Recently the Tennessee Department of Revenue adopted a new policy relating to entities with limited liability such as LLCs, LLPs, Limited Partnerships, etc.  These entities previously have been exempt from the Tennessee Franchise and Excise Tax if they meet certain tests.  If they qualify for the "exception," they are now required to file a form each year stating the reason they are exempt. 

As a brief summary of the law, Tennessee Franchise and Excise Tax applies to most all limited liability entities.  There is an exception for certain family owned entities.  Family owned entities must be 95% or more owned by members of the same family.  In addition for the exemption to apply, 66.67% of the income of the entity must be from passive sources such as dividends, interest and rentals.  Previously, the entity merely needed to write a letter to the Department of Revenue indicating that they were eligible for the exemption.  No further action was needed.  Now a form has to be filed every year by April 15.  The first form should be filed by April 15, 2008.  If you are not eligible for the exemption, there is no need to file the form. 

For your convenience, we have attached a link to the form.  If you any questions or need additional information, please contact a member of our Taxation & Estate Preservation Group.