67-6-232 - Credit for establishing a qualified facility to support an emerging industry or a major cultural attraction. - Tennessee Statutes

67-6-232. Credit for establishing a qualified facility to support an emerging industry or a major cultural attraction.

(a)  A taxpayer that establishes a qualified facility to support an emerging industry or a major cultural attraction in this state shall be eligible for a credit of all the state sales or use taxes paid to the state of Tennessee, except tax at the rate of one half percent (0.5%), on the sale or use of qualified tangible personal property.

(b)  For purposes of this section, the following definitions shall apply:

     (1)  “Emerging industry” means an industry that promotes high-skill, high-wage jobs in high-technology areas, emerging occupations or clean energy technology, including, but not limited to, clean energy technology research and development and installation, as determined by the commissioner of revenue and the commissioner of economic and community development, in a manner prescribed by the department of revenue. Emerging industry can include those primarily engaged in manufacturing clean energy technology. For the purposes of this section, clean energy technology means technology resulting in energy efficiency, technology used to generate energy from biomass, geothermal, hydrogen, hydropower, landfill gas, nuclear, solar and wind sources, and technology that is designed to result in the development of advanced coal through carbon capture and sequestration or otherwise any other manner that significantly reduces carbon dioxide emissions per unit of energy generated. Notwithstanding any other provision of this section, businesses engaged in the development and construction of coal fired power plants shall not be eligible for the emerging industry tax credit. The credit provided under this section shall apply only if the commissioner of revenue and the commissioner of economic and community development have determined that allowance of the credit is in the best interests of the state. For purposes of this section, “best interests of the state” includes, but is not limited to, a determination that the taxpayer made the minimum investment as a result of the credit. “High-wage” means any wage equal to or greater than the wage described in subdivision (b)(5).

     (2)  “Full-time employee position” means a permanent, rather than seasonal or part-time, position at a qualified facility, for at least twelve (12) consecutive months, for at least thirty-seven and one half (37.5) hours per week, with minimum health care, as described in title 56, chapter 7, part 22, that is new to the state of Tennessee, and further, that, for at least ninety (90) days prior to being filled by the taxpayer, the position did not exist in Tennessee as a position of the taxpayer or of another business entity. The full-time employee position at the qualified facility must be created and filled within the investment period. An employee in a new full-time employee position may be placed at a temporary location in this state, pending completion of construction or renovation work at the qualified facility;

     (3)  “Investment period” means the period beginning one (1) year prior to the start of the construction, expansion, or remodeling, and ending three (3) years after substantial completion of the construction, expansion, or remodeling of the qualified facility. However, in no event shall the investment period exceed eight (8) years;

     (4)  “Major cultural attraction” means a historical site that has been in existence for at least twenty-five (25) years that attracts at least five hundred thousand (500,000) tourists per year and significantly contributes to the state's tourism industry as determined by the commissioner of revenue and the commissioner of economic and community development, but shall not include any theme park or trade show facility;

     (5)  (A)  “Minimum investment” means a minimum investment in a qualified facility by the taxpayer and lessor to the taxpayer of one hundred million dollars ($100,000,000) or more in a building or buildings, either newly constructed, expanded, or remodeled, along with the creation of not less than fifty (50) full-time employee positions, created primarily for the support of the operations at the qualified facility during the investment period, that pay at least one hundred fifty percent (150%) of Tennessee's average occupational wage, as defined in § 67-4-2004, for the month of January of the year in which such full-time employee positions are created. The minimum investment shall not include land or inventory;

          (B)  The minimum investment may include, but is not limited to, the purchase price of an existing building and the cost of building materials, labor, equipment, furniture, fixtures, computer software, parking facilities and landscaping, but shall not include land or inventory;

     (6)  “Qualified facility” means a building or buildings, improvements and other infrastructure, built or installed in conjunction with operations at such building or buildings, either newly constructed, expanded, or remodeled, and located in a county or metropolitan statistical area in this state where the taxpayer has made the minimum investment during the investment period. The qualified facility must maintain fifty (50) qualifying full-time employee positions, and be utilized to support an emerging industry or a major cultural attraction for a period of at least ten (10) years, beginning from the date of substantial completion; and

     (7)  “Qualified tangible personal property” means building materials, machinery, equipment, furniture and fixtures used exclusively in the qualified facility and purchased or leased during the investment period and computer software used primarily in the qualified facility and purchased or leased during the investment period. Qualified tangible personal property does not include supplies or repair parts. Qualified tangible personal property does not include any payments with respect to leases of qualifying tangible personal property that extend beyond the investment period. Qualified tangible personal property does not include any materials, machinery, or equipment that replaces tangible personal property that previously generated a credit under this section.

(c)  A taxpayer qualifying for this credit must be subject to the taxes imposed by chapter 4, parts 20 and 21, of this title, or be an insurance company, as defined in § 56-1-102(2). The taxpayer shall not be permitted to take advantage of any additional sales tax or other state tax credits, exemptions, or reduced rates as a result of the same purchases or minimum investment claimed under this section, except the tax credits provided under §§ 67-4-2009(1) and (4)(A)(ii) and 67-4-2109(b) and (c) and the exemption provided under § 67-6-206(a). A taxpayer qualifying for this credit shall also not be permitted to utilize the credits available to hospital companies under § 67-4-2009.

