Tennessee Tax Preparer Requirements: No License, No Income Tax, and F&E Traps for LLCs

Tennessee is one of the simplest states in which to start a tax preparation business. No state license is required, no exam, no bond, no state-mandated continuing education. A valid federal PTIN is the only credential the law demands. In exchange, Tennessee hands you a genuinely unusual operating environment: there is no individual income tax of any kind, so your clients file zero state returns on their wages, investment income, or retirement distributions. The complexity is not in the state rules you must follow as a preparer. It is in two specific places: your own business entity structure (the franchise and excise tax trap that catches new LLC-organized preparers by surprise) and the specialized federal return work your Tennessee client base requires, from Nashville songwriters and touring musicians to Fort Campbell soldiers, Vanderbilt healthcare workers, and auto manufacturing employees at Nissan in Smyrna and Volkswagen in Chattanooga. This guide covers every requirement and opportunity a Tennessee paid preparer needs to understand for 2026.

Tennessee Tax Preparer Requirements: No State License

Tennessee imposes no state-level registration, license, exam, or continuing education requirement on non-credentialed paid tax preparers. The Tennessee State Board of Accountancy regulates the CPA credential and the use of the CPA title, but it has no authority over non-credentialed commercial preparers. Any individual who holds a valid federal PTIN may legally prepare tax returns for compensation in Tennessee.

Tennessee is among approximately 34 states that have enacted no state preparer oversight law. Contrast this with states like California (CTEC registration), Oregon (state licensing exam), Maryland (registration requirement), and New York (registration and CE mandate). In Tennessee, the federal requirements are the entire floor.

PTIN: The One Required Credential

Every paid preparer who prepares or assists in preparing any federal tax return must hold a valid, annually renewed Preparer Tax Identification Number (PTIN) issued by the IRS. This is federal law under IRC Section 6109(a)(4) and applies in all 50 states.

• 2026 PTIN fee: $18.75 (paid at irs.gov/ptin)
• Renewal is annual, by December 31 for the upcoming filing season
• Renewal takes approximately 15 minutes online
• New applicants complete the same online process

Your PTIN must appear on every federal return you sign or prepare for compensation. No PTIN equivalent exists at the Tennessee state level because Tennessee has no individual income tax return to sign.

EFIN: Required at 11 or More Returns Per Year

An Electronic Filing Identification Number (EFIN) is required if you plan to e-file federal returns. The IRS requires preparers who file 11 or more returns in a calendar year to e-file. EFIN applications are processed through IRS e-Services. Tennessee participates in the IRS Fed/State e-File program, so your IRS EFIN covers both federal and any state returns you file (in states where clients have state obligations).

Note: Because Tennessee has no individual income tax, the only state returns your Tennessee resident clients need are returns for other states where they earned income (for example, a Nashville artist who performed in New York or California). Your EFIN covers those non-resident filings.

Circular 230 and Conduct Standards

Non-credentialed preparers are subject to IRS Circular 230 rules governing practice before the IRS, including standards of conduct, due diligence, and prohibition on frivolous return positions. Violations can result in PTIN suspension or revocation and civil penalties under IRC Section 6694.

Non-credentialed preparers have limited representation rights: they may represent clients during an examination of a return they prepared and signed, but only at the examination level. They may not represent clients before Appeals, Collections, or other IRS functions without an EA, CPA, or attorney credential.

FTC Safeguards Rule: Written Information Security Plan

Every paid tax preparer, including solo practitioners, must maintain a Written Information Security Plan (WISP) under the Gramm-Leach-Bliley Act and FTC Safeguards Rule. Required elements include a designated responsible individual, multi-factor authentication (MFA) on all systems containing client data, a risk assessment, vendor management controls, and an incident response plan. FTC penalties can reach $46,517 per violation per day. A free WISP template is available in IRS Publication 5708.

Title Restrictions: What You Cannot Call Yourself

Non-credentialed preparers in Tennessee may not use the title "CPA," "Certified Public Accountant," or any variation that implies CPA licensure. The Tennessee State Board of Accountancy enforces these restrictions. You may use titles such as "Tax Preparer," "Tax Professional," "Enrolled Agent" (if you hold that credential), or your business name without a protected title.

Voluntary Credentialing: The IRS Annual Filing Season Program

Because Tennessee imposes no CE requirement, the IRS Annual Filing Season Program (AFSP) is the most important voluntary credentialing option for Tennessee preparers. It signals competence to clients, appears in the IRS public directory, and grants limited representation rights that non-credentialed preparers otherwise lack.

