April 19, 2018 | Tennessee Chamber of Commerce & Industry
April 19, 2018
Tax Update:
Compromise Reached on Tax Decoupling: Savings for TN Business Estimated $1.2 Billion, Economic Development Protected

Even with an early start and a solid plan, passing legislation in the Tennessee General Assembly is not an easy task. This year has been especially challenging with pending legislative retirements and the desire for an early adjournment.  Over the past few months the lobbying efforts and the grassroots network of Tennessee Chamber and our business community leapt into action and achieved success that will result in savings for Tennessee business that is estimated to save over $1.2 Billion over the next 10 years. 

As a business membership organization, the effort is notable. But more importantly Tennessee’s competitive edge will be maintained.  Interest deductibility is an important provision to existing Tennessee business and the state’s ability to recruit major industry, especially headquartered companies.  If changes were not enacted this year, revenue would be collected making future changes difficult, if not impossible.  In addition, our neighbor Georgia moved early (and other surrounding states are considering) to decouple from federal interest deductibility limits, raising more interest in this issue.  

To bring this issue to the forefront of a busy Legislative session and to overcome a steep learning curve, the Tennessee Chamber worked aggressively on informing, meeting, and negotiating with state leaders.  The Tennessee Chamber and Tennessee’s business community accomplished what initially seemed impossible, achieving major tax reform in a matter of months.  When the dust settled, the Chamber achieved a victory for Tennessee business that will prevent a major tax increase. Other major business tax reform efforts in Tennessee were years in the making and we are fortunate to have strong legislative leadership and local chamber engagement.

Behind the Scenes :  In January, we faced a significant uphill battle, Haslam administration officials had a consistent message to hold off and not act, noting limited details and the possibility of Tennessee losing money from Federal tax reform.  A COST study (see notes) and other states’ action on this issue helped us to overcome this message, showing that significant revenue collections will be realized.  In addition, leaders in both the Senate and House Finance Committees pushed this issue and demanded action to ensure Tennessee businesses are protected and our economic climate is primed for growth.  Specifically Senator Bo Watson (R-Hixon), Sen. John Stevens (R-Huntington ), Sen. Bill Ketron (R-Murfreesboro), Lt. Governor Randy McNally (R-Oak Ridge ) and House members Rep. Gerald McCormick (R-Chattanooga), Rep. Charles Sargent (R-Franklin), Rep. Kevin Vaughan (R-Collierville), and Speaker Beth Harwell (R-Nashville) fought hard to make this happen for Tennessee business.  In the end a compromise was reached to start interest decoupling in 2020. This will allow for potential revenue losses from federal tax reform in 2018 and 2019 to offset significant savings in 2020.   
  • Data obtained through Council of State Taxation (COST) 2018 The Impact of Federal Tax Reform on State Corporate Income Taxes, click here to read full report.
  • Section 118 data is estimated based on Tennessee distributing an annual minimum of $50m in FASTRACK dollars
Tennessee General Assembly: Calendar

Schedule for next week (all times are local)
Monday, April 23, 2018
  • 11:00am State Building Commission Executive subcommittee
  • 11:00am Health Subcommittee, followed by Health full committee
  • 1:00pm Senate Finance, Ways & Means
  • 12:00pm House Budget subcommittee on bills behind the budget, followed by House Finance, Ways & Means committee, then followed by House Calendar and Rules committee.
  • 3:00pm Senate Floor Session
  • 4:00pm House Floor Session
Tuesday, April 24, 2018
  • 8:30am Senate Floor Session
  • 9:00am House Floor Session (anticipated)
Wednesday, April 25, 2018
  • TBD
Thursday, April 26, 2018
  • TBD
Tennessee Chamber Work-Based Learning Proposal
Gets Funded! 
Employers eligible to receive $500 per WBL Student
Senator Mark Norris and Rep. John Forgety Find Funding for Essential Program
Budget negotiations were intense this week as the House and Senate made substantial revisions to Governor Bill Haslam’s proposed budget.   HB 1599 / SB 1649 establishes liability protections and a grant program for employers to engage students in work-based learning programs was included in both House and Senate versions of the appropriations bill.  This legislation was a priority included in our 2018 Legislative and Policy Agenda. We are proud of the hard work by Senator Mark Norris and Representative John Forgety who masterfully worked this legislation through the Tennessee General Assembly.  A number of our surrounding states have moved aggressively in this area and passage of this legislation will enhance Tennessee’s ability to develop a strong workforce.  Stay tuned for more details about this program and its implementation. We will send out details on how employers can apply for the program in the coming weeks.
( Left) Senator Mark Norris (R-Collierville) ( Right) Rep. John Forgety (R-Athens)
Tennessee Chamber Effort Repeals Outdated Workers’ Compensation In-State Claims Office Requirement

