1. STATE OF TENNESSEE
Tennessee Economic Development Finance Course
WWW.TNECD.COM
FEBRUARY 21, 2014

2. PAGE 1
Tennessee Incentives
State Incentives Include:
o Training grants
o Infrastructure grants
o Discretionary grants covering other
expenses
o Tax credits and exemptions
Incentives are based on:
o Number of Jobs
o Quality of Jobs
o Capital Investment
o Location

3. Type
PAGE 2
Eligible Industries
Description
Headquarters
Administrative, research and development, planning, marketing,
personnel, legal not manufacturing, distribution, wholesaling , or call
centers
Manufacturing
Principle business is fabricating or processing of tangible property for
resale
Data Centers
Building or buildings, either newly constructed or remodeled, housing
high‐tech computer systems and related equipment
Warehouse & Distribution
Storage or distribution of finished tangible personal property. Does not
include a location where tangible personal property is processed,
manufactured, sold to customers or assembled
Call Centers
Uses telecommunications in customer service, soliciting sales, reactivating
accounts, surveys or research, fundraising, collecting receivables,
reservations, taking or receiving orders

4. Grant
FastTrack Training Grant
FastTrack Infrastructure Grant
Description
The Tennessee FastTrack Job Training Assistance Program (FJTAP) will provide funding
to support the training of new employees to new or expanding companies.
The Tennessee FastTrack Infrastructure Development Program provides funding to
communities to assist in providing the public infrastructure to support economic
development projects. ECD will work with the local officials to identify and support
eligible infrastructure needs for this project.
NOTE: There must be at least a five (5) year PILOT provided by the local governing body
to the company for real property.
FastTrack Economic
Development Grant
The FastTrack Economic Development Grant Program provides funding to the local
communities to reimburse companies for expenditures not covered by infrastructure
or job training grants. This grant can help offset expenses such as relocation,
temporary office space, capital improvements, and retrofitting.
NOTE: These funds are available subject to terms of the Accountability Agreement.
PAGE 3
FastTrack Grant Programs

5. Type
PAGE 4
Tennessee Business Tax
Description
Fanchise Tax (.25%)
Greater of the company’s net worth or book value of its real or
tangible property owned or used in Tennessee.
Excise Tax (6.5%)
An apportionment formula based on the proportion of the
company’s payroll, sales and property in Tennessee, with the
sales proportion double‐weighted.
Sales & Use Tax (1.0%
to 2.75%)
Applied to tangible personal property purchased or used within
the state.

6. Description
Job creation tax credit that can be used to offset a company’s franchise and excise tax liability
•Tax credit of $4,500 per job for companies creating at least 25 net new full‐time jobs within a three‐year
period and investing at least $500,000 in a qualified business enterprise
•Can be used to offset up to 50% of F&E taxes in any given year and carried forward for up to 15 years or
until used
•Qualified business include: manufacturing, warehousing, distribution, R&D, computer services, call
centers, headquarter facilities, or convention and trade show facilities
Jobs Created
Amount of Credit
25
$112,500
100
$450,000
500
$2,250,000
1,000
$4,500,000
PAGE 5
Standard Job Tax Credit

7. Tennessee counties designated as Tier 2 and Tier 3 Enhancement Counties are entitled to the Standard Job
Tax Credit and an additional annual Enhanced Job Tax Credit.
PAGE 6
Enhanced Job Tax Credit

8. Headquarters
Headquarters
Credit of 1% for computer equipment purchased in making the required capital investment for
the standard job tax credit Tenn. Code Ann. § 67‐4‐2109
For headquarters:
o
Computer,
o
Computer network,
o
Computer software or computer systems and any peripheral devices including, but not limited
to, hardware, such as printers, plotters, external disc drives, modems and telephone units
PAGE 8
Industrial Machinery Tax Credit

9. Manufacturing
Credit of 1% to 10% for the purchase, third‐party installation and repair of qualified industrial
machinery as defined in Tenn. Code Ann. § 67‐6‐102(46)(A)(i).
For manufacturers, qualified industrial machinery includes:
o
o
o
o
Machinery
Apparatus and equipment with all associated parts
Appurtenances and accessories, including hydraulic fluids, lubricating oils, and greases
necessary for operation and maintenance
Repair parts and any necessary repair or taxable installation labor that is necessary to, and
primarily for, the fabrication or processing of tangible personal property for resale and
consumption off the premises
In addition:
o
o
o
Computer,
Computer network,
Computer software or computer systems and any peripheral devices including, but not limited
to, hardware, such as printers, plotters, external disc drives, modems and telephone units
purchased by the taxpayer in making the required capital investment for the Standard Job Tax
Credit. Tenn. Code Ann. § 67‐4‐2109
PAGE 9
Industrial Machinery Tax Credit

10. Data Centers
Data Centers
Credit of 1% to 10% for the purchase of qualified industrial machinery as defined in Tenn. Code
Ann. § 67‐6‐102(46)(K).
For data centers, qualified industrial machinery includes:
o
Computer,
o
Computer network,
o
Computer software or computer systems and any peripheral devices including, but not limited
to, hardware, such as printers, plotters, external disc drives, modems and telephone units
PAGE 10
Industrial Machinery Tax Credit

