer Bill of Rights)
• T.C.A. § 67-1-1438 (Informal Conference) — https://law.justia.com/codes/tennessee/title-67/chapter-1/part-14/section-67-1-1438/
• T.C.A. § 67-1-1501 (Limitation on assessment)
• T.C.A. §§ 67-1-1801 to 67-1-1808 (Taxpayer Remedies for Disputed Taxes) — https://law.justia.com/codes/tennessee/title-67/chapter-1/part-18/section-67-1-1801/
• T.C.A. §§ 67-4-2001 et seq. (Excise Tax Law of 1999)
• T.C.A. §§ 67-4-2101 et seq. (Franchise Tax)
• T.C.A. §§ 67-4-701 et seq. (Business Tax Act)
• Tennessee Department of Revenue — https://www.tn.gov/revenue
• Hearing Office — Request an Informal Conference — https://www.tn.gov/revenue/tax-resources/compliance-information/request-an-informal-conference.html
• Franchise and Excise Tax Manual (current edition) — https://www.tn.gov/revenue/tax-resources/tax-manuals.html
• Business Tax Manual — https://www.tn.gov/revenue/tax-resources/tax-manuals.html
• Hall Income Tax Repeal (HIT-3) — https://revenue.support.tn.gov/hc/en-us/articles/360057828631-HIT-3-Hall-Income-Tax-Repealed-Beginning-January-1-2021
• TNTAP Portal — https://tntap.tn.gov
• J.C. Penney National Bank v. Johnson, 19 S.W.3d 831 (Tenn. Ct. App. 1999)
• Hartman v. Stanton Indus., 568 S.W.2d 821 (Tenn. 1978)
• Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977)
• South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018)

Disclaimer: This template is provided for informational purposes only and does not constitute legal advice. A Tennessee-licensed attorney or CPA must review and customize this document for the specific assessment, taxpayer, and audit record before filing. Tennessee tax statutes, rules, Department policies, and Letter Rulings change frequently; verify all authorities through the Tennessee Code Annotated and the Tennessee Department of Revenue before use.