(d)  (1)  A taxpayer seeking this credit shall first submit to the commissioner of revenue an application to qualify as a qualified facility, together with a plan describing the investment to be made. In the case of a leased qualified facility, the lessor shall also file an application and plan, if any taxes paid by the lessor are to be claimed as part of the credit in subsection (a). The application and plan shall be submitted on forms prescribed by the commissioner of revenue, and shall demonstrate that the requirements of the law will be met.

     (2)  After approval of the application and business plan, the commissioner of revenue shall issue a letter to the taxpayer stating that the taxpayer has tentatively met the requirements for the credit provided for in this section.

     (3)  In order to receive the credit, the taxpayer must submit a claim for credit, along with documentation as required by the commissioner of revenue, showing that Tennessee sales or use taxes have been paid to the state on qualified tangible personal property. The taxpayer's claim for credit of sales or use taxes paid to Tennessee may include such taxes paid by the taxpayer, lessor, in the case of a leased qualified facility, contractors, and subcontractors on sales or use of qualified tangible personal property. Documentation verifying that the minimum investment requirements have been met shall include, but are not limited to, employment records, invoices, bills of lading, lease agreements, contracts, and all other pertinent records and schedules as required by the commissioner.

     (4)  After the taxpayer has established the fifty (50) full-time employee positions and has met the minimum investment threshold, the commissioner of revenue shall review the claim for credit and notify the taxpayer of the approved tax credit amount and provide direction for taking the credit. The taxpayer may not take the credit until the commissioner of revenue has notified the taxpayer of the amount approved and provided direction to the taxpayer on the proper methodology for taking the credit. The credit may only be taken by the taxpayer establishing the qualified facility.

(e)  If the qualified facility does not maintain at least fifty (50) qualifying full-time employee positions, or is not utilized to support an emerging industry or a major cultural attraction for a period of at least ten (10) years beginning from the date of substantial completion, the taxpayer shall be subject to an assessment of sales or use tax, penalty, or interest that would otherwise have been due, and for which credit was taken; provided, however, that the assessment shall be prorated, based on the period of time that the terms of this subsection (e) are not met. The statute of limitations shall not begin to run on these assessments until December 31 of the final year of the ten-year period provided for in subdivision (b)(5).

(f)  Credits under this section shall not reduce the taxes earmarked and allocated to education, pursuant to § 67-6-103(c).

(g)  Nothing in this section shall require that the taxpayer establish its commercial domicile in this state in order to receive the credit.

(h)  (1)  The commissioner may, in the commissioner's sole discretion, enter into a managed compliance agreement with a taxpayer that is entitled to the credit provided in this section. The agreement may provide for:

          (A)  One (1) or more effective rates to be applied to a predetermined base of purchases subject to the credit provided in this section for a defined period;

          (B)  A procedure under which the eligible taxpayer can use a direct pay permit issued by the commissioner to purchase tangible personal property without paying to its supplier the tax imposed by this chapter and to remit the tax due on the tangible personal property directly to the department;

          (C)  A term not to exceed the investment period; provided, that nothing shall preclude the commissioner from entering into a subsequent agreement with the same taxpayer;

          (D)  The conditions under which the agreement may require modification or termination;

          (E)  A procedure to resolve disputes concerning the agreement; and

          (F)  Any other provisions that the commissioner and the eligible taxpayer mutually agree upon to carry out the purposes of this section.

     (2)  The commissioner may, in the commissioner's sole discretion, terminate a managed compliance agreement and conduct an audit of an eligible taxpayer if the taxpayer fails to fulfill any of the terms of the agreement and the failure is materially adverse to the commissioner and the taxpayer fails to cure the failure not later than thirty (30) days after the mailing of written notice of the failure by the commissioner; provided, however, that no such notice need be given in the event the failure is not capable of being cured or the commissioner believes that the collection of any tax required to be collected and paid to the state or of any assessment will be jeopardized by delay.

     (3)  Other than as authorized by this section and expressly agreed in the managed compliance agreement, nothing in this section shall abridge or alter any requirements, rights or obligations of an eligible taxpayer or the commissioner granted or imposed by statute or regulation.

     (4)  For purposes of this subsection (h):

          (A)  “Eligible taxpayer” means any person that has qualified to receive the credit provided in this section and that, in the opinion of the commissioner, meets the following criteria:

                (i)  Demonstrates a willingness and ability to comply with the tax laws of this state;

                (ii)  Maintains an acceptable system of internal controls and business records; and

                (iii)  Cooperates with the state's efforts to collect tax; and

          (B)  “Managed compliance agreement” means an agreement between the commissioner and an eligible taxpayer that provides for an agreed upon method for calculating the credit due under this section.

[Acts 2005, ch. 499, § 89; 2007, ch. 602, §§ 4-6; 2008, ch. 1106, §§ 28, 63; 2009, ch. 529, §§ 15-17; 2009, ch. 530, §§ 10, 21, 22, 25.]