TENNESSEE PROPERTY TAX*

§ 43-000. INTRODUCTION. e Tennessee Consti-

tution and common law authorize counties and cities

to tax property. T.C.A. § 67-5-101. Although the law

includes references to a state property tax, no state tax

has been imposed since 1949. T.C.A. § 67-1-602. e

Tennessee property tax is imposed on most privately-held

real property, tangible property other than household

goods, personal eﬀects, and foreign property. e Ten-

nessee property tax is also imposed on certain intangible

property of insurance, loan, investment and cemetery

companies. e tax is administered by the State Board of

Equalization, which has jurisdiction over the evaluation,

classiﬁcation, and assessment of all property in the state.

Finally, the Tennessee property tax year is a calendar

year. T.C.A. § 67-5-504.

§ 43-100. DEFINITIONS AND CITATIONS.

§ 43-110. Deﬁnitions and Key Terms.

§ 43-111. Personal Property. T.C.A. § 67-5-501(7).

“Personal property” is deﬁned as “every species and

character of property which is not classified as real

property.”

§ 43-112. Real Property. T.C.A. § 67-5-501(9). “Real

property” is broadly deﬁned to include “lands, tene-

ments, hereditaments, structures, improvements, move-

able property assessable under § 67-5-802 (taxing mobile

homes), or machinery and equipment aﬃxed to realty .

. . and all rights thereto and interest therein, equitable

as well as legal.”

§ 43-113. Public Utility Property. T.C.A.

§ 67-5-501(8). “Public utility property” is deﬁned as “all

property of every kind, whether owned or leased, and

used, or held for use, directly or indirectly, in the opera-

tion of a public utility.” Public utility property includes

business entities such as railroad companies, telephone

companies (which encompasses cellular telephone ser-

vice, radio service, and long distance service), freight

and private car companies, express companies, gas and

electric companies, motor bus and truck companies, taxi

cab and limousine companies, and commercial air car-

rier companies holding a certiﬁcate of convenience and

necessity from the public service commission. Cellular

phone companies, companies providing “radio common

carrier service as deﬁned in T.C.A. § 65-30-103” and

companies providing long distance telephone service are

excluded from the deﬁnition of “Public Utility Property”

and are assessed at the lower assessment rate for com-

mercial and industrial property. (See § 43-211.1). Public

utility property using wind to generate energy is valued

at 1/3 of its total installed costs. T.C.A. § 67-5-601.

§ 43-120. Citations to Statutes, Regulations and

Cases Cited.

§ 43-121. Tennessee Code Annotated (T.C.A.

§ 67-5-101 et. seq.).

§ 43-122. Rules and Regulations of the State of Ten-

nessee (Tenn. Comp. R. & Reg. 0600-1 et. seq. - Rules

of State Board of Equalization).

§ 43-123. Southwestern Reports, Second Series

(S.W.2d).

§ 43-124. State of Tennessee Assessment Manual,

Division of Property Assessments, 1972 (Manual).

§ 43-200. CLASSIFICATION AND VALUATION

OF PROPERTY.

§ 43-210. Classiﬁcation of Property. T.C.A. § 67-5-503.

For purposes of taxation, Tennessee categorizes all prop-

erty into three distinct classes: real property, tangible

personal property, and intangible personal property.

Within each classification, property may be further

divided into subclasses according to certain speciﬁed

criteria. “e ratio of assessment to value of property

in each class or subclass shall be equal and uniform

throughout the state.” T.C.A. 67-5-503(b); TENN.

TENNESSEE PROPERTY TAX*

Dwayne W. Barrett

Richard A. Johnson

Brett R. Carter

*e authors wish to acknowledge the past contributions of Samuel F.

Miller

Property Tax Deskbook, 2010-2011, 16th Edition

43-1

CONST., art. II, § 28 (setting out rates of assessment

for classes of property).

§ 43-211. Real Property.

§ 43-211.1. Real Property in Use. T.C.A.

§ 67-5-801. All real property is classiﬁed according to

its use. e exceptions to this classiﬁcation system are

vacant or unused property, or property held for use (See

§ 43-211.2 below). Real property is separated into the

following subclasses and assessed at the corresponding

percentage of its value: (1) public utility property is

assessed at 55% of its value; (2) industrial and com-

mercial real property is assessed at 40% of its value; (3)

residential property is assessed at 25% of its value; and

(4) farm property is assessed at 25% of its value.

