AN ACT to amend Tennessee Code Annotated, Title 4; Title 54; Title 55; Title 65 and Title 67, relative to transportation.
SB1642 directs the Tennessee Department of Transportation to conduct a long-range study of transportation infrastructure needs, costs, and funding sources for the years 2028, 2050, and 2075. The study must examine current dedicated transportation revenues, possible existing revenue sources that are not currently dedicated to transportation but are generated substantially by transportation activity, and the effect of the bill’s tax allocation changes on future infrastructure needs. TDOT must report its findings and recommendations to the relevant House and Senate transportation committee chairs by January 1, 2028.
The bill also changes how certain sales tax revenues are distributed beginning October 1, 2026. It redirects 95.3970% of sales and use tax revenue from the sale, use, consumption, distribution, or storage of new or used motor vehicles and tires to the highway fund, while 4.6030% is distributed monthly to municipalities based on population. It further provides that sales tax revenue from the 2.75% tax on the portion of motor vehicle and tire sales between $1,600 and $3,200 is also deposited into the highway fund. The bill preserves existing special allocations for sales tax revenue dedicated to education and for the 6% to 7% sales tax increase enacted in 2002.
In practical terms, the bill would increase the share of transportation-related tax revenue flowing to the state highway fund and reduce the amount distributed to municipalities from those specific motor vehicle and tire transactions. It would also require TDOT to evaluate whether Tennessee’s transportation funding structure is adequate for long-term infrastructure demands and to consider alternative revenue sources tied to transportation activity.
The committee record shows clear support at the Transportation and Safety Committee level, where the bill was recommended for passage by a 9-0 vote and referred onward to the Senate Finance, Ways, and Means Committee. No committee transcript was provided, so the available history suggests little visible opposition at that stage, though the revenue reallocation provisions could be of concern to municipalities that receive population-based distributions and to stakeholders focused on preserving local revenue streams.
Overall, the bill appears to be framed as a transportation funding and planning measure, combining a future-looking infrastructure study with a targeted reallocation of tax receipts to support the highway fund.
SB1642 amends Tennessee Code Annotated Title 54 and Title 67 to create a new TDOT study requirement and to revise the distribution of certain sales and use tax revenues from motor vehicle and tire transactions. The bill increases highway fund deposits from those revenues and reduces the municipal share for those specific receipts, while leaving certain existing education-related allocations intact. It affects the state highway fund, municipal revenue distributions, and TDOT’s planning obligations.
The available legislative history indicates generally favorable sentiment toward the bill, at least in the Transportation and Safety Committee, where it passed unanimously 9-0 and was recommended onward. The bill’s structure suggests it was viewed as a transportation funding and planning measure rather than a controversial policy overhaul. No transcript is available, so there is no recorded floor debate or detailed committee discussion to indicate broader support or opposition.
The main point of contention is likely the reallocation of sales tax revenue from motor vehicle and tire sales away from municipalities and into the highway fund. Municipal governments may object to losing a portion of revenue they would otherwise receive on a population basis, while transportation advocates may support the shift as a way to strengthen highway funding. A secondary issue is the bill’s long-term study mandate, which may raise questions about future revenue sources and whether the state should rely more heavily on transportation-related taxes to fund infrastructure.