AFSP Requirements

• 18 hours of CE per year: 10 hours federal tax law, 6 hours federal tax law updates, 2 hours ethics
• Completion earns an IRS Record of Completion
• AFSP holders are listed in the IRS public directory of tax return preparers
• AFSP holders have limited representation rights: they may represent clients during an examination of a return they prepared, including client interviews and document submission

ATP as an IRS-Approved CE Provider

America's Tax Professionals is an IRS-approved continuing education provider (provider number P619F). Tennessee preparers can complete the full 18-hour AFSP curriculum through ATP's online courses, satisfying every AFSP hour requirement. ATP courses count toward the AFSP Record of Completion and are available throughout the year.

Tennessee Has No Individual Income Tax: What This Means for Your Practice

Tennessee has had zero individual income tax of any kind since January 1, 2021. The Hall Income Tax (a 6% tax on dividends and interest only, not wages) was phased down from 6% in 2016 to 1% in 2020 and was fully repealed effective January 1, 2021 under Tennessee Code Annotated Section 67-2-101. No replacement was enacted.

As of today, Tennessee levies no state tax on any of the following for individuals:

• Wages and salaries
• Self-employment income
• Dividends and interest (previously Hall-taxable)
• Capital gains
• Retirement income, including Social Security, pensions, and IRA distributions
• Military pay, BAH, and BAS
• Royalties and business distributions from pass-through entities

No Tennessee Individual Return to File

Tennessee clients do not file a state individual income tax return. The Form INC-250 (Hall Tax return) no longer exists for years beginning on or after January 1, 2021. A common first-year error is attempting to generate a Tennessee state individual return in tax software. Your software should produce no Tennessee individual return for any client whose only Tennessee income is personal income. If it does, that is a configuration error.

W-2 State Withholding: Zero Is Correct

Tennessee employers have no state income tax withholding obligation. W-2s issued to Tennessee employees will show $0.00 in the state wages and state withholding boxes. This is correct and expected, not a payroll error. Do not attempt to reconcile or explain missing state withholding to clients; Tennessee simply has no withholding system.

No Tennessee 1099 State Filing Requirement

Tennessee does not require state-level 1099-MISC, 1099-NEC, 1099-B, or 1099-R filings. Preparers serving business clients do not need to include Tennessee in their 1099 state distribution workflow.

Tennessee Residents Working in Other States

A Tennessee resident who earns income in another state still owes that other state's income tax on income sourced there. Tennessee has no income tax to reciprocate, so there are no reciprocity agreements to simplify these returns. The preparer handles the non-resident return for the income-tax state; there is no Tennessee credit computation to offset it.

Common scenarios: a Nashville touring artist performing in New York and California; a Fort Campbell soldier whose military records show Kentucky as their state of legal residence; a Vanderbilt healthcare administrator working remotely from Tennessee for an employer headquartered in a state with a "convenience of employer" rule.

Pre-2021 Hall Tax Deficiencies

Hall Income Tax obligations through Tax Year 2020 can still be assessed, audited, and collected by the Tennessee Department of Revenue. If you assist a client with back-year returns or amended returns covering any year through 2020, you may encounter Hall Tax deficiencies. Those returns were filed on Form INC-250. Statutes of limitation apply; consult current Tennessee DOR guidance for applicable limitation periods.

Tennessee Sales Tax: Tax Prep Services Are Exempt

Tax preparation services are not subject to Tennessee sales and use tax. Tennessee's sales and use tax applies to the retail sale of tangible personal property and a narrowly enumerated list of services. The default rule under Tennessee law is: services are not taxable unless specifically included in the statute. Accounting, bookkeeping, and tax preparation services are not in the enumerated taxable list. The Tennessee Department of Revenue confirms this in official guidance SUT-116 (Non-Taxable Services).

If you sell access to software or digital files as a separate line item (for example, selling a client access to a filing portal), Tennessee taxes specified digital products at the 7% state rate. That is a separate analysis from your professional service fee, which remains exempt.

Tennessee Combined Sales Tax Rate (Client Advisory Context)

Even though your fee is exempt, your business clients frequently ask about Tennessee's overall sales tax burden because it is among the highest combined rates in the country. This context is relevant when advising clients on business compliance:

The state rate on most tangible goods is 7.0% (5.25% on food). Local option adds up to 2.75%. Business clients selling tangible goods in Tennessee owe sales tax on those sales and need a Tennessee DOR retail license to collect and remit.