In 2004, the deﬁnition of real property was clariﬁed

to explicitly include railroad structures; telephone and

broadcast transmission poles, towers and conduits;

property used for conduction utilities such as steam,

heat and electricity; marinas; and structures attached to

real property with a utility service or by anchors or a

foundation. T.C.A. § 67-5-501(9)(B)(i), (ii), (iii), and

(iv). Real property does not include propane tanks for

residential use or above-ground storage tanks that are not

aﬃxed to the land and that cannot be removed without

disassembly. 2006 Tenn. Pub. Acts Ch. 521.

§ 43-211.2. Vacant or Unused Real Property. T.C.A.

§ 67-5-801. “All real property which is vacant, or

unused, or held for use, shall be classiﬁed according

to its immediate most suitable economic use, which

shall be determined” after considering the following:

(1) immediate prior use; (2) location; (3) availability

of water, electricity, gas, sewers, and public services;

(4) size, etc. If the use of the real property does not ﬁt

within one of the foregoing classes, such property is

classiﬁed as farm or residential property. e State Board

of Equalization issued a decision holding that 44 single

family cottages owned by a nonproﬁt corporation and

occupied by individuals under contracts providing for

the right to reside in either the cottages or other build-

ings on the property (such as assisted living or nursing

home facilities) in exchange for a one-time purchase

payment were properly classiﬁed as commercial property.

e State Board of Equalization opinion overturned the

holding by the Assessment Appeals Commission that

the cottages should be classiﬁed as residential property.

Appeal of: McKendree Village, Inc. (Davidson County,

Jan. 6. 2009).

§ 43-211.3. Real v. Tangible Personal Prop-

erty. A common legal issue in property tax

matters is whether property qualiﬁes as real or tan-

gible personal property. See Hermann Holtkamp

Greenhouses, Inc. v. Metro. Nashville and Davidson Cty.,

No. M2009-00345-COA-R3-CV, 2010 WL 366697

(Tenn. Ct. App. Feb. 2, 2010). In Hermann Holt-

kamp, the Tennessee Court of appeals concluded

that greenhouses were tangible personal property. See

also ANR Pipeline Co. v. Tenn. Bd. of Equalization,

No. M2001-01098-COA-R12-CV, 2002 WL 31840689

(Tenn. Ct. App. Dec. 19, 2002) (concluding that subterra-

nean petroleum pipelines were tangible personal property).

In 2004, the deﬁnition of real property was clariﬁed

to explicitly include railroad structures; telephone and

broadcast transmission poles, towers and conduits;

property used for conduction utilities such as steam,

heat and electricity; marinas; and structures attached to

real property with a utility service or by anchors or a

foundation. T.C.A. § 67-5-501(9)(B)(i), (ii), (iii), and

(iv). Real property does not include propane tanks for

residential use or above-ground storage tanks that are not

aﬃxed to the land and that cannot be removed without

disassembly. 2006 Tenn. Pub. Acts Ch. 521.

Mobile homes are considered to be improvements to the

land where located. Owners of mobile home parks are

responsible for the additional improvements to the land,

but the owners may impose a lien against the owners of

mobile homes to collect taxes for the improvements. By

enacting this statute, the state legislature intended “that

mobile homes are to be taxed and the taxable value of

mobile homes is to be determined by treating them as

if they are real estate and improvements to the underly-

ing land.” CMH Homes, Inc. v. McEachron, 2005 Tenn.

App. LEXIS 627 (Sept. 29, 2005). In CMH Homes the

Court of Appeals held that even when a mobile home

has been moved oﬀ the land after assessment, the land

owner remains liable for the tax on the assessed value of

the improvement to the land. Id. A delinquent tax sale

of the land owner’s property does not include title to

mobile homes thereon owned by a third party because

tax liens only attach to property upon which the tax has

been imposed. Id.

§ 43-212. Commercial and Industrial Property.

§ 43-212.1. Industrial and Commercial Property.

