Amends TCA Title 57 and Title 67.

For tax years beginning on or after January 1, 2025, this bill eliminates the tax on the retail sale of food and food ingredients, enacts the "Business Enterprise Tax Act," and enacts the "Worldwide Combined Reporting Act." FOOD RETAIL SALES TAX Present law requires the retail sale of food and food ingredients for human consumption to be taxed at the rate of 4 percent of the sales price. This bill revises this law to, instead, prohibit the retail sale of food and food ingredients from being taxed. This bill specifically provides that the sale at retail, the use, the consumption, the distribution, and the storage for use or consumption in this state of food and food ingredients is specifically exempted from sales and use taxes. BUSINESS ENTERPRISE TAX ACT IMPOSITION OF TAX. This bill provides that a tax is imposed at the rate of 0.75 percent upon the taxable enterprise value tax base of every business enterprise. SPECIAL ADJUSTMENTS. This bill requires the following adjustments to be made to the enterprise value tax base in determining the taxable enterprise value tax base: (1) For each business enterprise, the enterprise value tax base of which includes compensation derived from net earnings from self-employment subject to tax under the Internal Revenue Code, a deduction of such amounts of compensation as are retained for use in the business enterprise, except that compensation deducted under this must not be included in this deduction. The business enterprise has the burden to show that any amounts deducted have actually been retained for use in the business enterprise; (2) In the case of a business enterprise that is a corporation, a deduction of an amount equal to dividends received from another corporation that have previously been included in the payor corporation's taxable enterprise value tax base subject to taxation under this bill and which payor corporation is, at the close of the day on which such dividend is received, a member of the same affiliated group as the corporation receiving the dividend. For purposes of this provision, "affiliated group" has the same meaning as defined in the Internal Revenue Code, except that it does not include (i) an insurance company subject to taxation on its taxable income under the Internal Revenue Code; (ii) regulated investment companies or real estate investment trusts subject to tax under the Internal Revenue Code; or (iii) an includible insurance company as defined in the Internal Revenue Code; and (3) In the case of a business enterprise that is not a corporation, a deduction of an amount equal to dividend distributions received from another business enterprise that have previously been included in the payor business enterprise's taxable enterprise value tax base subject to taxation under this bill and which payor business enterprise is, at the close of the day on which such dividend is received, a member of the same affiliated group as the business enterprise receiving the dividend distribution. For purposes of this provision, an "affiliated group" must be determined by rules adopted by the commissioner of revenue ("commissioner") similar to those applicable to corporations. DEDUCTIONS. In the case of a proprietorship, partnership, or limited liability company filing a return under this bill as a proprietorship or partnership, this bill provides a deduction equal to a fair and reasonable compensation for the actual personal services of a natural person who is a proprietor, partner, or member provided to the business organization. However, the amount of such deduction must not reduce such business organization's taxable business profits to less than $0. The purpose of this is to permit a deduction from gross business profits of such a proprietorship, partnership, or limited liability company of all amounts that are fairly attributable to the actual personal services of the proprietor, partner, or member. Such amounts must not exceed the amount reported as net earnings on the federal income tax returns of the proprietor, partner, or member, but may also include an amount not to exceed net rental income as compensation for operating rental property, and an amount not to exceed 15 percent of the gross sales price as commissions on the sale of business assets. This bill requires the method of determining the amount of the deduction available to the business organization to be by using the standards set forth in the law regarding trade or business expenses under the Internal Revenue Code and the regulations, administrative rulings, and judicial cases issued thereunder. The business organization must keep such records as may be necessary to determine that the deduction is reasonable under these standards. RECORD-KEEPING SAFE HARBOR. In lieu of substantiating the value of the personal services of proprietors, partners, or members, this bill authorizes a business organization or group of related business organizations to elect, as a record-keeping safe harbor, to deduct up to $75,000 as total compensation for the tax year. As used in this bill, a "record-keeping safe harbor" means the amount of compensation for personal services claimed by a business organization which does not need to be substantiated by any evidence, records, or legal or regulatory authority, except as provided in this bill. This bill prohibits the record-keeping safe harbor from being relevant or admissible for any purpose in determining whether a compensation deduction claimed in an amount in excess of any such record-keeping safe harbor is fair and reasonable. This bill authorizes a business organization or group of related business organizations to elect to use the record-keeping safe harbor option without a redetermination of the reasonableness of the deduction by the commissioner. Any such deduction claimed by the business organization or group of related business organizations must not be subject to challenge. However, upon request, the business organization or group of related business organizations is required to substantiate that the proprietor or at least one partner or member performed actual personal services for the business organization or group of related business organizations. Related business organizations electing not to substantiate the extent of the actual personal services of their proprietors, partners, and members, are limited to the record-keeping safe harbor deduction, less any owners' compensation taken on the federal tax returns of corporate members of the group, allocated among the related business organizations. This bill provides that a business enterprise claiming a deduction under this bill bears the burden of proving that all proprietors, partners, or members for whom a deduction is being claimed provided actual personal services to the business enterprise at any time during the taxable period. Once a business organization has satisfied this burden of proof, the amount claimed as a deduction is presumed to be reasonable, unless the commissioner proves by a