Tax News

CCH (cch.taxgroup.com) reports:

The Tennessee franchise tax jobs credit was not available to a taxpayer that acquired a paper plant and hired 615 former employees who had been terminated one day earlier by the plant's previous owner. The taxpayer argued that the 615 jobs constituted net new full-time employee jobs, as required under the credit statute, but that argument was rejected.
The taxpayer asserted that, because the previous owner was a separate entity, the number of workers employed at the plant prior to the sale should not be considered when determining whether the taxpayer was entitled to claim the credit. However, an analysis of the statutory language and legislative history showed that the general purpose of the statute was to provide an incentive for companies to create new jobs and increase employment in Tennessee by either expanding existing operations or locating new operations within the state. Therefore, for the general purpose to be met, an employer must prove that it created at least 25 net new jobs resulting in an increase in employment in Tennessee.
In this case, the plant's previous owner terminated 820 full-time employee jobs on the day that the taxpayer acquired the plant. The following day, the taxpayer hired 615 employees to fill positions that previously existed, resulting in a decrease in employment in Tennessee by 205 workers. Accordingly, allowing the taxpayer to claim the credit for the 615 employees would not be in accord with the general purpose of the statute.
The taxpayer also claimed that its massive training program changed the 615 jobs into new positions, but that claim was without merit. Investment in training employees and updating plant equipment did not entitle the taxpayer to the jobs credit.
Weyerhaeuser Co. v. Chumley , Tennessee Court of Appeals, No. M2005-00212-COA-R3-CV, September 7, 2007, ¶401-202
Other References:
Explanations at ¶5-525