Tennessee is recognized for its business-friendly tax structure, skilled workforce, and strategic location.  The state offers a wide range of incentives aimed at fostering economic development across industries such as manufacturing, automotive, healthcare, and technology.  Below are some of the key incentives available for businesses in Tennessee.

Tennessee Job Tax Credit

Overview

The Tennessee Job Tax Credit is designed to encourage businesses to create new jobs in the state.  The program provides tax credits to businesses that generate new full-time jobs in eligible counties.

Eligibility

• The business must create a minimum number of new jobs within a specified time frame.

• The new jobs must be full-time, permanent positions with a minimum wage above the state’s average.

• The business must operate in one of Tennessee’s targeted industries or in a designated economically distressed area.

Incentive Value

• Tax credits are worth up to $4,500 per new job created, depending on the county and economic conditions.

• Credits can be carried forward for up to 15 years if they are not fully utilized in a given year.

Application Process

Businesses must apply through the Tennessee Department of Economic and Community Development (TNECD), providing documentation of job creation and wage levels.

Tennessee Industrial Machinery Tax Credit

Overview

The Tennessee Industrial Machinery Tax Credit allows manufacturers to claim a tax credit for investments in qualifying machinery and equipment.  This incentive is designed to encourage capital investment in the manufacturing sector.

Eligibility

• The business must be engaged in manufacturing operations within Tennessee.

• The business must purchase and install qualifying industrial machinery and equipment used in production.

Incentive Value

• Businesses can receive a credit worth up to 1% of the total cost of qualifying machinery and equipment.

• The credit is applied against Tennessee franchise and excise taxes.

Application Process

Businesses must apply to the Tennessee Department of Revenue (DOR), submitting documentation of machinery purchases and the equipment’s use in manufacturing processes.

Tennessee Renewable Energy Tax Credit

Overview

The Tennessee Renewable Energy Tax Credit incentivizes businesses to invest in renewable energy projects, including solar, wind, and biomass. The program supports businesses in adopting clean energy technologies.

Eligibility

• The business must invest in renewable energy systems such as solar panels, wind turbines, or biomass facilities.

• The energy systems must be installed at the business’s operational facility in Tennessee.

Incentive Value

• The credit is worth up to 20% of the business’s total investment in renewable energy systems.

• The maximum credit amount is $5 million for qualifying projects.

Application Process

Businesses must apply through TNECD, providing detailed information about the renewable energy systems and their expected benefits.

Tennessee Research and Development (R&D) Tax Credit

Overview

The Tennessee R&D Tax Credit incentivizes businesses that engage in research and development activities.  This program is designed to promote innovation and technological advancement in the state.

Eligibility

• The business must conduct R&D activities in Tennessee.

• The R&D must involve the development or improvement of products, processes, or software.

Incentive Value

• The credit is worth up to 10% of eligible R&D expenditures in Tennessee.

• Businesses can carry forward unused credits for up to 15 years.

Application Process

Businesses must apply to DOR, submitting documentation of their R&D activities and expenses.

Tennessee Data Center Tax Incentive Program

Overview

The Tennessee Data Center Tax Incentive Program provides significant tax savings for businesses that develop or expand data centers in the state.  The program is designed to attract investment in the high-tech sector and to support the growth of Tennessee's data infrastructure.

Eligibility

• The business must be engaged in data processing and related services.

• The project must involve the construction, expansion, or operation of a data center in Tennessee.

Incentive Value

• The program offers exemptions from sales and use tax on purchases of tangible personal property for data centers.

• Businesses can also receive exemptions from property taxes on qualifying real and personal property for up to 10 years.

Application Process

Businesses must apply to TNECD, submitting plans for the data center and a detailed analysis of the project’s impact on job creation.

Tennessee Film, Entertainment, and Music Tax Credit

Overview

The Tennessee Film, Entertainment, and Music Tax Credit provides financial incentives to businesses involved in film, television, and music production in the state.  The program is designed to encourage growth in Tennessee’s entertainment and creative industries.

Eligibility

• The business must be involved in the production of films, television shows, music videos, or music albums.

• The production must take place in Tennessee, and a certain percentage of the project’s budget must be spent in the state.

Incentive Value

• The credit can be worth up to 25% of qualified expenses incurred in Tennessee, with a maximum credit of $4 million per project.

• The program also provides additional incentives for projects that include music components, such as album production or concert filming.

Application Process

Businesses must apply to the Tennessee Entertainment Commission, submitting a detailed production plan and a budget breakdown.

Tennessee Economic Development Grants

Overview

The Tennessee Economic Development Grants program provides financial assistance to businesses that are investing in the state and creating jobs.  The program is designed to support projects in targeted sectors and economically distressed areas.

Eligibility

• The business must create a specified number of jobs and make a significant investment in facilities, equipment, or infrastructure.

• The business must be in a targeted industry, such as manufacturing, healthcare, or logistics.

Incentive Value

• Grants are awarded on a case-by-case basis and can cover up to 25% of a project’s total cost.

• The maximum grant amount varies depending on the project’s size, job creation potential, and economic impact.

Application Process
Businesses must apply through TNECD, providing project details, financial projections, and job creation estimates.

Tennessee Sales and Use Tax Exemption for Manufacturing

Overview

Tennessee offers a sales and use tax exemption for manufacturers on the purchase of equipment, machinery, and raw materials used directly in production processes.  The program supports manufacturers by lowering operational costs.

Eligibility

• The business must be engaged in manufacturing operations within Tennessee.

• The equipment or materials must be used directly in the production process.

Incentive Value

• The exemption applies to the sales and use tax on purchases of qualifying equipment, machinery, and raw materials.

• The exemption covers up to 100% of the tax for qualifying purchases.

Application Process

Businesses must apply to DOR, providing documentation of the items being purchased and their use in manufacturing processes.