Amends TCA Title 4; Title 8; Title 9; Title 12, Chapter 3; Title 45; Title 50; Title 56, Chapter 1 and Title 67.

This bill creates tax incentives for small businesses to establish employee stock ownership plans or employee ownership trusts or to convert to a worker-owned cooperative, as discussed below. Tax Credit Under this bill, for tax years commencing on or after January 1, 2023, but prior to January 1, 2028, there will be an excise tax credit in the tax year in which a conversion is completed, as follows: (1) Up to 50 percent of the conversion costs, not to exceed $25,000, incurred by a qualified business for converting the qualified business to a worker-owned cooperative or an employee ownership trust; or (2) Up to 50 percent of the conversion costs, not to exceed $100,000, incurred by a qualified business for converting the qualified business to an employee stock ownership plan. For purposes of this bill, a "qualified business" means a taxpayer subject to a state excise tax, including a C corporation, S corporation, limited liability company, partnership, limited liability partnership, sole proprietorship, or other similar pass-through entity, that is not owned by an employee ownership trust, does not have an employee stock ownership plan, or is not a worker owned cooperative and is approved by the department of revenue for the tax incentives. The maximum amount of the credit to all taxpayers will be $10 million. If, for any tax year, the total amount of tax credits issued is equal to, or exceeds, the maximum amount allowed under this bill, then the department must divide the total amount of tax credits into as many equal amounts as may be necessary to allocate a tax credit to each qualified business or owner. This bill requires the department to submit, on or before January 1, 2023, a one-time report to the finance, ways and means committees of the house and senate, setting forth the metrics and data requirements that the department will track in order to allow the general assembly to measure the effectiveness of the tax expenditure allowed under this bill. The tax credit will be repealed on December 31, 2034. Tax Exemptions This bill exempts from taxes imposed under the Business Tax Act a worker-owned cooperative, an employee ownership trust, or an employee stock ownership plan. This provision takes effect January 1, 2023, and applies to tax periods that begin on or after January 1, 2023. Other Incentives This bill extends the application of the Tennessee Minority-Owned, Woman-Owned, Service-Disabled Veteran-Owned, Business Owned by Persons with Disabilities, and Small Business Procurement and Contracting Act, which governs public contracts with such entities, to employee-owned businesses in this state.