SB 2074

Present law requires all property to be taxed for state, county, and municipal purposes. This bill generally prohibits a tax from being levied on property in this state after January 1, 2031. This includes property taxes levied by counties, municipalit ies, cities, metropolitan governments, special districts, and special school districts. However, the present law governing property taxes applies to all taxes levied prior to that date, and this bill does not absolve a taxpayer of liability for a tax lev ie d by present law prior to January 1, 2031, for a tax year ending before that date. This bill authorizes a county, municipality, or special district that issued debt prior to January 1, 2031, to continue to levy a property tax for the sole purpose of servicing sub debt until the outstanding indebtedness is fully retired. However, debt issued on or after January 1, 2031, is prohibited from being secured by a pledge of property tax revenue. LOCAL GOVERNMENT REVENUE STABILITY TAX Beginning January 1, 2031, this bill levies a statewide local government revenue surtax of 4% on all sales subject to the sales and use tax levied by present law. This tax is in addition to the tax rate in present law for the sale of tangible personal p roperty at retail and any local option sales tax rate. This bill requires all revenue collected pursuant to this surtax to be deposited in the local government stability tax fund, a dedicated account created by this bill in the state treasury. This bill requires moneys in the local government revenue stabil ity tax fund to be used solely to provide revenue disbursements to counties, municipalities, local education agencies and special school districts, and special tax districts. Distribution of Funds This bill requires each local government to receive an annual distribution from the local government revenue stability tax fund equal to the local government's property tax revenues from 2028 plus a growth supplement. Such growth supplement is calculate d by multiplying the property tax revenues by a growth factor equal to the percentage increase in revenues over the prior year from the sales and use tax levied by present law. As used in this provision, a "local government"" includes a county, municipali ty, special district, and special school district. This bill requires the department of revenue (""department"") to calculate and disburse monthly payments from the local government revenue stability tax fund in accordance with all of the following requirements:  Each county, including those with a metropolitan form of government, must receive funds in proportion to the county's share of the total amount of county property tax revenues collected statewide for 2028.  Each municipality must receive funds in proportion to the municipality's share of the total amount of municipal property tax revenues collected statewide for 2028 .  Each special school district must receive funds in proportion to the district's share of the total amount of special school district property tax revenues collected statewide for 2028 .  Each special distric t must receive funds in proportion to the district's share of total amount of special district property tax revenues collected statewide for 2028. However, this bill clarifies that any reduction in fund disbursements does not relieve a local government of any maintenance of effort obligations, unless expressly authorized by statute. ANNUAL REPORT This bill requires the department, in consultation with the comptroller of the treasury, to submit a report to the chief clerks of the senate and house of representatives; the finance, ways and means committee of the senate; the committee in the house of representatives having jurisdiction over tax-related matters; the office of legislative budget analysis; and the legislative librarian detailing revenue collected pursuant to the surtax described above, growth factor calculations, and disbursements from th e local government revenue stability tax fund . Such report must be submitted no later than February 1 of each year. RULEMAKING This bill authorizes the department to promulgate rules to effectuate this bill. CONTINGENCY This bill is contingent on the approval and ratification of an amendment to Article II, Section 28 of the Constitution of Tennessee, to remove the requirement that all property be taxed."