Tennessee Business Tax (Gross Receipts Privilege Tax)

Tennessee also levies a business tax on gross receipts of businesses operating in the state. This is a separate tax from sales tax and from franchise and excise tax. Licensed CPAs are explicitly exempt from business tax on professional receipts. Non-credentialed preparers should confirm with the Tennessee Department of Revenue whether their receipts fall within the accounting services exemption under Classification 3.

The filing threshold is $100,000 in gross receipts per jurisdiction (raised from $10,000 by the Tennessee Works Tax Act). If your gross receipts in a given city or county are under $100,000, no business tax filing is required for that jurisdiction.

Tennessee Franchise and Excise Tax: The Critical LLC Trap

Tennessee's franchise and excise (F&E) tax is the most important state tax issue for any preparer operating as a business entity in Tennessee. It catches new LLC-organized preparers by surprise because Tennessee's treatment of single-member LLCs contradicts what most new business owners expect.

Who Owes F&E Tax

F&E tax applies to corporations, limited partnerships, limited liability companies, and business trusts that are chartered, qualified, or registered in Tennessee or doing business in the state (Tennessee Code Annotated Section 67-4-2004 et seq.). This includes:

• Multi-member LLCs
• Single-member LLCs owned by individuals (the most common preparer structure)
• S-corporations (Tennessee does not follow federal S-Corp pass-through treatment for F&E purposes)
• C-corporations

Who Is Exempt: Sole Proprietors and General Partnerships

Sole proprietors (Schedule C filers with no separate legal entity) and general partnerships are NOT subject to F&E tax. This is the most consequential business structure decision a new Tennessee preparer makes.

A sole proprietor has no franchise tax bill, no excise tax bill, no Form FAE170 to file, and no TNTAP registration for F&E purposes. Their state tax profile is entirely federal: Schedule C, self-employment tax, and whatever non-resident state returns their clients require.

The Single-Member LLC Trap

This is where preparers get hit. Tennessee does NOT follow federal "disregarded entity" treatment for F&E tax purposes when the single-member LLC is owned by an individual (not a corporation). At the federal level, a single-member LLC is a disregarded entity: the LLC files no federal return of its own, and the owner reports all income on Schedule C. Most people assume Tennessee follows the same logic.

Tennessee does not. An individual-owned single-member LLC is fully subject to both franchise tax and excise tax in Tennessee, even though that same LLC files no federal return of its own. The LLC must register with the Tennessee Department of Revenue via TNTAP, file Form FAE170, and pay both taxes annually.

Practical implication: a solo preparer who forms a Tennessee LLC to obtain liability protection takes on a state tax obligation their sole proprietor competitor does not have, even though their federal taxes are identical.

Franchise Tax: Rate, Minimum, and the 2024 Exclusion

The franchise tax is assessed on the Tennessee-apportioned net worth of the entity (total assets minus total liabilities).

• Rate: 0.25% of apportioned net worth
• Minimum: $100 per year, regardless of entity activity or net worth level
• 2024 change: Businesses may exclude up to $500,000 of property value from the franchise tax base. For most small preparer LLCs, this exclusion covers the entire net worth base, leaving only the $100 minimum due.

Excise Tax: Rate, Deduction, and the $50,000 Break

The excise tax is assessed on net earnings (Tennessee-modified federal taxable income).

• Rate: 6.5% of Tennessee net earnings
• 2024 change: A $50,000 standard deduction against net earnings applies starting with Tax Year 2024. This effectively eliminates excise tax for preparers whose net earnings are $50,000 or less.

Practical F&E Example for a New Preparer LLC

A solo preparer operating as a Tennessee single-member LLC with $75,000 in net earnings in year one:

• Excise tax base: $75,000 minus $50,000 standard deduction = $25,000 taxable
• Excise tax due: $25,000 x 6.5% = $1,625
• Franchise tax: based on entity net worth; $500,000 exclusion covers most small LLCs, leaving the $100 minimum
• Total F&E bill: approximately $1,725

A sole proprietor with identical income owes $0 in F&E tax.