preponderance of the evidence that the deduction claimed by the business enterprise is clearly unreasonable. APPORTIONMENT. This bill requires a business entity, the business activities of which are taxable both within and without this state, and that is subject to a business privilege tax, a tax on net earnings, a franchise tax measured by net earnings, a capital stock tax, or a tax of the type imposed by this bill or is subject to the jurisdiction of another state to impose a business privilege tax, a tax on net earnings, a franchise tax measured by net earnings, a capital stock tax, or a tax of the type imposed by this bill to apportion its enterprise value tax base so as to allocate to this state a fair and equitable proportion of such base. This bill requires the portion of the base from compensation to satisfy the following criteria: (1) Include the amount of any deduction taken pursuant to this bill, the amount relating to self-employment income, and the amount relating to wages and salaries subject to or specifically exempt from withholding under the Internal Revenue Code except such payments as are made expressly exempt from withholding under that code. (2) Be apportioned to this state as a percentage of total compensation paid by the business enterprise to employees everywhere as is paid by the business enterprise to employees for services rendered within this state. Such compensation is deemed to be disbursed for services in this state if (i) the service is performed entirely within this state, (ii) the service is performed both within and without this state, and the service performed without this state is incidental to the service within this state, or (iii) some of the service is performed in this state and the base of operations or the place from which the service is directed or controlled is located in this state, or the base of operations or the place from which the service is directed or controlled is not located in any state in which some part of the service is performed, but the individual performing such service resides within this state; This bill requires the portion of the base from interest to be apportioned by multiplying the percentage of value of the total real and tangible personal property owned and employed by the business enterprise everywhere as is owned and employed by it in business activities in this state. Property owned by the business enterprise must be valued at its original cost. This bill requires the portion of the base from dividends to be apportioned on the basis of the following three factors, giving equal weight to each, and applying the average of the three percentages to the dividends: (1) The compensation factor determined in accordance with (2) above; (2) The interest apportionment factor calculated by multiplying the percentage of value of the total real and tangible personal property owned and employed by the business enterprise everywhere as is owned and employed by it in business activities in this state; and (3) The percentage of the total sales, including charges for services, made by the business enterprise everywhere as is made by it within this state and determined as follows: (A) Sales of tangible personal property are made in this state if the property is delivered or shipped to a purchaser, other than the U.S. government, within this state regardless of free on board point or other conditions of sale, or the property is shipped from an office, store, warehouse, factory, or other place of storage in this state and (i) the purchaser is the U.S. government or (ii) the business enterprise is not taxable in the state of the purchaser; (B) Sales other than sales of tangible personal property are in this state if the business enterprise's market for the sales is in this state, as follows: (i) In the case of sale, rental, lease, or license of real property, if and to the extent the property is located in this state; (ii) In the case of rental, lease, or license of tangible personal property, if and to the extent the property is located in this state; (iii) In the case of sale of a service, if and to the extent the service is delivered to a location in this state; (iv) In the case of sale, rental, lease, or license of intangible property, if and to the extent the property is used in this state; (v) In the case of interest income, if and to the extent the debtor or encumbered property is located in this state; (vi) In the case of dividend income, if and to the extent the business enterprise's commercial domicile is in this state; and (vii) In the case of other income, if and to the extent the income is derived from sources in this state; (C) In the case of sales other than sales of tangible personal property, if the state or states of assignment cannot be determined, then the state or states of assignment must be reasonably approximated; and (D) In the case of sales other than sales of tangible personal property, if the taxpayer is not taxable in a state to which a sale is assigned, or if the state of assignment cannot be determined or reasonably approximated, then the sale is excluded from the denominator of the sales factor. This bill provides that if the method of apportionment in the above provisions does not fairly represent the business enterprise's business activity in this state, then the business enterprise may petition for, or the commissioner may require, in respect to all or part of the business enterprise's business activity, if reasonable: (A) The exclusion of one or more of the apportionment factors; (B) The inclusion of one or more additional apportionment factors that will fairly represent the business enterprise's business activity in the state; or (C) The employment of another method to effect an equitable apportionment of the business enterprise's enterprise value tax base. RETURNS. This bill requires a business enterprise having gross business receipts in excess of $250,000 during the taxable period or an enterprise value tax base that is greater than $250,000 to make a return to the commissioner in accordance with the following schedule: (i) if required to file a U.S. partnership tax return, then on or before the fifteenth day of the third month following expiration of its taxable period; (ii) if required to file a U.S. exempt organization return, then the fifteenth day of the fifth month following expiration of its taxable period; and (iii) for all other business enterprises, the fifteenth day of the fourth month following expiration of its taxable period. This bill requires the commissioner to biennially adjust these threshold amounts rounding to the nearest $1,000 based on the two-year percentage change as measured by the U.S. bureau of labor statistics consumer price index for all urban consumers, south region, using the amount published for the month of June in the year prior to the start of the tax year. This bill requires all returns to be signed by the business enterprise or by its authorized representative under penalty of perjury. This bill also requires a business