Following the adjournment of each state legislative session, businesses are faced with the difficult task of identifying if, how and when any of the more than 500 changes in law will affect them.
As an advocate for businesses in the Middle Tennessee region, the Nashville Area Chamber of Commerce routinely tracks legislation and analyzes its impact on the region’s job creators. This year, the Chamber played a direct role in the passage of three key pieces of legislation important to the business community. Changes to unemployment regulations will reduce the burden on employers to prove that a former employee was guilty of willful work-related misconduct and therefore ineligible to receive unemployment benefits. A second major legislative victory, the complete phase-out of the inheritance, or “death,” tax, will help attract and retain investment and jobs in Tennessee. Finally, the preservation of Tennessee’s competitive business environment through expansion of the FastTrack program to offer grants and loans for general economic development projects including purchasing equipment, building repairs and improvements, and temporary office space.
While many of these issues received significant news media attention, the specifics of each bill and individual timetables for implementation aren’t as widely known. For human resources professionals, the most important bill passed this year is likely SB 3658/HB 3431, or the “Unemployment Insurance Accountability Act of 2012.” This bill builds on changes to unemployment law which went into effect January 1, 2010, to further define “misconduct,” and allows businesses to provide information to the Department of Labor and Workforce Development when they expect a separation issue to arise. As a result of this bill, employees who deliberately disregard an employer’s written attendance policy, receive a severance package, or are offered a similar job with equivalent compensation which they subsequently reject are excluded from receiving unemployment benefits. Claimants are also required to contact at least three employers per week regarding employment or access services at a state career center. A random state audit of 1,000 claimants weekly will ensure that beneficiaries of unemployment benefits are complying with the new regulations. All but two parts of this bill will take effect immediately after being signed by Governor Haslam. The audit verification piece and the provision to allow employers to preempt a separation issue will take effect on September 1, 2012.
Another significant piece of legislation passed in 2012 is the four-year phase-out of Tennessee’s inheritance tax. This refers to the federal estate tax
levied on individuals, including owners of small companies, after their death. According to research
by economist Antony Davies, farms and small business assets comprise two-thirds, or 67 percent, of the estates susceptible to the estate tax. Paying the estate tax, even when it does not force the sale of business property, ties up valuable capital, slowing expansion and job creation.
While the full repeal of the inheritance tax will not be effective until January 1, 2016, the bill, and the increased exemption schedule, becomes the law of the land with the governor's signature. The exemption levels increase incrementally each year, from $1.25 million in 2013 to $5 million in 2015, and although the inheritance tax remains on the books for the next couple of years, citizens can begin to make plans to remain in Tennessee knowing that their estates will not be taxed upon their death. Keeping wealth in Tennessee is critical to attracting and retaining jobs and building a robust economy. While the results of this legislation may not immediately be felt, we believe it will contribute to a stronger, more stable economy in the future.
Expansion to the state’s FastTrack program was met with overwhelming support by state legislators who realized the popularity of the economic development tool. The Nashville Area Chamber supported Governor Haslam’s plan to expand beyond infrastructure developments and worked with legislative leaders and administration officials to ensure its passage. The language of the bill gives broad discretion to the commissioner of economic development to determine if a wide array of improvements could be eligible for grants or loans from the state. While minor reporting requirements were added to the program, including one that would require the state department of economic development to notify the state funding board of each new award, these should not hinder the application or approval process. This bill was signed by the governor on May 17 and is now in full effect.
A full report of this year’s session and the Chamber’s advocacy efforts will be shared with our members this summer. In the meantime, please continue to check our Business Voice tool