Tennessee Taxpayers Association

During the past and current Legislative Sessions, the local and State governmental agencies introduced legislation to add a single word to the statutes regarding the filing of  Tangible Personal Property Returns for property taxes.

That one word was “timely”.

The legislation passed (unopposed) and the word “timely” was inserted before the word “filed” in the statutes regarding amended property schedules and automatic application of appraisal ratios. 

If a taxpayer does file the tax schedule after March 1st, the typical procedure is for the county board of equalization to accept the schedule and value the property in the same manner as the timely filed schedules. The taxpayer usually has until June to file these late schedules with the county boards.

Here are the adverse effects to the taxpayers as a result of the legislative change:

1. If a taxpayer files the schedule timely (before March 1st), that taxpayer may correct any errors made by filing an amended schedule before September 1st of the following year. If the schedule is filed after March 1st, the taxpayer may not file an amended schedule at all and no errors may be corrected. If the errors are discovered after the county board deadline in June, there is no way for corrections to be made or for the taxpayer to receive a refund of the erroneous taxes.

 

2. If the Assessor of Property makes an audit of a “timely” filed schedule, the Assessor is limited to only auditing back one year. If the schedule is not filed “timely”, the Assessor may audit and increase assessments as far back as three years. This is a major financial change against the taxpayers.

 

3. Assessments resulting from “timely” filed schedules are eligible for automatic application of the appraisal ratio. The appraisal ratio is a percentage calculated by the State for each county. It is based upon a comparison of real estate sale prices and the Assessor’s appraisals. For example, in Nashville for 2008 the appraisal ratio was .8380. In Shelby County the ratio was .9330. Therefore, the assessment and taxes resulting from a “timely” filed schedule received an automatic reduction of 16.2% in Davidson County and 6.7% in Shelby County. If the schedule is filed even one day late, the taxpayer does not receive these reductions.

 

All these new enactments simply amount to hidden tax increases and a means to gain more tax dollars from audits. The Taxpayers become trapped and cannot escape erroneous assessments and taxes.

Extensions for filing the schedules are not available to the taxpayers in order that they may avoid these harsh hidden tax increases and tremendous loss of rights. This is extremely unfair to the taxpayers. The filing date of March 1st if very early compared to most states and most states do allow extensions to file without penalties. Tennessee is not tax friendly in that regard.

In addition, unbelievably, taxpayers who do not file tangible personal property schedules at all may be better off than those who file after the deadline of March 1st and  filed with the county boards of equalization that meet in June.

This resulted from a separate bill passed this year in which the Legislature approved legislation to permit  taxpayers, who failed to file any schedules at all for up to two years and received forced assessments, to file the very late schedules. If the assessments were excessive, the assessments were adjusted and refunds were issued less a penalty (25% of the reduction in taxes). Refunds, less penalties, are also available to these types of taxpayers if the forced assessments are audited and found excessive.

However, those taxpayers who actually filed schedules, but filed them after March 1st with the county boards of equalization, suffer penalties of 100% because no amended returns may be filed if mistakes were made in the original filing. In addition, if the account is audited and found to be over-assessed, those taxpayers are not eligible for any refunds.

by continuing to file inconsistent hidden tax seeking legislation, the local and State governmental agencies have created a very unfair tangible personal property assessment system in Tennessee.

Tennessee Taxpayers Association will be there in the future to keep such bad legislation from passing and also plans to have bills filed to correct some of these inequities.

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Lobbyists get a bad rap when it comes to publicity. 

The press seems to blame any corruption or bad legislation mainly on the lobbyists.  Frankly, I have never read any good things that were printed in press articles which referred to lobbyists.

When there is reform due to some public corruption, the lobbyists usually wind up more restricted than the public office holders. 

This is why the public perception of lobbyists is so low.

We should feel differently.  Lobbyists are good for our system.  They serve the people.

They represent and make known to the Legislators the point of view and needs of their employers.  This needs to be done.  How else are the Legislators going to find out how a bill will affect the people or a segment of our society.   

With over 2,000 bills filed in the Legislature, the Senators and Representatives do not have time to read these bills.  Even reading them may not explain what a bill will actually do.  

To fully comprehend the effects of a bill, it is necessary that each law affected must be researched.  Then, often the punch line is missed, the hidden agenda, or the real purpose of the bill.

Therefore, the Legislators need lobbyists to explain the proposed legislation and how it will affect people.

Of course, just like any other profession or occupation, there are always a few bad apples in the barrel.  That will always be true.