Form FAE170: The Combined F&E Return

Both the franchise and excise taxes are reported on a single combined return, Form FAE170. For calendar-year filers:

• Annual return due: April 15 (15th day of the 4th month after fiscal year end)
• Estimated payments: April 15, June 15, September 15, and January 15 if required
• File and pay through TNTAP (Tennessee Taxpayer Access Point) at tntap.tn.gov

Starting a Tax Preparation Business in Tennessee

Stage 1: Sole Proprietor (Simplest Path)

A sole proprietor operating under their own name requires no formation filing, no Secretary of State registration, no annual report, and no F&E tax registration. Federal taxes run through Schedule C. Business tax applies only if gross receipts in a jurisdiction exceed $100,000. PTIN and EFIN (if applicable) are the only required registrations.

If using a business name other than your legal name, register a "doing business as" (DBA) trade name with the county clerk in the county where you operate. Fees vary by county but are typically $10 to $20.

The tradeoff versus an LLC is personal liability exposure. A sole proprietor has no liability shield; creditors and plaintiffs can reach personal assets. Many preparers start as sole proprietors in year one and form an LLC once revenues justify the additional cost and compliance.

Stage 2: Tennessee LLC

Tennessee LLCs are formed through the Tennessee Secretary of State (sos.tn.gov).

Annual report fees are notably higher than most states. Tennessee charges the same per-member formula for the annual report as for formation: $300 minimum for a single-member LLC, due to the Secretary of State by April 1 each year. This is separate from the April 15 F&E return.

F&E Registration After Forming an LLC

Once your LLC is formed, register with the Tennessee Department of Revenue through TNTAP (tntap.tn.gov) for franchise and excise tax purposes. Registration is free. Your first Form FAE170 will be due April 15 of the year following your formation (for the period your LLC was active during the prior tax year). The $100 minimum franchise tax applies for any year the LLC exists, even if you had zero gross receipts.

OBBBA Federal Conformity: What Changes for Tennessee Preparers

Tennessee has rolling conformity to the Internal Revenue Code, meaning the state automatically adopts federal tax law changes as they are enacted. The One Big Beautiful Bill Act (OBBBA, signed July 4, 2025) therefore flows through to Tennessee's excise tax base for entities subject to F&E tax. However, Tennessee has independently decoupled from one TCJA provision, making one OBBBA change effectively irrelevant at the state level.

OBBBA Provisions That Flow Through to Tennessee

• Bonus depreciation restored to 100% (Section 168(k)): Flows through to the excise tax base. Business clients with capital equipment purchases reduce Tennessee net earnings by the full depreciation amount.
• Section 179 cap raised to $2.5M: Flows through. Tennessee already provided 100% Section 179 expensing independently, so this is a confirmation of existing treatment.
• Section 168(n) qualified production property: New immediate expensing category; flows through under rolling conformity.
• PSLF (Public Service Loan Forgiveness) exclusion made permanent: Relevant to Vanderbilt employees and other nonprofit healthcare workers. The federal income exclusion for PSLF forgiveness is now permanent. Tennessee residents receive the full federal benefit with no state income tax concern because Tennessee has no individual income tax.

Section 174: Tennessee Is Already Decoupled

The OBBBA restored immediate expensing for domestic research and experimental (R&E) costs under Section 174, eliminating the TCJA-mandated 5-year amortization. For Tennessee excise tax purposes, this change is effectively moot. Tennessee previously decoupled from the TCJA Section 174 amortization requirement and adopted pre-TCJA full expensing for domestic R&E via Tenn. Code Ann. Section 67-4-2006(a)(11). Tennessee R&E costs were already fully deductible in the year incurred at the state level; the OBBBA does not change Tennessee's position.

OBBBA Provisions with No Tennessee Analog

Several OBBBA provisions are significant for federal returns but deliver no additional Tennessee benefit because Tennessee has no individual income tax:

• No tax on tips (Section 62(a)(23)): Federal above-the-line deduction through 2028. Zero Tennessee benefit; Tennessee already imposes no income tax on tips or any other earned income.
• No tax on overtime compensation: Federal deduction up to $12,500 (single) or $25,000 (joint), 2025-2028. Zero Tennessee benefit for the same reason.
• Senior bonus deduction ($6,000 for age 65+): Federal only; no Tennessee income tax to reduce.
• Auto loan interest deduction: Federal only.
• SALT cap modifications: Federal itemized deduction change; no Tennessee individual income tax to itemize against.

When clients ask whether the "no tax on tips" or "no tax on overtime" provisions help them, the accurate answer is: yes, at the federal level, where those deductions reduce federal AGI. Tennessee residents already pay zero state income tax on all earned income, so the state-level benefit is zero because the state-level tax is zero. The federal savings are real and meaningful; there is simply no additional Tennessee layer to save.

