AN ACT to amend Tennessee Code Annotated, Title 48 and Title 67, relative to real property taxes.
Summary
SB1398 amends Tennessee law governing payments in lieu of ad valorem taxes (PILOTs) for certain corporate projects. The bill allows a municipality to delegate to a corporation the authority to negotiate and enter into PILOT agreements with the corporation’s lessees, but only when the municipality finds the arrangement furthers the corporation’s public purposes. A municipality may also require its own approval of any such agreement.
The bill adds a notice-and-review process when a proposed PILOT agreement would reduce payments below the taxes otherwise owed. In that case, the corporation must give written notice to each affected taxing jurisdiction’s chief executive officer, who may either object and require submission to that jurisdiction’s legislative body or decline to object. If no response is given within 10 days, the corporation may proceed. If legislative approval is required, the agreement cannot be entered into unless approved. For projects inside municipal limits, PILOT payments must be apportioned between the municipality and county in the same manner as ad valorem taxes on the date the agreement is executed. Agreements entered into on or after July 1, 2026, without following the new procedures are void and unenforceable.
Impact
The bill changes Title 48 and Title 67 by tightening procedural requirements for PILOT agreements tied to real property taxes and by clarifying who must be notified and when local approval is required. It affects municipalities, counties, other taxing jurisdictions, corporations, and corporate lessees involved in economic development or property tax incentive arrangements. The new rules are intended to protect local taxing jurisdictions from reduced tax collections without notice and an opportunity to review or approve the agreement.
Sentiment
The bill appears to have been broadly supported. It passed the Senate State & Local Government Committee unanimously and cleared both floor votes with strong margins, including a 33-0 third consideration vote in one chamber and a 77-10 final passage vote. The voting pattern suggests general agreement with the bill’s goal of adding oversight and transparency to PILOT arrangements.
Contention
The main point of potential contention is the balance between economic development flexibility and local tax authority. Supporters likely favored giving municipalities and corporations more flexibility to structure PILOT agreements while adding notice and approval safeguards for affected jurisdictions. Any opposition appears to have centered on the possibility that the bill could slow or complicate incentive deals, especially where a corporation can proceed after a short notice period unless a taxing jurisdiction objects. The final vote shows limited but present concern about the added procedural constraints.