However, lobbyists are good and honorable people who gain credibility by telling the truth to the Legislators. 

Once a Legislator has found out a lobbyist’s statements were misleading, the Legislator has lost reliance upon that particular Legislator.  Therefore, lobbyists must tell it like it is or they will lose their credibility and effectiveness and the Legislators no longer will listen.

There are all kinds of lobbyists.   There are large lobbyist firms with long client lists, small individual lobbyists, and in house lobbyists for Associations and Corporations.  

If these are all paid to lobby Legislators or the Administration, they must register with the Tennessee Ethics Commission which regulates them and their employers to ensure no illegal monies are paid or illegal activities take place.   The Commission polices the industry.

In Tennessee it is difficult and expensive to be a lobbyist.  It used to be easy.  Pay$25 and that was just about it.  The lobbyists were required to report their annual contributions to any Legislators and they were made public. 

The lobbyist laws are complex now and it is so difficult and regulated that some Legislators have even considered doing away with the Tennessee Ethics Commission and starting all over again.

Now, who uses lobbyists?  From the long list of employers registered with the Ethics Commission, the list is a cross segment of our society.   All types of special interest associations, corporations, individuals, and governments.

Therefore, we all directly or indirectly rely upon lobbyists to tell our story and protect our interests in the government process.

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Each year there are Legislators who have good intentions to try to help the taxpayers get relief from unfair taxing procedures or exorbitant taxes.

The government agencies have a magnificent defense against these types of bills.  It is called a “Fiscal Note” and it is attached to each bill for all legislators to read .  A fiscal note is an estimate of what it will cost the government if the bill passes. 

Most of the estimates are way over the top and designed to kill the bill.  It works.  The Legislators collectively do not want to be responsible for breaking the government.   Of course, these bills will not do that, but the Fiscal Notes are so high that it scares them from voting for any one of these types of bills.

Some of the good bills that would have really helped the taxpayers are listed below.  However, none ever  had a chance of passing because of the high fiscal notes.

SB0082 / HB 984 – Increase Exemption on Hall Income Tax

This bill would have increased the Hall Income Tax exemption limit for persons over 65.  A single filer’s limit would increase from $16,200 to $30,000 and  joint filer’s from $27,000 to $60,000.

The Hall tax is an income tax on people who receive dividends and interest.   Some dividends and interest are exempt from the tax, but most are not.

Many retirees over 65 years of age depend on dividend and interest income.   Retirees need to keep the money to live on, yet the government just keeps on taking.  

Bill Sponsors:  Sen. Stanley and Rep. McManus

SB0046 / HB 116 – Appeals to Courts from Administrative Agencies shall be de novo.

This bill would change the system of appeals .   At the present time, the system for most agencies is Judicial Review.  This means the court can only review the record made at the administrative agency and cannot accept any new evidence,

Judicial Review system is repressive to the parties involved and enhances the powers of administrative agencies.   Courts should have the power to consider new evidence at the first level of court. In this case, usually Chancery Court.

Bill Sponsors:   Sen. Bunch and Rep. Bell

SB 0574 / HB 594 – Increase Exemption for Inheritance Tax

This bill was filed to increase the maximum exemption amount from $1,000,000 to $3,500,000 beginning with 2009.

This is a good bill, but no chance in passing because of the loss in revenue.

Bill Sponsors:  Sen. Jackson and Rep. Coleman

The next bill is an even better one.

SB 0696 / HB 1540 – Phasing Out Inheritance Tax

This completely phases out  the inheritance tax beginning with 2010 so that by 2014, there is no inheritance tax.

Bill Sponsors:  Sen. Southerland and Rep. Litz. 

SB0561 / HB 953 - Hall Income Tax Deduction for Long Term Care

This bill was worthy.   It allowed the taxpayer to deduct the cost of long term care insurance premiums.

The fiscal note for each year’s cost was $ 2,464,000 for State and $1,478,400 for local governments.

Can you imagine? 

Bill Sponsors:  Sen. Norris and Rep. Harwell

SB 785 / HB 1878 - Increase Gift Tax Exemption

This bill would have made all donees the subject to the same tax rates and would have increased the gift tax exemption to that level allowed by the Federal Government for gift tax purposes.  Presently the exemption level for the State gift tax is significantly less than the Federal gift tax exemption

Bill Sponsors:  Senator Overbey and Rep. McDaniel

SB 750 / HB 559 -  Permits voters to approve  tax rate increases by refendum.

Bill Sponsors:  Sen. J. Johnson and Rep. Kelsey

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