Since 1992, Tennessee statute has mandated that workers’ compensation insurers and third party administrators maintain a claims office in Tennessee or contract with adjuster in Tennessee who is authorized to initiate workers’ compensation benefits. The provision had largely gone unnoticed until the Tennessee Bureau of Workers’ Compensation moved to enforce the burdensome requirement. This year, the General Assembly passed and Governor Haslam has signed legislation eliminating the in-state claims office requirement. The repeal of the in-state claims office requirement is effective immediately and the Tennessee Chamber believes this action removes another undue and burdensome regulation that did not provide any benefit.

The legislation was enacted in response to the Bureau of Workers’ Compensation’s proposed rules that potentially penalize non-compliance with the in-state claims office requirement. The elimination of the in-state claims office requirement will nullify the Bureau’s proposed enforcement of the obsolete requirement. The Tennessee chamber would like to thank Michael Haynie with Manier & Herod, who helped us facilitate passage of the legislation.  
Tennessee Business Survey Shows Improved Outlook

In a recent release the MTSU Jones College of Business in partnership with the Tennessee Chamber of Commerce & Industry rolled out the April 2018 survey that showed positive perceptions in t he Tennessee Business Barometer increas ing to a new high of 606 from a previous high of 577 in January.  This improved outlook resulted from two offsetting trends. 
Perceptions of the current and future economy have subsided.  The Current Situation Index dipped slightly to 289 from 313, and the Future Expectations Index saw a similar decline to 162 from 185.   Business leaders continue to have concerns regarding workforce and employment.   Although there was a net increase in the percent who expect to increase employment in the next 12 months, a growing number express difficulties finding qualified employees to fill open positions.  This dichotomy of trends is concerning as firms who seek to hire new employees increasingly find it difficult to find qualified new employees to fill those positions.

Conversely, Tennessee business leaders have become increasingly optimistic about the prospects for their individual businesses/firms.  The Business/Firm Index rose significantly to 183 from 100 in January.   Business leaders have become more optimistic about their individual firm’s growth, investments, sales, profitability, and inventories.   The participants who said business conditions for their industry are “good” increased to 64 from 57 percent.  Further, the percent who said business conditions for their firm/business are “good” rose to 83 from 70. 

Focus Shifts to Internal Referrals and Retention Efforts to Fill Positions

When it comes to finding employees, firms are more likely to use employee referrals, online job boards, and promoting from within to fill positions than they are to rely on college internship programs or attending university career fairs. 
However, the inability to find qualified employees seems to result from a problem with supply (“There are not enough qualified employees out there in the job market”) rather than simply a problem with locating qualified employees (“There are qualified employees out there in the job market; we just have difficulty finding them”).  It is interesting that almost one in four (24 percent) report difficulties with employees shopping around for another job while still employed by their firm/business. 
To help retain employees, the majority of firms actively take steps to create and foster positive relationships with their employees.  This includes developing policies for employee behavior, establishing lines of communication with employees, and offering attractive benefits packages. However, less than half reported having employee development programs that encourage employees to become advocates for the firm/business.  In addition, less than 40 percent offer additional “perks” to improve employee morale and decrease turnover.

The Tennessee Chamber of Commerce & Industry/Tennessee Manufacturers Association (TMA), is pleased to continue our 2018 TMA Statewide Tour next week in Knoxville (4/24) and Cleveland (4/26)! Remaining Tour Locations include: Knoxville, Cleveland, Memphis, Jackson, Gallatin, Nashville, Smyrna/ Murfreesboro, Kingsport and Morristown. We hope to see you on the tour!

Register at www.tnmfg.org or call (615) 256-5141.