T.C.A. § 67-5-501. “Industrial and commercial property”

is all property of every kind used, directly or indirectly,

or held for use, for any commercial, mining, industrial,

manufacturing, trade, professional, club (whether pub-

lic or private), non-exempt lodge, business, or similar

purpose, whether conducted for proﬁt or not. All real

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Property Tax Deskbook, 2010-2011, 16th Edition

property which is used, or held for use, for dwelling

purposes, which also contains two or more rental units,

is classiﬁed as “industrial and commercial property.” See

§ 43-211.1 above with respect to the assessment ratio of

industrial and commercial real property.” See § 43-211.1

above with respect to the assessment ratio of industrial

and commercial real property.

§ 43-212.2. Commercial and Industrial Tangible Per-

sonal Property. T.C.A. § 67-5-501. “Commercial and

industrial tangible personal property” includes personal

property and particular machinery and equipment. Per-

sonal property includes things capable of manual or phys-

ical possession, such as goods, chattels and other articles

of value. e machinery and equipment in this category

are conﬁned to those used essentially and principally for

the commercial or industrial purposes for which they are

intended, and if aﬃxed or attached to real property, can

be detached without material injury to such real prop-

erty. See § 43-214 below with respect to the assessment

ratio of commercial and industrial tangible personal

property.

§ 43-213. Inventory.

§ 43-213.1. Inventories Excluded from Tax. T.C.A.

§ 67-5-901. The term “inventories held for sale or

exchange,” means tangible personal property held for

lease or rental, unless such property is in the possession

of a lessee. T.C.A. § 67-5-901(b). Tangible personal

property is generally subject to property taxes. However,

inventories of merchandise for sale by persons subject to

the business and occupation tax are speciﬁcally exempt

from property taxes. See T.C.A. § 67-4-701, et seq. with

regard to the business and occupation tax.

§ 43-213.2. Property Held for Lease. e exclusion

for inventories speciﬁcally encompasses tangible personal

property held for lease or rental not in the possession

of a lessee. T.C.A. § 67-5-901(b). Whether property is

held for lease is a fact determination. Appeal of Pre-

mier Global Prod. (Davidson County, Aug. 26, 2009)

(concluding that stage and lighting equipment was held

for lease).

§ 43-213.3. Compliments Business Tax Statute.

Because the business tax applies to virtually all enti-

ties selling tangible personal property, the exclusion in

T.C.A. § 67-5-901 for inventory eﬀectively excludes all

inventories from property tax. is exclusion should be

read in pari materia with the business tax statute. Art

Pancake’s United Rent-All v. Ferguson, 601 S.W.2d 926

(Tenn. Ct. App. 1979). us, where a lessor of personal

property had paid business tax on its rental inventory,

the Tennessee Court of Appeals held that it could not be

further held liable for the equivalent property tax. Id.

§ 43-213.4. Exclusion Favors Taxpayer. Unlike exemp-

tions, the exclusion in T.C.A. § 67-5-901 for inventories

is not an exemption but a portion of a taxing statute. As

such, it arguably must be “liberally construed in favor

of the taxpayer and strictly construed against the taxing

authority.” Sky Transp., Inc. v. Knoxville, 703 S.W.2d

126 (Tenn. 1985).

§ 43-214. Tangible Personal Property. T.C.A.

§ 67-5-501. “Tangible personal property” includes

personal property such as goods, chattels, and other

articles of value that are capable of manual or physical

possession, and certain machinery and equipment whose

value is intrinsic to the article itself. In addition, storage

tanks that are not permanently attached to the realty

but stand freely on specially prepared beds of sand and

gravel are personal property for property tax assessment

purposes. All tangible personal property, except invento-

ries discussed in § 43-213 above, is classiﬁed into three

categories of use. T.C.A. § 67-5-901(a). e classiﬁca-

tion and assessment ratios for tangible personal property

are as follows: (1) public utility property is assessed at

55% of its value; (2) industrial and commercial prop-

erty is assessed at 30% of its value; and (3) all other

tangible personal property is assessed at ﬁve percent

of its value. In actuality, any “other tangible personal

property” in category three above is not taxed under the

law because it is deemed to have no value. See T.C.A.

§ 67-5-901(a)(3)(A); Sherwood Co. v. Clary, 734 S.W.2d

318 (Tenn. 1987).

§ 43-215. Intangible Property.

§ 43-215.1. Intangible Property: In General. T.C.A.

§ 67-5-501. “Intangible personal property” is deﬁned as

property whose value is established by what the property

represents rather than its intrinsic worth. is includes

personal property such as money, debts, and shares of

stock and all personal property not deﬁned as tangible

personal property.

