INSTRUCTIONS: APPLICATION FOR EXEMPTION FROM FRANCHISE AND EXCISE TAXES
Tennessee Code Annotated Section 67-4-2008 provides exemption from Tennessee’s Franchise and Excise Taxes under certain situations. The form on the
reverse side should be completed by entities requesting exemption under provision of these laws. Please see the descriptions of exempt entities shown
below to determine if your entity qualifies for exemption.
E
ach entity is required to make its initial application for exempt status on this form and must also submit a renewal applicati on annually. This annual
certification is due each year by the 15th day of the fourth month following the end of the entity's fiscal year.
Please mail completed applications and annual renewals to: Tennessee Dep
artment of Revenue, 500 Deaderick Street, Nashville, TN 37242. For questions
or assistance with this form, please call (615) 253-0700, Monday through Friday, from 8:00-4:30, Central time or visit www.tn.gov/revenue for more detailed
information.
Venture Capital Funds [Tenn. Code Ann. Section 67-4-2008(a)(5)]: An LLC, LLP, or LP formed and operated exclusively for buying, holding, and/or selling
securities, including debt securities, primarily in non-publicly traded companies, on its own behalf and not as a broker. The capital of the fund is primarily (over
50%) derived from investments by entities and/or individuals which are not affiliated with the fund. A “non-publicly traded company” is a business entity that
is not a “publicly traded company,” which is defined as (a) a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934 or
exempted from registration under such act by 15 U.S.C. Section 78f because of the limited volume of transactions; (b) a foreign securities exchange operating
under principles analogous to a national securities exchange; (c) a regional or local exchange; (d) an interdealer quotation system that regularly disseminates
firm buy or sell quotations by identified brokers or dealers by electronic means or otherwise; or (e) on a secondary market or the substantial equivalent thereof,
if taking into account all of the facts and circumstances, the owners are readily able to buy, sell or exchange their ownership interest in a manner that is
comparable, economically, to trading on an exchange.
Farming/Personal Residence [Tenn. Code Ann. Section 67-4-2008(a)(6)]: An LLC, LP, or LLP where at least 66.67% of the activity of the entity is either farming
or holding one or more personal residences, including acreage contiguous to the dwelling, where one or more of the members or partners reside. At least 95%
of the entity must be owned either by persons who are relatives of one another or by trusts for their benefit. Natural persons shall be considered “relatives”
by
blood or adoption if they are descended from a common ancestor and their relationship with each other is that of a first cousin or closer than that of a first
cousin, or if they are spouses of one another.
Third Party Indebtedness [Tenn. Code Ann. Section 67-4-2008(a)(7)]: On May 1, 1999, and at all times thereafter, the entity must be at least 98% owned by
corporate members of an affiliated group, and be formed and operated for the exclusive purpose of acquiring notes from members of such affiliated group,
accounts receivable, installment sale contracts, and similar evidence of indebtedness obtained in the ordinary course of business by one or more members of
such affiliated group. The entity’s assets must directly or indirectly serve as security for third party borrowings or secur
itized indebtedness acquired by third
parties. At least 80% of the income therefrom must be included in the income of a corporation doing business in Tennessee, and such income must be subject
to the applicable franchise and excise tax allocation and apportionment rules.
Affordable Housing [Tenn. Code Ann. Section 67-4-2008(a)(8)]: The LLC or LP must have received an allocation of low-income housing tax credits
pursuant to Section 42 of the Internal Revenue Code of 1986, as amended. An “extended low-income housing commitment” as defined in Section 42(h)(6)
(B) of the Internal Revenue Code of 1986, as amended, must be in effect with respect to each residential building owned by the entity for the period covered
by the return. Attach separate Affordable Housing Certification Form.
