Tennessee is home to several large manufacturing projects for which the state has provided subsidies of at least $50 million (Good Jobs First refers to these as “megadeals”). Ford Motor was approved for a $884 million subsidy package in 2021 and Volkswagen received $817 million between two deals spanning 2008-2014, for example.
The state also offers performance-based grants for infrastructure development, training, and other activities. Because Tennessee does not have an income tax, it abates sales and use, or franchise and excise taxes instead.
Tennessee localities are aggressive in offering local tax abatements via Payment in Lieu of Taxes, or PILOT programs. Almost every county offers PILOTs, but most of them are in the Memphis and Shelby County area.
The State Funding Board votes on FastTrack grants larger than $750,000. The Tennessee Department of Economic and Community Development (ECD) provides grant management, while the state Department of Revenue manages tax-based subsidies. Local PILOTS are approved by county governments or their industrial development agencies.
Tennessee’s disclosure of grant programs includes company names, outcomes, and other aggregated data posted to the OpenECD website. In 2020, ECD started publishing clawback reports, but they include only basic information such as company names and amounts owed to them. State law shields recipients of tax-based subsidies from disclosure. Transparency of local subsidies varies greatly from one of the best in the country (Memphis/Shelby County) to non-existent (Chattanooga). The Tennessee Board of Equalization lists all companies in the state that have PILOT agreements with counties. The list, however, does not include the value of the abatements.
Annual state Tax Credit Reports list the cost of tax-based programs but not much other information is included – sales and use tax exemptions such as those for data centers are missing from the report. The state as well as a limited number of localities report some program costs under GASB 77; no schools report under the provision as they are component units of cities.
The Tennessee Department of Economic and Community Development is tasked with evaluating major tax-based subsidies every four years. Cash grant subsidies, such as FastTrack, however, are excluded from the evaluation. While the state has clawback agreements, officials choose whether to enforce them.