High-Value Client Niches in Tennessee

Because Tennessee has no individual income tax, the value a Tennessee preparer delivers is almost entirely federal return expertise plus knowledge of where clients owe taxes in other states. The preparers who build the most durable practices in Tennessee are the ones who own a niche. Here are the four most significant ones.

Nashville Music Industry: Songwriters, Artists, and Touring Musicians

Nashville is the center of the country music industry and a major hub for Christian music, Americana, and independent recording. Independent songwriters, session musicians, touring artists, and music publishers represent a high-density self-employed population in Middle Tennessee with federal return complexity that general preparers frequently mishandle.

Key issues for Nashville music clients:

• Royalty income classification: Royalties paid to a songwriter who owns the copyright are Schedule C self-employment income, subject to 15.3% SE tax. Royalties paid to an investor who purchased rights are Schedule E passive income, not subject to SE tax. The distinction turns on the taxpayer's level of involvement and requires analysis at intake.
• Multi-state touring returns: Each state where performances occur may require a non-resident income tax return if that state has an income tax. A Nashville artist touring through New York, California, and Illinois owes non-resident filings in each of those states. Tennessee has no return, but the tour states do.
• Streaming royalties: 1099s from distributors (DistroKid, TuneCore, CD Baby) report ordinary income. Classify correctly between Schedule C (active creator) and Schedule E (passive rights holder).
• Home studio deduction: Nashville musicians frequently have dedicated home studio space. The exclusive and regular use standard applies. Form 8829 or the simplified method; documentation is critical.
• OBBBA overtime deduction for touring crew: Qualifying backstage and production crew workers with substantial overtime pay may benefit from the OBBBA overtime deduction at the federal level (up to $12,500 single).
• Tennessee advantage: A Nashville-based artist pays zero state income tax on all of the above. Compared to Los Angeles (California top rate 13.3%) or New York City (combined rate up to 14.776%), this is a material retention and relocation argument that informed preparers use to attract clients moving from high-tax creative markets.

Healthcare Workers: Vanderbilt, HCA Healthcare, and Traveling Nurses

Vanderbilt University Medical Center and HCA Healthcare (headquartered in Nashville) are two of Tennessee's largest employers. HCA operates facilities across multiple states, creating a healthcare workforce that frequently crosses state lines for assignments.

• Traveling nurses with multi-state W-2s: One of the most complex individual return categories in Tennessee. A nurse assigned to facilities in three states in a single year has three non-resident state returns (for states with income tax) and a federal return, all of which must reconcile correctly. Tennessee residency means no home-state return, but each assignment state has its own filing obligation.
• Locum tenens physicians: Frequently 1099-NEC contractors. Schedule C, SE tax on physician-level income, and entity structure analysis (S-Corp with Tennessee F&E implications) are standard planning conversations for this client type.
• PSLF (Public Service Loan Forgiveness): Vanderbilt is a nonprofit academic medical center and qualifies as a PSLF-eligible employer. The OBBBA made the federal income tax exclusion for PSLF forgiveness permanent. Tennessee residents receive the full federal exclusion with no additional state income tax because Tennessee has no individual income tax. This is a significant value point for Vanderbilt residents and fellows carrying medical school debt.
• Remote work complexity: Healthcare administrative and revenue cycle staff who work remotely from Tennessee for employers headquartered in states with "convenience of employer" rules (New York is the primary example) may owe that state's income tax even while physically working in Tennessee. This is an underdiagnosed issue for Tennessee-based remote workers.

Automotive Manufacturing: Nissan Smyrna, Volkswagen Chattanooga, and GM Spring Hill

Tennessee is one of the top automotive manufacturing states in the US. Three major facilities anchor this client niche:

• Nissan North America (Smyrna, Rutherford County): One of the largest Nissan manufacturing plants in the world. The Nissan LEAF is assembled here, making Smyrna workers a natural audience for EV purchase credit conversations.
• Volkswagen (Chattanooga, Hamilton County): The Chattanooga plant became the first major UAW-organized VW facility in the US following a union contract ratification in February 2026. This creates a new population of union members whose dues are not deductible under current post-TCJA law (the OBBBA did not restore Miscellaneous 2% AGI deductions).
• General Motors (Spring Hill, Maury County): W-2 hourly and salaried workers with moderate complexity: standard deductions, profit sharing as W-2 income, and substantial overtime.

