FONCE Loophole closed
TFT is pleased to announce that the FONCE bill passed with the support of TFT and the leadership of Gov. Bredesen. This bill, as you may know, will close large tax loopholes for wealthy landowners and raise an estimated $22 million for the state. Below is a statement issued by TFT in support of the Governors proposed FONCE loophole closing bill:
In the November budget hearings, Gov. Bredesen referred to the "FONCE" (family-owned, noncorporate entity) tax loophole as "fairly outrageous." While the state is facing a record budget shortfall, the FONCE loophole is costing the state as much as $25 million in lost revenue according to Department of Revenue estimates. "I think it's sinful on the one hand to be talking about laying off people and on the other hand giving a huge loophole to relatively wealthy individuals in the state of Tennessee who found some ways of working the system," the Governor said.
Tennesseans for Fair Taxation (TFT) joins the Governor in calling on the General Assembly to abolish this outrageous tax break for rich families. Dick Williams, TFT board member, says, "The State should be using that $25 million to help lower the food tax or provide pre-K education for our young children instead of giving a tax break to rich families. There is no benefit to the state in allowing this tax break."
"We applaud Governor Bredesen for raising this issue on behalf of the overwhelming majority of hard-working Tennesseans," Williams said.
"The Governor is right to try and close the FONCE loophole," adds Williams, "We would like to see that and other corporate tax loopholes closed in 2009 as part of a comprehensive plan to add fairness to our tax system." In addition to supporting the Governor in closing the FONCE loophole, TFT is working in 2009 to close other corporate tax loopholes, such as Delaware and Nevada Holding Companies and Captive REITs (Real Estate Investment Trusts).
Last year, TFT helped push a bi-partisan proposal, sponsored by Sen. Tim Burchett and Rep. Craig Fitzhugh, that would enact combined reporting for business tax purposes as twenty-two other states already use, including six states that enacted combined reporting since 2004. By requiring parent companies and their related subsidiaries to file a single, unified tax return, combined reporting makes it difficult to hide profits and engage in elaborate accounting schemes such as the use of Holding Companies and Captive REITs. A study was commissioned at the end of the 2008 session to look further at combined reporting for Tennessee. That report is expected shortly.
"We've got some serious challenges facing Tennessee now and we can't afford to let these loopholes continue," adds Williams, "We're facing nearly one-billion dollars in proposed cuts to education, environmental protection, health care, and other public structures that are vital to the common good. At the same time, families are struggling to make ends meet in this recession while still paying the third highest food tax in the nation. Both of these are issues we can do something about by closing these inexcusable loopholes."
"It's time we get these loopholes closed and start putting Tennessee families first," concludes Williams.