REMIC or FASIT [Tenn. Code Ann. Section 67-4-2008(a)(10)]: An entity which (a) is classified as a partnership or trust in accordance with the federal
regulations and rulings promulgated under 26 U.S.C. Section 7701, or has elected to be treated as a real estate mortgage investment conduit (REMIC) under
26 U.S.C. Section 860D, or as a financial asset securitization investment trust (FASIT) under 26 U.S.C. Section 860L, or a business trust, as defined in Section
48-101-202(a), when the commercial domicile of the trustee is not in Tennessee; and (b) the sole purpose of the entity, except for foreclosures and
dispositions of the assets of foreclosures, is the asset-backed securitization of debt obligations, such as first or second mortgages, including home equity
loans, trade receivables, whether an open account or evidenced by a note or installment or conditional sales contract, obligations substituted for trade
receivables, credit card receivables, personal property leases treated as debt for purposes of the Internal Revenue Code of 1986, as amended, automobile
loans or similar debt obligations. “Trade receivables” are defined as obligations arising from the sale of inventory in the ordinary course of business;
Family-Owned Non-corporate Entity [Tenn. Code Ann. Section 67-4-2008(a)(11)]: Any family-owned non-corporate entity where substantially all the activity
of the entity is either (a) the production of passive investment income; or (b) the combination of the production of passive investment income and farming.
“Family-owned” means that at least 95% of the ownership units of the entity are owned by members of the family, which means, with respect to an individual,
only an ancestor of such individual; the spouse or former spouse of such individual; a lineal descendent of such individual, of such individual’s spouse or
former spouse, or of a parent of such individual; the spouse or former spouse of any lineal descendent; or the estate or trust of a deceased individual who,
while living, qualified as a lineal descendent. A legally adopted child of an individual shall be treated as the child of such individual by blood. “Passive
investment income” means gross receipts derived from royalties, rent from residential real estate, dividends, interest, annuities, and any gains from sales or
exchanges of stock or securities. Entities with no income may qualify for this exemption if all other requirements are met.
Diversified Investment Fund [Tenn. Code Ann. Section 67-4-2008(a)(12)]: Formed and operated for the purpose of buying, holding, or selling qualified
investment securities on its own behalf. The capital of the fund must be primarily derived from investments by entities or individuals that are not affiliated
with the fund. At least 90% of the fund’s income must consist of interest, dividends, and gains from the sale or exchange of such investment securities.
Facilities Owned by the Armed Forces [Tenn. Code Ann. Section 67-4-2008(a)(16)]: Any entity owned directly, in whole or in part, by a branch of the
United States Armed Forces. The entity must derive more than 50% of its gross income from the operation of facilities that are located on property owned or
leased by the federal government and operated primarily for the benefit of member of the United States Armed Forces.
Obligated Member [Tenn. Code Ann. Section 67-4-2008(a)(9)]: In order to qualify as an exempt obligated member entity the appropriate documentation
required for each of the entity’s members, partners or owners to waive their limited liability protection shall be filed with the Tennessee Secretary of State on or
before the first day of the first otherwise taxable year for which the entity wishes to claim exemption. This does not relieve the obligated member entity from
filing an initial Application for Exemption with the Department of Revenue within 60 days of the beginning of the first fiscal year for which the person claims the
exemption or from submitting a renewal application annually by the date on which a return would otherwise be due were it not for the exemption. To the extent
that any obligated member, or any owner of an obligated member, provides limited liability protection, the obligated member entity shall owe the taxes
otherwise imposed by the franchise and excise tax statutes on the portion of income and equity attributable to such obligated member. Ownership includes
any form of ownership, whether in whole, in part, direct or indirect. Also, estates, trusts that are not taxpayers, nonprofit entities, or other entities exempt under
this section, shall not be deemed to provide limited liability protection.
Qualified Low-Income Community Historic Structure owner or lessee [Tenn. Code Ann. Section 67-4-2008(a)(17)]: The entity must own an interest in or be
the lessee of a qualified low-income community historic structure. The entity must have no business operations or assets other than its investment or lease
in the qualified low-income community historic structure, business operations and assets incidental to such investment or lease and de minimis other
operations and assets.
