Will Lee Company benefit from Gov. Bill Lee’s $5.7 billion corporate tax break and refund?
Democrats ask governor to release Lee Company’s tax returns, show whether he’ll benefit from his tax law
NASHVILLE —Gov. Bill Lee, owner of the Lee Company, wants the legislature to approve a $5.7 billion tax break and refund for property-rich corporations in Tennessee, like the Lee Company.
The first part of Lee’s legislation would give these companies an immediate $1.6 billion tax refund and the second part would enact a new tax break for those same businesses worth $4.1 billion over the next decade.
The governor says he’s bringing the bill to avoid legal challenges, but independent experts have said Lee’s refund proposal is unprecedented and unnecessary.
It would be the single largest tax handout in Tennessee history and Democratic lawmakers say the public deserves to know whether Gov. Lee will benefit.
In a letter delivered to the governor’s office March 7, Democratic lawmakers asked Lee to release the last four annual Franchise and Excise Tax Returns filed by the Lee Company and the state returns of any other businesses the governor has a financial interest in.
“Our request is grounded in the belief that Tennesseans deserve to understand whether their governor stands to financially benefit from tax policies included in the Administration’s budget recommendation,” the letter says.
Lee is the owner of the Lee Company, a $300 million, Tennessee-based business with locations in four states that provides HVAC, electrical and plumbing services to residential, industrial and commercial buildings.
Lee served as both CEO and chairman before becoming governor when he resigned from the board and placed his assets in a blind trust. But he still owns the company.
House Democratic Caucus Chairman Rep. John Ray Clemmons, an attorney by trade who signed the letter, says the administration jumped to a giant corporate tax break without fully exploring the state’s options.
“Gov. Lee is attempting to sneak through the legislature one of the largest corporate tax breaks in modern history by misrepresenting it as a legal necessity,” Clemmons said. “The least he could do is be honest about whether he and his own company stand to financially benefit from the legislation.”
Senate Democratic Caucus Chairwoman Sen. London Lamar, who also signed the letter, said this corporate welfare will further delay investments needed for Tennessee’s families and weaken the public’s faith in government.
“Transparency is key if we want people to trust the decisions being made at the Capitol,” said Lamar. “The people I represent say we should be investing in working families and our economy — not tax breaks for big corporations.”
‘Corporate giveaway’
The governor says he included this massive corporate tax handout in his budget to ward off potential legal challenges to Tennessee’s 87-year-old franchise tax. The administration claims that large companies owning property in multiple states are being illegally double taxed under the franchise tax’s property factor.
But independent tax experts say those threats are overblown and similar legal challenges against states have never resulted in a refund at the scale or size of what Gov. Lee is proposing in his budget.
“It seems like a corporate giveaway by another name,” says Peter Enrich, a state tax policy expert at Northeastern University’s School of Law. Last month, Enrich told the Tennessee Lookout the law — and revenue — could be preserved easily with a technical fix called a tax limitation credit. The credit eliminates any potential double-taxation issues with large, multi-state firms.
What’s next?
Next week, Sen. Jeff Yarbro and Rep. Clemmons will introduce Senate Bill 2198 to enact a franchise tax limitation credit. The legislation’s fiscal memo explains it would preempt any legal challenge, preserve corporate tax collections for future investments in families, and provide a dollar-for-dollar credit for any company that proves legitimate double-taxation.
Senate Bill 2103, enacting the governor’s $5.7 billion tax break and refund, will also be considered Tuesday for its first vote in the Senate.