§ 43-215.2. Intangible Property: Other. e Tennessee

Legislature has not provided a statutory procedure for

taxing intangible personal property, with the exception

of the stock of loan, investment, insurance, and cemetery

companies. See T.C.A. § 67-5-1201 regarding insurance

companies; T.C.A. § 67-5-1101 regarding loan, invest-

ment, and cemetery companies. Until the legislature

directs otherwise, the assessment ratio for stock of the

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Property Tax Deskbook, 2010-2011, 16th Edition

above companies is 40% of the stock’s value, less the

value of the property owned by such companies upon

which the property tax has previously been paid.

§ 43-216. Other Property.

§ 43-216.1. Farm Property. T.C.A. § 67-5-501(3).

“Farm property” includes all real property which is used,

or held for use, in agriculture, which includes, but is not

limited to, “growing crops, pastures, orchards, nurser-

ies, plants, trees, timber, raising livestock or poultry,

or the production of raw dairy products, and acreage

used for recreational purposes by clubs.” See § 43-211.1

with respect to the assessment ratio of farm property.

Applications for such application must be ﬁled with

the county assessor by March 1 of the year in which the

classiﬁcation is sought.

§ 43-216.2. Residential Property. T.C.A.

§ 67-5-501 (10). “Residential property” is deﬁned as

“all real property which is used, or held for use, for

dwelling purposes and which contains not more than

one (l) rental unit.” Real property which is used for

dwelling purposes but contains two or more rental units

is classiﬁed as “industrial and commercial property.” See

§ 43-211 for the deﬁnition of industrial and commercial

and § 43-21 1. 1 with respect to the assessment ratio of

residential property.

§ 43-220. Valuation of Property.

§ 43-221. Valuation: In General. Real property is

appraised for assessment purposes by county property

assessors, except for property of public utilities, which is

appraised statewide by the Comptroller of the Treasury.

e appraised value of real property is determined from

“the evidences of its sound, intrinsic and immediate

value for purposes of sale between a willing seller and

a willing buyer without consideration of speculative

values.” T.C.A. § 67-5-601(a). Property classiﬁed as

agricultural, forest or open space land is an exception

to the principle of valuing property at its highest and

best use, which is normally the property’s present use.

See § 43-224 below for a discussion of agricultural,

forest and open space land. Generally, other than with

greenbelt properties, property values for property tax

purposes will be updated before the regularly scheduled

update where the property tax appraisals are less than

90% of the market value of all properties within the

county or within a property subclass in the county or

within a group of properties within a subclass in the

county. Updating is accomplished pursuant to appraisal

ratio studies conducted by the Division of Property

Assessment. See T.C.A. § 67-5-1604.

§ 43-222. Valuation Methods: Real Property. ere are

three general methods of appraisal of real property in

Tennessee: (1) the market data approach; (2) the income

approach; and (3) the cost approach. Manual.

§ 43-222.1. Market Data Approach. e market data

approach to appraising property results in the most reli-

able indication of value. e market data approach is

a direct method of estimating the value by comparing

similar properties that have recently sold in the open

market (referred to as “comparables”).

§ 43-222.2. Income Approach. e income approach

is essential in appraising properties, such as rental apart-

ments, that are normally bought and sold on the basis

of their ability to produce net income. e income

approach uses capitalization rates reﬂecting the demands

of the market in relation to investment returns, convert-

ing net rental income that the property may be expected

to produce during its remaining economic life into the

property’s present value.

§ 43-222.3. Cost Approach. e cost approach uses

two basic concepts to estimate the cost of the property:

(1) reproduction cost new; and (2) replacement cost

new. e cost approach establishes the value of the

property as a summation of depreciated cost of new like

property and of improvements of new like property in

the value of land.

§ 43-223. Factors Used in Valuation. T.C.A.

§ 67-5-602. e following factors are to be considered in

determining the value of real property: (1) location; (2)

current use; (3) income-bearing or non-income-bearing

nature of property; (4) zoning restrictions on use; (5)

legal restrictions on use; (6) availability of water, elec-

tricity, gas, sewers, street lighting, and other municipal

services; (7) natural productivity of the land; and (8) all

other factors and evidences of value generally recognized

by appraisers.

§ 43.223.1. Low-Income Housing Tax Credits.

