Tennessee ~ Franchise Tax, Practice and Procedure: Notice Regarding Alternative Method for Estimating Franchise and Excise Tax Discussed

The Tennessee Department of Revenue has issued a franchise and excise tax notice discussing the alternative annualized method for estimating quarterly tax payments. The notice, consistent with a new law, states that beginning on or after January 1, 2017, taxpayers may calculate their quarterly estimated tax installment by using the new alternative annualized income method that may benefit those with income earned unevenly during the year. The annualized income method recognizes that sometimes a disproportionate amount of income is earned later in a year, and it permits the payment of estimates to be made in a manner that more closely correlates to when the income was earned. The annualized income method computes the franchise and excise components separately. The excise tax component of each installment is calculated in the manner provided by IRC 6655(e)(2). The franchise tax component of each installment is the lesser of 25 percent of the franchise tax shown on the tax return for the preceding tax year (annualized if less than 12 months) or 25 percent of 80 percent of the current year’s liability. Further, the notice provides a web link to a worksheet for calculating quarterly estimates under both the standard and the annualized income method as well as information regarding election to use the annualized method.

Notice No. 17-15, Tennessee Department of Revenue, July 2017, ¶401-693



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