11. Warehouse & Distribution
Warehouse & Distribution
Credit of 1% to 10% for the purchase of qualified industrial machinery as defined in Tenn. Code
Ann. § 67‐6‐102(46)(H)(i)
For warehouse & distribution, qualified industrial machinery includes:
o
Qualified industrial machinery includes material handling equipment and racking systems
purchased for a qualified warehouse and distribution facility if the taxpayer makes a minimum
$10,000,000 capital investment in the facility and/or equipment within thirty‐six (36) months
of the effective date of the Business Plan
In addition:
o
o
o
Computer,
Computer network,
Computer software or computer systems and any peripheral devices including, but not limited
to, hardware, such as printers, plotters, external disc drives, modems and telephone units
purchased by the taxpayer in making the required capital investment for the Standard Job Tax
Credit. Tenn. Code Ann. § 67‐4‐2109
PAGE 11
Industrial Machinery Tax Credit

12. Call Centers
Call Centers
Credit of 1% for computer equipment purchased in making the required capital investment for
the standard job tax credit Tenn. Code Ann. § 67‐4‐2109
For call centers:
o
Computer,
o
Computer network,
o
Computer software or computer systems and any peripheral devices including, but not limited
to, hardware, such as printers, plotters, external disc drives, modems and telephone units
PAGE 12
Industrial Machinery Tax Credit

13. Headquarters
Headquarters
Credit of 6.5% state sales tax paid for qualified tangible personal property purchased for a
qualified headquarters facility
Definition of a qualified HQ
o
A qualified headquarters facility is an international, national or regional headquarters where headquarters staff are
located and employed, performing headquarters related functions and services, including, but not limited to,
administrative, marketing and legal work.
o
Required capital investment of $10M or more along with the creation of 100 net new full time jobs paying 150% of the
TN average occupational wage ($39,135 is the average occupational wage for 2013)
o
The investment period for the sales and use tax credit begins one year prior to construction or expansion and ends one
year after construction or expansion has concluded, but can be extended to six years with permission from the
Commissioner of Economic and Community Development and the Commissioner of Revenue.
Credit
o Qualified tangible personal property purchased for the HQ “that is directly related to the creation of the new full‐time
employee jobs.”
o Qualified tangible personal property is defined as building materials, building machinery, equipment, furniture and
fixtures used exclusively in the qualified headquarters facility and purchased or leased during the investment period.
Tenn. Code Ann. § 67‐6‐224
PAGE 13
Sales and Use Tax Exemption

14. Manufacturing
Manufacturing
Sales tax exemption for industrial machinery and reduced sales tax rate for utilities at qualified
manufacturing facilities
Definition of a qualified Manufacturer
o A qualified manufacturer is a fabricator, producer, compounder, processor or assembler of any product or its component
parts for resale off the premises
Exemptions
o
Industrial machinery defined as machinery and equipment, including all associated parts and repair‐related labor,
primarily used in the fabrication or processing of tangible personal property for resale or consumption off a company’s
premises
Reductions
o
Tax applied at a rate of 1.5% on water unless it comes into direct contact with the product being manufactured or
becomes a part of the product being manufactured and separately metered. If separately metered and it comes into
direct contact with the product being manufactured or becomes a part of the product being manufactured the rate is
Zero. The process is set up through the local utility.
o
Tax applied at a rate of 1.5% on gas, electricity, and various energy sources unless it comes into direct contact with the
product being manufactured and is separately metered. If separately metered and it comes into direct contact with the
product being manufactured the rate is zero. The process is set up through the local utility.
PAGE 14
Sales and Use Tax Exemption

15. Data Centers
Data Center
Sales tax exemption for certain hardware and software purchased for a qualified data center
Definition of a qualified Data Center operation
o A qualified data center is a building(s) housing high‐technology computer systems and related
equipment in which the taxpayer has made a minimum capital investment of $250M and has created
25 new jobs paying at least 150% of the state’s average occupational wage (e.g. $39,135/year for the
2013 period).
o
The investment must be made during a 3 year period, but can be extended to 5 years for investments
under $1B or 7 years for investments exceeding $1B at the discretion of the Commissioner of Economic
and Community Development.
Exemptions
o computers, computer systems, and computer software used in qualified data centers
Reductions
o taxes applied at a rate of 1.5% on electricity
Tenn. Code Ann. § 67‐6‐102(46)(K)
PAGE 15
Sales and Use Tax Exemption

16. Warehouse & Distribution
Warehouse & Distribution
Sales tax exemption for certain equipment purchased for a qualified warehouse or distribution
center
Definition of a qualified Warehouse & Distribution operation
o A qualified warehouse or distribution facility is a warehouse or distribution facility that is newly
constructed, renovated or expanded through an investment of $10M or more, land and inventory is
excluded from the capital investment.
o The investment must be made during a 3 year period.
Exemptions
o
Material handling and racking equipment purchased for use in the storage, handling, or movement of
tangible personal property in a qualified warehouse or distribution facility.
Tenn. Code Ann. § 67‐6‐102(46)(H)
PAGE 16
Sales and Use Tax Exemption

17. Call Centers
Call Centers
Sales tax exemption on any sales of interstate telecommunication and international
telecommunication services sold to a business for use in the operation of one or more qualified
call centers.
Definition of a qualified Call Center operation
o In order to qualify for the Sales and Use Tax savings for telecommunication services used by the call
center a company must have at least 250 employee jobs engaged primarily in such call center activities.
Tenn. Code Ann. § 67‐6‐356
PAGE 17
Sales and Use Tax Exemption

18. THANK YOU
Jamie Stitt
Deputy Assistant Commissioner, Business Development Division
State of Tennessee Department of Economic and Community Development
931.637.8133 · Jamie.Stitt@TN.gov
TN.gov/ecd
Twitter.com/tnecd
Facebook.com/tnecd
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