Including low-income housing tax credits as a factor in

the valuation of real property is consistent with T.C.A.

§§ 67-5-601 and 602. Although the Tennessee Legis-

lature has not statutorily included federal low-income

housing tax credits as a factor in valuation, the courts

have deemed such credits to be included despite the

assertion that the credits meet the deﬁnition of intan-

gible personal property under the default construction

of the Property Tax Act. Spring Hill, L.P. v. Tenn. State

Bd. of Equalization, No. M2001-02683-COA-R3-CV,

2003 Tenn. App. LEXIS 952 (Tenn. App. Ct. Dec. 31,

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Property Tax Deskbook, 2010-2011, 16th Edition

2003). In Spring Hill, the court held that low-income

housing credits are properly included in the valuation of

property for tax assessment purposes because both value

enhancing and value decreasing intangible factors should

be considered in the valuation of property. e result of

this decision indicates that when a rental property has

attached low-income housing tax credits, the present

value of these credits will be added to the net income

produced by the properties when calculating valuation

for the property.

§ 43-224. Valuation: Other Real Property. T.C.A.

§ 67-5-1002. In order to preserve certain types of

property, the legislature implemented provisions that

allow certain properties to be classiﬁed as agricultural

land, forest land, and open space land which is com-

monly referred to as the “Greenbelt Law.” Even though

that law provides that these lands are taxed according

to their value in unimproved condition, rather than at

fair market value, it has been declared a constitutional

expansion of the Legislature’s power to set methods of

valuation. Marion County v. State Bd. of Equalization,

710 S.W.2d 521 (Tenn. Ct. App. 1986).

§ 43-224.1. Open Space Land. T.C.A. § 67-5-1004(7).

“Open space land” is any area of land of at least three

(3) acres, characterized by open or natural condition,

whose preservation provides the public with such ben-

eﬁts as the study and enjoyment of natural areas and the

conservation of natural re-sources, water, and wildlife.

e value of open space land is deemed to be equal to

its most suitable economic use and assessment must be

based on its value in that current use.

§ 43-224.2. Forest Land. T.C.A. § 67-5-1004(4). “For-

est land” is land constituting a forest unit engaged in

the growing of trees under a sound program of sustained

yield management or any tract of 15 or more acres

having tree growth in such quantity and quality and so

managed as to constitute a forest.

§ 43-224.3. Agricultural Land. T.C.A. § 67-5-1004(1).

“Agricultural land” is deﬁned as a tract of land of at

least 15 acres, including woodlands and wastelands, or

“two noncontiguous tracts, including woodlands and

wastelands, one of which is at least 15 acres and the

other being at least ten acres and together constituting a

farm unit.” Additionally, in order to qualify as “agricul-

tural land,” the land must be used to produce or grow

“agricultural products,” or, alternatively, the land must

have been farmed by the owner’s parent or spouse for

at least 25 years, be used as the residence of the owner,

and not be used “for any purpose inconsistent with an

agricultural use.” Owners of land must apply by April

1 of the ﬁrst year in which the classiﬁcation is sought.

No application is required for subsequent years until the

property is acquired by a new owner, who must reap-

ply. T.C.A. § 67-5-1005. For a detailed analysis of the

valuation of timber land, see In re New Forrestry, LLC,

Initial Decision and Order (State Board of Equalization

Feb. 11, 2011).

§ 43-224.4. Fifteen Hundred (1,500) Acre Limit. No

person can own more than 1,500 acres of land in a single

taxing jurisdiction assessed as agricultural, forest, or open

space land. T.C.A. § 67-5-1003. Where property has

more than one owner, ownership is apportioned based

on percentage of ownership in order to come up with

the acreage ﬁgures that determine the availability and

extent of this tax treatment. Id.

§ 43-224.5. Written Application. Anyone wanting to

take advantage of the tax break for agricultural, open

space, or forest land must ﬁle an application with the

county assessor by March 1st of the year in which the

classification is sought. Subsequent reapplication is

not required during the period that the ownership of

the land remains unchanged. New owners must reap-

ply by March 1st to maintain their eligibility without

having to appeal a notice of assessment change. T.C.A.

§ 67-5-1005.

§ 43-224.6. Assessment Ratio of Other Real Property.

