Advisers, brokers to continue paying Tennessee tax

Investment advisers and brokers will continue to pay an annual tax for working in Tennessee after a bill that would have eliminated that obligation for certain professions was narrowed to cut them out.

A bill that was being considered during the state’s current legislative session would have removed a $400 annual tax on several professions — attorneys, securities agents, broker-dealers, investment advisers, lobbyists, osteopathic physicians and physicians — by reducing it by $100 a year over the next four years.

The legislation became part of negotiations over the state budget that was approved last Thursday. Spending items were added to the measure, which caused the privilege tax legislation to be narrowed so that the levy would be eliminated only for osteopathic and other physicians.

Investment advisers and brokers who live in Tennessee, as well as those who have clients in the state, will continue to pay the privilege tax. It was originally created in 1992 to fill a budget revenue gap. Since then, the number of jobs that are taxed has been expanded and reduced.

Later this week, various legislative committees are scheduled to pass bills that will fund the budget. In that process, the privilege-tax-elimination measure will be amended to exclude advisers, brokers and other jobs.

The Financial Services Institute and the Securities Industry and Financial Markets Association were among the groups that comprise the No Tax on My Occupation Coalition that fought the privilege tax.

This year’s legislative session is scheduled to end this week. Opponents of the privilege tax will have to try again next year to remove advisers, brokers and other jobs from the tax roll.

“We are disappointed in the Tennessee legislature’s failure to fully repeal the professional privilege tax, which will continue to burden our members with this unfair tax,” David Bellaire, FSI executive vice president and general counsel, said in a statement. “Repealing this tax for financial advisors remains one of our priorities, and we will continue to work with state lawmakers and the No Taxation on My Occupation coalition to try to achieve a repeal in future legislative sessions.” 

The coalition advocated to remove the levy for all the professions. Instead, with the elimination of only one, it has become more unfair, said Jim Brown, Tennessee director for the National Federation of Independent Business. The NFIB organized the opposition.

“Our coalition didn’t believe in picking winners and losers,” Brown said. “That’s why we’re in the situation we’re in. It’s even more discriminatory now that it’s down from seven professions to five.”

Eliminating one profession was progress, although not as much as the coalition hoped to make with a legislature in which Republicans hold supermajorities in the House and Senate. In addition, 90 of the 132 lawmakers in the legislature signed on as co-sponsors of the bill to end the privilege tax.

“The needle is moving but it’s moving too slowly,” Brown said. “We’ll talk about strategy going forward.”

A message they will continue to send is that taxing certain professions is unfair.

“No one should be taxed [for going] to work,” Brown said. “It’s not a privilege, it’s a right.”