Taxation of Banks and Financial Institution Unitary Businesses
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All the taxes collected under this part shall be applied as follows:
To cities and counties, an amount for each bank with a deposit facility in this state and each “financial institution unitary business” as defined in this section:
Three percent (3%) of the net earnings of the bank and the net earnings of a financial institution unitary business determined on a combined basis for the second fiscal year preceding the year in which the distribution under this section is made, less seven percent (7%) of the ad valorem taxes paid by the bank or financial institution unitary business on its real property and tangible personal property for the second fiscal year preceding the year in which the distribution is made. For the purposes of this subdivision (a)(1), “net earnings,” as applicable to either a bank or financial institution unitary business, does not include amounts attributable to interest earned on bonds and other obligations of the state of Tennessee. As used in this section, “financial institution unitary business” includes only those financial institutions that form a unitary business as defined in § 67-4-2004, that file a combined franchise, excise tax return in Tennessee and that have at least one (1) member with a deposit facility in Tennessee. The total amount thus determined shall be allocated between the county and municipal governments where the office of the bank or financial institution unitary business is located in the same proportion as the property tax rate of each such taxing jurisdiction shall bear to the sum of the property tax rates;
In circumstances where a bank or financial institution unitary business has more than one (1) branch or office, the total allocation attributable to such bank or financial institution unitary business as determined in subdivision (a)(1)(A) shall be further allocated between such counties and cities where its branches or offices are located as follows:
The proportionate percentage that is produced by the ratio of the deposits of each branch or office of the bank or financial institution unitary business to the total deposits of the bank or financial institution unitary business shall be determined as of January 1 of each year, and the percentage so determined shall then be applied to the total allocation to determine the portion of the total attributable to each branch or office;
The branches or offices shall then be grouped each to a common location so as to determine the aggregate allocation of all branches or offices located in each individual county and municipality; and
The percentage of the total allocation allowable to each county and municipality shall be divided between the county and municipality where the branch or office is maintained in the same proportion as the property tax rates of each for the second year preceding the year in which the distribution under this section is made shall bear to the total of the property tax rates;
The director of the division of property assessments shall provide to the commissioner, periodically on a timely basis, the ad valorem property tax rates for each taxing jurisdiction. The commissioner shall report the amount of such allocations made to each county and municipality to the comptroller of the treasury for audit purposes on an annual basis;
The status of each bank or financial institution unitary business as of January 1 of the fiscal year for which the allocation is calculated shall be the determining status;
If the net earnings of any bank or financial institution unitary business shall be redetermined for any period in accordance with this part, the commissioner shall recalculate the allocation attributable to such bank or financial institution unitary business, and any indicated increase or decrease in allocation shall be effected in the next succeeding general allocation to the respective county and municipal governments, as appropriate; and
The commissioner has the authority and power to prescribe forms upon which all banks or financial institution unitary businesses shall report such facts and information as will enable the department to ascertain the correctness of the allocation. The department has the full power to summon witnesses, to inspect or require the production of books and papers, and to obtain and consider any evidence and records other than the reports submitted by such banks or financial institution unitary businesses that it may deem proper or necessary to carry out its responsibilities under subdivision (a)(1). If any bank or financial institution unitary business subject to this part fails, refuses or neglects to collect and file such form with the department as provided by this section, the department shall determine the amount of the allocation in regard to such bank or financial institution unitary business on the basis of the best information available; and
After allocations to counties and municipalities as provided in subdivision (a)(1), the remainder of the taxes collected under this part shall be applied to and become a part of the general fund of the state.
The general assembly is exercising its discretion granted in article II, § 28 of the Tennessee Constitution to establish the manner in which banks shall be taxed. The allocation of taxes to local governments provided in subdivision (a)(1) shall be in lieu of the taxation of the subclassification of intangible personal property designated as “shares of banks and banking associations,” and all taxes on the redeemable or cash value of all their outstanding shares of capital stock, certificates of deposit and certificates of investment, by whatever name called, of such bank or banking association; provided, that such bank or banking association shall nonetheless continue to be subject to ad valorem taxes on its real property, tangible personal property and all other taxes to which it is currently subject.