T.C.A. § 67-5-1008. Once a parcel of land has been clas-

siﬁed as open space, forest, or agricultural land, the asses-

sor must compute the taxes due on such land each year,

based on both (1) farm classiﬁcation, 25% of appraised

value and present use value and (2) farm classiﬁcation

value as determined under the general assessment and

evaluation procedures. However, taxes are paid only on

the farm classiﬁcation and present use value.

§ 43-224.7. Rollback Taxes. T.C.A. § 67-5-1008. Upon

the real property’s termination of the classiﬁcation of

open space land, forest land, or agricultural land, the

property will be subject to rollback taxes. e rollback

tax is the diﬀerence in the amount of property tax had

the property not been subject to Greenbelt relief and the

actual property taxes paid under the Greenbelt Law. For

agricultural and forest land the rollback tax is computed

for the preceding three years and for open space land,

the preceding ﬁve years. Where the Greenbelt property

is sold and the rollback tax is not otherwise provided for

in the sales contract, the seller is liable for the roll-back

taxes. T.C.A. § 67-5-1005 provides that upon the sale of

land that was previously certiﬁed as “agricultural land,”

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the rollback assessment generally applicable to disquali-

ﬁed property for lack of certiﬁcation will not apply for

a period of up to three years provided the property

continues to be used as agricultural land and continues

to qualify under the mini-mum size or maximum acre-

age requirements. Generally speaking, this allows the

purchaser of agricultural land an extension of time to

satisfy the certiﬁcation requirements. To ensure the clas-

siﬁcation as agricultural land after this period, however,

the new owners must still apply for certiﬁcation in the

manner prescribed by the State Board of Equalization.

An assessor’s improper re-classiﬁcation of land from

agricultural to commercial was neither a clerical error

nor an “error of classiﬁcation” “apparent from the face

of the oﬃcial tax and assessment records” and could not

be corrected pursuant to T.C.A. § 67-6-509. Nashville v.

Delinquent Taxpayers, No. M2004-00040-COA-R3-CV,

2005 Tenn. App. LEXIS 195 (March 2, 2005).

§ 43-225. Valuation: Personal Property.

§ 43-225.1. Valuation Methods. As in the valuation

of real property, there are three basic approaches to the

value of tangible personal property: (1) market data

approach value inferred from market analysis of com-

parable properties; (2) income approach - value derived

from the capitalization of net earnings; and (3) cost

approach - value equivalent to the replacement cost new

less depreciation from all causes. Manual. Although all

three approaches to value should be used in the valu-

ation process, generally one approach is most suitable

to the valuation of a particular type of property. Rule

0600-5-.06. Due to the general lack of adequate market

and income data for personal property, the principal

approach used for most personal property is the cost

approach. Rule 0600-5-.07.

§ 43.225.2. Reporting. Assessors must furnish com-

mercial and industrial personal property taxpayers a

Tangible Personal Property Schedule on or before Feb-

ruary 1 of a tax year. Rule 0600-5-.04(1). e taxpayer

must complete, sign, and ﬁle the schedule before March

1. Id. Assessors need not provide such schedules to resi-

dential owners of tangible personal property because, as

noted in Section I, tangible personal property owned by

non-utility and non-commercial taxpayers is deemed

to have no value for property tax purposes. T.C.A.

§ 67-5-901. Taxpayers may ﬁle amended personal prop-

erty tax returns no later than September 1 following the

tax year. ere is no deadline for an Assessor to accept

or reject an amended property tax return. Att’y Gen.

Op. 07-27 (2007). e Assessment Appeals Commis-

sion issued a decision in 2009 holding that a company

that acquired personal property from a taxpayer who

previously ﬁled a personal property schedule with the

local assessor of property was entitled to amend the

scheduled ﬁled by the predecessor company pursuant

to Tenn. Code Ann. § 67-5-903. In re: Interstate Blood

Bank, Inc. (Shelby County, Jan. 6, 2009).

§ 43-225.3. Standard Valuation—Part II. Part II of

the Tangible Personal Property Schedule sets out the

diﬀerent categories of tangible personal property and

depreciation rates. “In the absence of evidence to the

contrary, the fair market value of commercial and indus-

trial tangible personal property, except for raw materials,

supplies, and scrap property, shall be presumed to be the

original cost to the taxpayer, less straight-line deprecia-

tion or the residual value, whichever is greater.” Rule

0600-5-.06(1). e residual value of all tangible personal

property is deemed to be 20% of original cost, in the

absence of evidence to the contrary. Rule 0600-5-.06(3).

