HB 2502

Present law levies a tax on the sales price of certain, specifically described, services. This bill adds the transmitting of money from a location originating in this state to a location outside of the United States or its territories by an entity licen sed under the Money Transmission Modernization Act to the services that are subject to such a tax. INTERNATIONAL MONEY TRANSMISSION TAX FUND This bill requires revenues from the tax as described above to be deposited in a special account in the state general fund, called the international money transmission tax fund. All revenue must be retained in this account until the revenue is unencumbe red. This bill provides that the revenue becomes unencumbered on July 1st of each year after the expiration of the application period for a refund, as described below. Refunds This bill requires revenues generated from the tax as described above to be subject to a refund upon an application from the individual who paid the tax. Such an application must be submitted to the department of revenue between June 1 st and June 30 th and include the applicant's social security number or taxpayer identification number and proof of the taxes paid. Allocation of Funds This bill requires unencumbered funds remaining in the international money transmission tax fund to be allocated and distributed on July 1 st of each year. Twenty-five percent of the funds must be allocated to the state general fund; 25% must be allocated to all counties and metropolitan governments in this state, in proportion with population, to be used for capital improvement projects and i nfrastructure expenditures; and 25% must be allocated to the Tennessee peace officer standards and training commiss ion to provide an additional pay supplement to law enforcement officers who complete in-service training requirements. K-12 Education Teacher Compensation Fund This bill establishes the K-12 education teacher compensation fund to be used to provide a pool of funds for employee salary increases or bonuses for teachers. Monies in the K-12 education teacher compensation fund must be allocated each August 1st to l ocal education agencies throughout the state. This bill requires the remaining 25% of the unencumbered funds from the international money transmission tax fund to be allocated to this fund on July 1st of each year. RULEMAKING This bill authorizes the department of education to promulgate rules with regard to the K-12 education teacher compensation fund. ON APRIL 9, 2026, THE HOUSE ADOPTED AMENDMENT #1 AND PASSED HOUSE BILL 2502, AS AMENDED. AMENDMENT #1 rewrites the bill to, instead, provide that the service of transmitting money from a location originating in this state to a location outside of the United States or its territories is a taxable service and such a tax is generally levied on the amount of money transmitted. The tax imposed by this amendment is levied at the rate of (i) $10 per transaction; and (ii) 2% of any money transmitted in excess of $500. However, the service of transmitting money form a location in this state to a lo ca tion outside of the United States or its territories is not subject to the local option tax. The transmission of money by any corporation defined as a financial institution, except for those licensed under the Money Transmission Modernization Act, is exe mpt from the tax levied by this amendment. This amendment requires revenues generated from such a tax be allocated and distributed as follows: • 20% to the state general fund. • 38% to the TennCare buyback fund, to be used solely to fund TennCare hospital buybacks. • 18.5% to the promising futures fund, to be administered by the department of human services and used solely to support pilot programs and targeted child care assistance initiatives that (i) strengthen and stabilize this state's child care workforce; (ii ) support employer participation in shared child care cost models; (iii) expand access to child care for working families who are ineligible for existing subsidy programs; and (iv) provide accountability, transparency, and data-driven evaluation to inform f uture programming and policy decisions. • 18.5% to the Tennessee housing development agency, to be used solely for workforce housing initiatives. • 5% to the teacher internship fund, to be administered by the department of education to provide paid internships for teachers in training at public schools, including public charter schools. ON APRIL 16, 2026, THE SENATE SUBSTITUTED HOUSE BILL 2502 FOR SENATE BILL 2166, ADOPTED AMENDMENT #2, AND PASSED HOUSE BILL 2502, AS AMENDED. AMENDMENT #2 makes the following changes:  Requires 51.5%, instead of 35%, of the revenue generated from the tax on transmitting money from a location originating in this state to a location outside of the United States or its territories to be allocated to the TennCare buyback fund.  Requires 5%, instead of 18.5%, of the revenue generated from the tax on transmitting money from a location originating in this state to a location outside of the United States or its territories to be allocated to the Tennessee housing development agency to be used for workforce housing initiatives.  Defines "originating in this state, for the purposes of this amendment, to mean (i) for a transaction requested in person, the physical location within this state at which the in-person request is made; and (ii) for a transaction requested electronically or by phone, a physical location in this state associated with the customer transmitting the money as determined by the provider of money transmission. In making such determination, the provider may consider the physical address of the customer or any records associated with the customer that the provider of money transmission may have that indicate such location or address.  Authorizes a provider of money transmission, when determining whether money is transmitted to a location outside of the United States or its territories, to rely on information provided by the customer regarding the location of the recipient's physical address, and any records associated with the recipient that the provider of money transmission may have."