NASHVILLE, Tenn. (US Local News) — In a significant move aimed at staving off potential legal challenges, the Tennessee Senate has greenlit a nearly $2 billion tax cut and refund for businesses. The decision, though contentious, is viewed as crucial for maintaining the state’s economic competitiveness.

The genesis of this move can be traced back to last fall when a prominent law firm representing a coalition of businesses raised questions about the legality of Tennessee’s long-standing franchise tax. Citing concerns over its compliance with the U.S. Constitution’s Commerce Clause, which prohibits laws that impede interstate commerce, the firm demanded substantial refunds on behalf of its clients.

Responding to the escalating situation, Governor Bill Lee proposed a series of measures, initially suggesting $1.2 billion in refunds and later refining the proposal to include ongoing tax breaks amounting to $410 million. However, the Senate has since modified the plan, now offering $1.56 billion in refunds coupled with $393 million in tax breaks, totaling close to $2 billion.

“This bill will put this issue behind us and address it in a responsible way,” remarked Republican Senator Ken Yager, emphasizing the importance of resolving the matter to enhance Tennessee’s appeal to businesses considering relocation.

Central to the legal dispute is the contention that Tennessee’s franchise tax may contravene the Commerce Clause, echoing a 2015 U.S. Supreme Court ruling that invalidated Maryland’s tax law for double-taxing income earned out-of-state.

With the Senate’s approval, the proposed tax cut and refund are poised to be a pivotal step in mitigating the threat of litigation and ensuring Tennessee’s continued attractiveness to businesses eyeing the state for potential expansion or relocation.