The public deserved information and didn’t get it with the $1.5 billion refund decision

In June, the state posted on its website a list of nearly 60,000 businesses that applied for and received a tax refund as part of a 2024 law changing the state’s excise tax.

The new law did not merely change the excise tax going forward but allowed businesses to amend five years’ worth of previous returns and get a refund on the difference between what they paid and what they would have paid under the new tax law.

Lawmakers in passing the bill said the refunds and the change in tax law were in response to threatened litigation over the constitutionality of the law. If not done, the state could be saddled with even more payouts. The refunds were supposed to head off such lawsuits.

To try to bring some transparency to what was happening, lawmakers included a provision to post the business names of the refund recipients online for one month in June 2025, putting them in three broad categories of receiving $750 or less, $750 to $10,000 and more than $10,000. The number of businesses falling into each category was 9,239 ($740 or less), 33,376 (between $750 and $10,000) and 15,868 (more than $10,000). The state in December said that $1.27 billion had been provided, but media outlets have reported that by June, the total had risen to more than $1.5 billion.

The list of companies is now off the state’s website, but in a move to preserve the data, the Tennessee Lookout copied the information before it disappeared and posted it on theirs.

The biggest complaint was that the specific amounts weren’t listed on the website and the $10,000-plus category hid the largesse of refunds to some companies. It’s a fair point and I’ve made it. But it’s hardly a wall of shame. Who can blame a company for taking advantage of a refund offer?

I suggest something else is a larger threat to the public’s right to know: The lack of transparency around details of what got the state in a place where lawmakers felt they had to make one-time payments of $1.5 billion in refunds and change the excise tax in a way that decreases state revenue going forward. (One lawmaker called it extortion.)

What were the threats specifically? Which companies made them? Were there other options considered? What were the communications by the companies making threats to the governor’s office or other state officials in the Revenue Department? Who negotiated the deal? Who proposed the five-year rebate window and why? Were there conflicts of interest? Answers to none of these questions and others have been reported or shared with the public.

There has been some good journalism around the topic, but it goes only so far, stymied by the lack of transparency in Tennessee state government.

Bloomberg News tax journalist Michael Bologna reported that the state began focusing on the issue of its excise tax after a lawsuit by Toyota Motor Credit Corp., which demanded a $3.3 million franchise and business excise tax refund.  In February 2024, Bologna interviewed two partners with the law firm Reed Smith LLP, who represented Toyota and also filed 80 additional administrative claims for refunds. Reed Smith alleged the franchise tax violated the dormant commerce clause of the U.S. Constitution.

Journalist Andy Sher with The Tennessee Journal / State Affairs reported on Bloomberg’s discovery of the pressure by Toyota and Reed Smith LLP, and interviewed Sen. Bo Watson, chairman of the Senate Finance Committee, about it. Watson said that the Toyota lawsuit was not the impetus. “The impetus is that some others have articulated it in a way now that the Department of Revenue has looked at it and gone, ‘Well, maybe we ought to think about this and they may have a good argument’ ” Watson told Sher.

Some lawmakers wanted to know more.

Sen. Jeff Yarbro’s comments to Sher are worth reviving here because they go to the lack of information shared with the Legislature and the public. (Yarbro is also an attorney.)