AN ACT to amend Tennessee Code Annotated, Section 67-4-409, relative to the recordation tax.
Summary
SB1080 amends Tennessee’s recordation tax statute to require the Department of Revenue to return 50% of recordation taxes collected on real property transfers back to the county where the tax was collected. The bill applies to transfers of real property on or after July 1, 2025. It also specifies that the state’s existing commissions and earmarked allocations are to be taken from the state-retained half of the revenue, so the county distribution does not reduce amounts dedicated to other state funds and purposes.
The county share may not be used for salaries or benefits. Instead, counties may spend the money on infrastructure such as roads, bridges, schools, and other public facilities; debt service for capital projects; matching funds for state and federal projects; and other nonrecurring expenses. Counties must dedicate at least 50% of the funds to transportation infrastructure projects, and the bill prohibits using these funds to replace other state or local money already budgeted for county road or bridge work. County highway officials must also present recommendations for use of the funds when submitting the annual work program.
The bill further provides that these county receipts are not to be treated as a local revenue source for purposes of calculating the five-year average of local funds under the referenced state funding formula. This is intended to prevent fluctuations in recordation tax collections from affecting county funding calculations under that statute.
The overall sentiment reflected in the available voting history is strongly favorable. The Senate State & Local Government Committee recommended the bill for passage with amendments on a unanimous 8-0 vote, suggesting broad support for the concept of returning a portion of recordation tax revenue to counties for capital and transportation needs.
The main points of contention are likely to center on fiscal distribution and spending restrictions. Counties benefit from receiving a dedicated revenue stream, but the state retains half of the tax and protects its existing allocations. The requirement that at least half of county funds go to transportation infrastructure, along with the prohibition on using the money for salaries or to supplant existing road and bridge funding, reflects concern that the money be used for one-time capital purposes rather than recurring operating costs.
Impact
The bill would amend Tennessee Code Annotated § 67-4-409 to create a new county distribution of recordation tax revenue from real property transfers, shifting 50% of collections back to the county of origin while preserving the state’s existing deductions and earmarks from the retained share. It would also impose new statutory limits on how counties may use those funds, including a minimum transportation infrastructure set-aside and a prohibition on using the money as a substitute for existing appropriations. In addition, it would exclude these receipts from a local revenue calculation under § 67-3-901(d), affecting how county funds are measured for state funding purposes.
Sentiment
The available legislative history suggests a positive and largely noncontroversial reception. The Senate State & Local Government Committee advanced the bill unanimously, 8-0, with an amendment and referral to the Senate Finance, Ways, and Means Committee. That vote indicates support for the policy direction of returning a portion of recordation tax revenue to counties, especially for infrastructure-related uses.
Contention
The principal policy tension is between state revenue retention and county revenue sharing. Supporters appear to favor directing more recordation tax revenue to counties for roads, bridges, schools, and other capital needs, while the bill preserves state allocations by taking county distributions from only the state-retained portion. Another potential point of debate is the spending restriction: counties must devote at least half of the funds to transportation infrastructure and may not use the money for salaries, benefits, or to replace existing road and bridge funding. Those limits may be viewed as necessary safeguards by proponents and as constraints on local flexibility by critics.