Presenting Sponsor:
State Unemployment Rate Remains Near Historic Low
NASHVILLE – Tennessee Gov. Bill Haslam and Department of Labor and Workforce Development Commissioner Burns Phillips today announced the March 2018 statewide unemployment rate for Tennessee remained near historic lows and matched the revised rate from the previous month.

The preliminary, seasonally adjusted rate for March was 3.4 percent, which mirrored the revised rate for February and was nearly one percentage point less than the March 2017 rate of 4.2 percent. Tennessee’s statewide unemployment rate has remained below 4.0 percent since last May, hitting an all-time low of 3.3 percent last September.
Tennessee added 4,900 new nonfarm jobs between February and March. Over the past 12 months, employers across the state created an estimated 49,000 new jobs. The largest increases occurred in the accommodations/food services, wholesale trade, and transportation/warehousing/utilities sectors. [ Image: TN Governor’s Office]
Environmental Updates...

WATER NEWS :   TN Board of Water Quality, Oil & Gas met this week and authorized staff in the TN Department of Environment & Conservation to begin rule making processes for two important areas: triennial review and revisions to the rules for aquatic resource alteration permits ( ARAP ).  The timeline for these rules to be back before the board is October 2018. Stay tuned for future updates on stakeholder meetings on both items. If you have an interest in the policy areas for water permitting and have not received a Water subcommittee email in the past week, please contact Charles Schneider .

Recent Actions:
SB2229/HB2313 - TN Chamber’s Permit Shield legislation was sent to the Governor for action.
SB0686/HB0571 - Mining Associations’ legislation to reestablish primacy for coal mine permitting was sent to the Governor for action.  Note: Once the state completes the process to reestablish “primacy” the TN board of water quality, oil & gas, will add two new members from industry and have its named changed to the Tennessee Board of Energy and Natural Resources. 
Politics & Debates...

As the Legislature Winds Down, Campaign for Governor Heats Ups
Gov. candidates participated in two debates this week

On Tuesday, four of the six major candidates for governor participated in a bipartisan forum focusing on issues important to rural Tennesseans. Topics in the debate covered opioids, education, transportation, and tariffs. Discussion and debate delved into many other issues of interest to voters from across the state.  The Jackson Sun has a recap and the full video, if you wish to watch.

Historically, voters in Tennessee have a deeply ingrained rural perspective, reflected in our state motto “Agriculture and Commerce”. While many families now participate in commerce away from the farm , it is important that we continue to encourage the common sense perspectives from our rural communities.  We congratulate the Jackson Chamber for encouraging this conversation on rural issues. If you would like to keep up with rural issues with a business focus in West TN, we encourage you to follow the Jackson Chamber on Facebook. If you are in business in West Tennessee you are likely plugged into the Jackson Chamber. We think you will agree they are an excellent regional resource on business issues.

Joining the Jackson Chamber as sponsors of the Rural Tennessee Gubernatorial Forum were Lane College, the Jackson Energy Authority, Leadership Tennessee, WBBJ and the USA-Today News Network. The Rural Tennessee Forum was televised across the state, on the internet and Facebook.  
GOP Candidates Debate Monuments, Arming Teachers, State Spending and More
Stuck in Session Speaker Harwell Unable to Participate

Wednesday night, three Republican candidates for Governor gathered in Memphis for the first of several Republican primary debates that will be held across our grand divisions. Bill Lee, Randy Boyd and Diane Black disapproved of the removal of Confederate monuments from city parks but also disagreed with the state legislature’s decision to cut $250,000 of city funding in retaliation. Boyd, Black and Lee also each favored arming school teachers although Boyd said it should be voluntary. The debate was largely cordial with candidates sticking close to their message from the campaign trails. The most excitement among the candidates occurred as Black, Lee and Boyd agreed that Memphis and West Tennessee have not gotten a fair share of infrastructure funding from the state. Each candidate agreed the state must do more to spur economic activity in the region.

The debate was sponsored by Greater Memphis Chamber , the Memphis Daily News and Nexstar’s WATN, an ABC affiliate; it was aired statewide. The Memphis Daily News and the Commercial Appeal highlight different aspects of the topics. Watch the debate , courtesy of WATN, channel 24 in Memphis.  
Tennessee Chamber of Commerce & Industry | www.tnchamber.org
(615) 256-5141 | info@tnchamber.org