enterprise to file a declaration of its estimated business enterprise tax for its subsequent taxable period. However, if the estimated tax is less than $260, then a declaration need not be filed. A declaration must be filed at the end of any quarter in which the estimated tax exceeds $260. The declaration must be filed when payments are due under this bill. PAYMENTS DUE WITH RETURNS. This bill requires a business enterprise required to file a declaration of its estimated business enterprise tax under this bill to make payments of the estimated tax in installments as follows: (i) 25 percent is due and payable on the fifteenth day of the fourth month of the subsequent taxable year; (ii) 25 percent is due and payable on the fifteenth day of the sixth month of the subsequent taxable year; (iii) 25 percent is due and payable on the fifteenth day of the ninth month of the subsequent taxable year; and (iv) 25 percent is due and payable on the fifteenth day of the twelfth month of the subsequent taxable year. If the return required by this bill shows an amount to be due, then the amount is due and payable on the prescribed payment date. If the return shows an overpayment of the tax due, then the commissioner must refund or credit the overpayment to the business enterprise in accordance to rules promulgated by the department of revenue ("department"). ADDITIONAL RETURNS. This bill authorizes the commissioner to require the enterprise to file a return or a supplementary return showing such additional information as the commissioner prescribes when the commissioner has reason to believe that a business enterprise failed to file a return or to include any part of its enterprise value tax base in a filed return. Upon the receipt of the supplementary return, or if none is received within the time set by the commissioner, the commissioner may find and assess the amount due based upon the information that is available. The making of the additional return does not relieve the business enterprise of any penalty for failure to make a correct original return or relieve it from liability for interest or any other additional charges imposed by the commissioner. EXTENSION. For good cause, this bill authorizes the commissioner to extend the time within which a business enterprise is required to file a return. If the return is filed during the period of extension, then a penalty must not be imposed for failure to file the return at the time required by this bill, but the business enterprise is liable for interest and late payment charges. Failure to file the return during the period of the extension voids the extension. CORRECTIONS. This bill requires a business enterprise to report to the commissioner any change in the amount of the business enterprise's compensation, interest, or dividends as finally determined by the internal revenue service with respect to any previous year for which the business enterprise has made a return under this bill. The report must be made not later than six months after the business enterprise has received notice that the change has finally been determined. A business enterprise reporting a correction must be given notice by the department of any adjustment to the tax due with respect to the correction within six months after the filing of the report. TAX PAYER RECORDS. This bill requires a business enterprise to (i) keep such records as may be necessary to determine the amount of its tax liability under this bill; (ii) preserve the records for the period of five years or until any litigation or prosecution is finally determined; and (iii) make the records available for inspection by the commissioner or authorized agents, upon demand, at reasonable times during regular business hours. This bill requires a violation of this provision to be assessed taxes, plus any applicable penalty and interest based on the best information available to the department, and the burden is on the taxpayer to show by clear and cogent evidence that the assessment is incorrect. CERTIFICATION FOR DISSOLUTION. This bill prohibits a corporation organized under any law of this state from transferring property to its shareholders pursuant to the law regarding dissolution until all taxes and interest imposed upon the corporation under this bill have been fully paid and a certificate of dissolution has been obtained from the commissioner that no returns, tax, additions to tax, interest, or penalties for taxes administered by the department are due and unpaid. A corporation wishing to transfer property to a shareholder must submit a written request containing the complete corporate name and identification number and accompanied by a nonrefundable fee of $30 to the department. This fee must be deposited into the state general fund. If, after reviewing the corporation's records, the commissioner determines that no returns, tax, additions to tax, interest, or penalties for taxes administered by the department are due and unpaid, then the commissioner must prepare a statement in accordance with this provision. CERTIFICATION FOR WITHDRAWAL. This bill requires a business enterprise wishing to obtain a certificate of withdrawal, in accordance with the law regarding withdrawal of a foreign corporation, to submit a written request containing the complete corporate name and identification number and accompanied by a nonrefundable fee of $30 to the department. This fee must be deposited into the state general fund. If, after reviewing the business enterprise's records, the commissioner determines that no returns, tax, additions to tax, interest, or penalties for taxes administered by the department are due and unpaid, then the commissioner must prepare a certificate of withdrawal. CERTIFICATION FOR GOOD STANDING. This bill requires a business enterprise wishing to obtain a statement that the business enterprise is in good standing with the department to submit a written request containing the complete corporate name and identification number and accompanied by a nonrefundable fee of $30 to the department. This fee must be deposited into the state general fund. If, after reviewing the business enterprise's records, the commissioner determines that no returns, tax, additions to tax, interest, or penalties for taxes administered by the department are due and unpaid, then the commissioner must prepare a statement of good standing. ELECTION OF QUALIFIED INVESTMENT COMPANY STATUS. This bill requires a business organization to file an election with the commissioner to be a qualified investment company with respect to any taxable period on a form prescribed by the commissioner at any time on or before the fifteenth day of the third month of the taxable period. An election is effective for the taxable period of the qualified investment company for which it is made and for all succeeding taxable periods until the election is terminated as provided in this bill. This bill requires a business organization electing treatment as a qualified investment company to, with respect to each taxable