Important issues approved in final hours of 2020 Legislative Session

 

The 111th Tennessee General Assembly completed its final order of business for the year in the early morning hours of June 19.
During the work-through-the-night marathon session, legislators took up several key pieces of legislation that impact local governments.

Liability and COVID-19
The conference report on SB2381/HB2623 provided to local government and its employees enhanced liability protections with respect to any loss, illness or injury relating directly or indirectly to the coronavirus. Under the report, this additional protection would have covered any loss, injury or illness occurring between March 5, 2020, and July 1, 2022. The conference report passed the Senate by a vote of 24-5. Unfortunately, the conference committee report fell four votes short of passage in the House on a 46-36 vote. Six House members were present and not voting. There has been some discussion that Gov.Bill Lee may call a special session this summer to reconsider this legislation.

Budget
Local Government Grants
The House and Senate agreed on and adopted a conference report on a revised budget for FY 20-21. The approved budget retains the grants allocated to cities and counties. With the exception of Memphis and Nashville, all city grant amounts remain as proposed by the governor. Under the revised budget, cities and counties are no longer required to pass an ordinance detailing the intended use of the funds or to file an application with the Tennessee Department of Finance and Administration. Instead, these grants will be distributed directly to cities and counties no later than July 31, 2020, and may be used to offset loss of local revenue or to supplement local revenue to address city needs. Grant amounts can be viewed at https://www.tn.gov/finance/governor-s-local-government-support-grants.html

Sales Tax Holiday
The conference report reduced the proposed two-weekend sales tax holiday from $100 million to $25 million. As a result, the holiday was limited to restaurants. In addition, the cap associated with items eligible for relief under the existing “back to school” sales tax holiday was increased. The holiday provides relief for state sales tax. The local sales tax will continue to be levied.

Hall Tax
The Hall Tax is scheduled for a complete phase-out in 2021. The House-passed budget delayed the final rate reduction until 2025. The conference report preserves the scheduled elimination.

Teacher’s Raises/Bonuses
The proposed BEP increase for teachers’ salaries was not included in the conference report. Moreover, the House-passed budget included a one-time bonus for teachers. This, too, was excluded from the conference report.

Short-Term Rental Properties
The Senate and House approved the conference report on SB1778/HB1830, which included three separate elements related to STRPs.
First, the report provides for the collection of local occupancy tax on short-term rental transactions conducted on an online platform. Currently, short-term rental stays are subject to the occupancy tax; however, most local jurisdictions are not aware of this potential revenue. The conference report ensures the platforms collect and remit the tax due to the Tennessee Department of Revenue for distribution to the appropriate local jurisdiction.
Second, the report addresses the grandfathering provisions under current law. Under the law, any property that is operating as a STRP at the time that a local government moves to regulate STRPS is grandfathered, unless the property is sold or transferred. This report further defines “transfer” to allow the grandfather protection to remain in the event that names on the title are changed as a consequence of marriage, death, or divorce. It also allows limited transfers to revocable trusts.
Third, the conference report allows for certain STRP properties to be classified as residential for property tax purposes. If an owner utilizes his/her principal residence as an STRP (owner-occupied), then such property may be classified as residential. In addition, owners that utilize their principal residence as STRP may qualify to have a second home that is also used as and STRP property classified as residential; provided they reside in that second home for 14 days each year or a number of days equal to 10 percent of the total days it is rented each year, whichever is greater.