Key issues for automotive manufacturing clients:

• OBBBA overtime deduction: Qualifying hourly workers with substantial overtime pay benefit from the federal deduction (up to $12,500 single, $25,000 joint, 2025-2028). Auto plant workers running heavy overtime in high-production years should have this analyzed at intake.
• Section 30D clean vehicle credit: Workers purchasing qualifying EVs (including models assembled at their own plant) may be eligible for up to $7,500 in federal credit. The OBBBA modified but preserved the Section 30D framework. Tennessee has no state EV credit.
• Union dues not deductible: Post-TCJA, union dues are not deductible as a miscellaneous itemized deduction. The OBBBA did not restore this deduction. Be direct with newly unionized VW Chattanooga workers asking about this; the deduction does not exist under current federal law.

Fort Campbell Military Clients: Tennessee vs. Kentucky Domicile

Fort Campbell (Clarksville, Tennessee / Oak Grove, Kentucky) is home to the 101st Airborne Division and approximately 30,000 active duty soldiers and their families. Clarksville is Tennessee's fifth-largest city and one of the highest-density military preparer markets in the country. Fort Campbell sits on the Tennessee-Kentucky state line, which creates the most important planning conversation for this client base.

• Tennessee vs. Kentucky domicile: Soldiers assigned to Fort Campbell must designate a state of legal domicile. Tennessee domicile means zero state income tax on all military pay, BAH, BAS, and allowances. Kentucky domicile means Kentucky's 4% flat rate applies. For a soldier earning $60,000 in military pay, that is a $2,400 annual difference. Tennessee domicile is typically the better choice from a pure tax perspective, but it requires affirmative steps to establish (updating official records, obtaining a Tennessee driver's license, registering to vote in Tennessee). Verify each client's state of domicile at intake; do not assume Tennessee residency based on the installation address.
• Combat Zone Tax Exclusion (CZTE): Military pay earned in a designated combat zone is excluded from federal gross income. BAH and BAS are always federally excluded from gross income under IRC Section 134, regardless of combat zone status. Tennessee has no income tax impact on either.
• PCS moves and domicile documentation: A permanent change of station (PCS) to Fort Campbell from another state does not automatically establish Tennessee domicile. The soldier must take affirmative steps. A soldier whose prior state of domicile was California, for example, may still owe California income tax on military pay until they formally establish Tennessee domicile.
• Military spouse remote work: A military spouse who works remotely from Tennessee for an employer headquartered in another state should be evaluated for the Military Spouses Residency Relief Act (MSRRA), which allows military spouses to maintain the same state of domicile as the servicemember. If the spouse claims Tennessee domicile (zero income tax), income earned from an out-of-state employer while physically in Tennessee may still be subject to the employer's state's income tax under convenience of employer rules (primarily a New York issue).

Agriculture: West Tennessee Farms and the FONCE Exemption

Tennessee has significant agricultural activity: cotton, soybeans, and corn in West Tennessee; tobacco in East Tennessee; nursery and greenhouse operations statewide. Agricultural clients have a distinct federal and state tax profile.

• Schedule F: Crop and livestock sales, government program payments (CRP, ARC, PLC), and custom hire income flow to Schedule F. SE tax applies to net farm profit.
• Farm income averaging (Schedule J): Allows farmers to average income over three prior years to reduce rate volatility from large crop years. Often overlooked by general preparers handling occasional farm clients.
• Tennessee agricultural sales tax exemption: Qualified farmers receive a sales and use tax exemption for farm inputs (seeds, fertilizer, pesticides, fuel, farm equipment used more than 50% in agricultural operations). The exemption certificate is Form F1308401. The farmer applies directly to the Tennessee DOR; you do not file for this, but advising clients on its availability is a meaningful value-add.
• FONCE exemption (F&E): The Family-Owned Non-Corporate Entity exemption from Tennessee franchise and excise tax is available for family-owned farm entities that meet two tests: (a) predominantly owned by persons related by blood, marriage, or adoption, and (b) at least 66.67% of gross income derives from farming activities. The exemption must be claimed annually on Form FAE183. A qualifying farm LLC pays zero F&E tax. A tax preparation LLC does not qualify for FONCE unless the preparer independently meets the agricultural income test.
• Section 1031 exchanges: Tennessee farmland values have appreciated significantly. Like-kind exchanges on farmland dispositions are common in estate planning and succession conversations.

Tennessee Tax Forms Reference for Preparers

There is no Tennessee individual income tax form. Do not generate, file, or attempt to e-file a Tennessee state individual return for any client who is a Tennessee resident with purely Tennessee-source income.

Frequently Asked Questions