Amends TCA Title 67.

This bill provides working families' tax relief in the form of a refund of state and local sales and use tax paid on or after January 1, 2024, by an eligible low-income person. As used in this bill, an "eligible low-income person" means a natural person who meets the following criteria: (1) The person (i) is eligible for the federal earned income tax credit, and (ii) properly files a federal income tax return for the prior federal tax year while being a resident of this state during the year for which the credit is claimed; or (2) The person meets the requirements in (1)(ii) above and would otherwise qualify for the federal earned income tax credit, except that one or a combination of the following conditions apply: (A) The person filed a federal income tax return for the prior federal tax year using a valid individual taxpayer identification number in lieu of a social security number, and the natural person's spouse, if any, and all qualifying children, if any, have a valid individual taxpayer identification number or a social security number; or (B) The person filed a federal income tax return for the prior federal tax year under the married filing separately status. For purposes of the refund provided in this section, the special rule for a separated spouse under federal law does not apply. This bill further provides that all refunds under this bill must be paid from the state's general fund, and that this bill does not reduce the amount of sales and use tax payable to local governments. Additionally, receipt of a refund under this bill must not be used in eligibility determinations for any state income support programs or in making public charge determinations. REFUND CALCULATION This bill generally provides that, for calendar year 2025 and subsequent calendar years, the working families' tax refund amount for the prior calendar year is $300 for eligible persons with no qualifying children, $600 for eligible persons with one qualifying child, $900 for eligible persons with two qualifying children, or $1,200 for eligible persons with three or more qualifying children. Such refund amounts are generally reduced, rounded to the nearest dollar, as follows: (1) For eligible persons with no qualifying children, beginning at $2,500 of income below the federal phase-out income for the prior federal tax year, by 18 percent per additional dollar of income until the minimum refund amount of $50 is reached; (2) For eligible persons with one qualifying child, beginning at $5,000 of income below the federal phase-out income for the prior federal tax year, by 12 percent per additional dollar of income until the minimum refund amount of $50 is reached; (3) For eligible persons with two qualifying children, beginning at $5,000 of income below the federal phase-out income for the prior federal tax year, by 15 percent per additional dollar of income until the minimum refund amount of $50 is reached; and (4) For eligible persons with three or more qualifying children, beginning at $5,000 of income below the federal phase-out income for the prior federal tax year, by 18 percent per additional dollar of income until the minimum refund amount of $50 is reached. MINIMUM REFUND AMOUNT This bill provides that if the refund for an eligible person as calculated in this bill is equal to one cent or more, but less than $50, then the refund amount is $50. ADJUSTMENTS FOR INFLATION AND OTHER FACTORS On January 1, 2026, and on January 1 of each subsequent year, this bill requires the refund amounts to be adjusted for inflation based upon changes in the consumer price index that are published by the U.S. department of labor, bureau of labor statistics or another similar index established by the federal government, for the most recent 12-month period. The adjusted refund amounts must be rounded to the nearest $5. This bill requires the percentage rate of refund reductions to be adjusted each calendar year beginning January 1, 2025, based on calculations by the department that result in the minimum refund being received at the maximum qualifying income level. PROCESS FOR DISTRIBUTING REFUNDS This bill requires the department of revenue ("department") to provide refunds to eligible persons who apply to the department in a form and manner determined by the department. The application must include any information and documentation as required by the department. This bill generally requires an application for a refund to be made in the year following the year for which the federal tax return was filed, but in no case may a refund be provided for a period before January 1, 2024. The department must use the eligible person's most recent federal tax filing for the tax year for which the refund is being claimed to calculate the refund. The department must coordinate efforts with the internal revenue service to administer the credit on an automatic basis as soon as practicable. However, this bill authorizes a person to apply for a refund for which the person was eligible but did not claim within the time period described above for up to three additional years. A person must complete an application to claim this refund within the three calendar years after the end of the calendar year in which the federal income tax return for that tax year was legally due for federal income tax purposes, without regard to any federal extension. For such applications for refund, the department must use the federal tax filing for the tax year for which a refund is being claimed to calculate the refund. This bill prohibits a person from claiming a credit on behalf of a deceased natural person. Additionally, a natural person must not claim a credit for a year in a disallowance period under federal law or for a year for which the natural person is ineligible to claim the credit by reason of deficiency procedures under federal law. PUBLIC INFORMATION CAMPAIGN This bill requires the department, in conjunction with other agencies or organizations, to design and implement a public information campaign to inform potentially eligible persons of the existence of, and requirements for, the refund. AUDITS This bill authorizes the commissioner of revenue to conduct audits or require the filing of additional information necessary to substantiate the amount of a refund due to the eligible person. PENALTIES This bill authorizes the department to assess a civil penalty not to exceed $25,000 against a person who knowingly files a false or fraudulent application for refund. A person who is assessed a penalty is entitled to the remedies in state law, including, but not limited to, filing suit against the commissioner in chancery court. RULEMAKING This bill authorizes the department to promulgate rules necessary to implement this bill.