In other words, absent evidence to the contrary, a tax-

payer must, to value a given item of tangible personal

property, look to the standard depreciation tables in Part

II of the Tangible Personal Property Schedule, multiply

the item’s original cost by the appropriate depreciation

factor dictated by the age of the property, and add up the

sum of the depreciated values to determine the aggregate

value of its property.

§ 43-225.4. Statutory Depreciation Tables. These

tables were developed by the General Assembly in 1990.

T.C.A. § 67-5-903. ey diﬀer distinctly from tables

used by most states, such as North Carolina, Arkansas,

Alabama, and Mississippi, in that the Tennessee tables

divide property into far fewer categories than those

states’ tables. Indeed, most states divide manufactur-

ing machinery alone into numerous detailed categories

based largely on depreciation lives developed by the

U.S. Treasury in the late 1970’s and early 1980’s. By

lumping all manufacturing machinery, which is by far

the most signiﬁcant group, accounting for over 40% of

all tangible personal property by value, into one group

with an eight year life and a 20% residual, the Legis-

lature essentially promulgated a broad-based “average”

depreciation schedule which is presumably not reﬂective

of the depreciation of most individual items of tangible

personal property, but is deemed to be a reasonable

approximation of value in the aggregate. e groups into

which items of tangible personal property are divided

for depreciation purposes are:

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Statutory

Group

Type of

Property

Depreciable

Life

1A. Vehicles 5 years

1. Furniture, Fixtures,

General Equipment

and other

8 years

2. Computers,

Copiers, Peripherals,

Fax Machines, and

Tools

3 years

3. Molds, Dies

and Jigs

4 years

4. Aircraft, Towers

and Boats

13 years

5. Manufacturing

Machinery

8 years

6. Billboards, Tanks

and Pipelines

16 years

7. Scrap Property 0.2% of value

regardless of age

8. Raw Materials

and Supplies

100% of

original cost

Construction

in Process

Fifteen per-

cent of cost as

reported for

federal income

tax purposes

§ 43-225.5. Scrap Property. Scrap property is “personal

property no longer capable of use and for which there is

no expectation of repair.” Rule 0600-5-.01(11) (deﬁning

“scrap value”). A taxpayer should aggressively move any

such property into Group 7 on Part II of its Tangible

Personal Property Schedule because it is depreciated to

two percent of its value—a signiﬁcant savings even over

the residual value of 20%.

§ 43.225.6. Raw Materials and Supplies. T.C.A.

§ 67-5-903 speciﬁcally provides that “all raw materials

[and] supplies” are to be taxed. “Raw materials” are

speciﬁcally deﬁned as:

items of tangible personal property, crude or processed,

which are held or maintained by a manufacturer for use

through reﬁning, combining, or any other process in the

production or fabrication of another item or product.

Rule 0600-5-.01(8). “Supplies” are deﬁned as:

expendable items of tangible personal property which

are used or held for use in support of a business activity,

including but not limited to oﬃce supply stocks, stocks

of spare parts for maintenance of machinery and equip-

ment, accessories used in manufacturing processes, print-

ing supplies, and cleaning and maintenance supplies.

Rule 0600-5-.01 (13). e statutory depreciation sched-

ule provides no depreciation rate for such property,

reﬂecting the fact that such materials, not generally

held over time, are not deemed to depreciate and are

taxed at full value. e State Board’s regulations speciﬁ-

cally provide that the fair market value of raw materials

and supplies shall be presumed to be original cost as

determined by the “ﬁrst-in-ﬁrst-out” (FIFO) method

of accounting. Rule 0600-5-.06 (2).

§ 43-225.7. Construction in Process. All intangible

personal property which the taxpayer treats as construc-

tion in process (“CIP”) for federal income purposes

falls within Group 10 on the statutory schedule. T.C.A.

67-5-903(g)(1). CIP property is deﬁned as “tangible

personal property which as of the assessment date is

undergoing construction, assembly or installation prior

to being committed to use.” Rule 0600-5-.01(3). As set

out on the statutory schedule, CIP property may be

reported at 15% of cost as reported for federal income

tax purposes. Id.

§ 43-225.8. Leased Property—Part III. Part III of the

Tangible Personal Property Schedule requires a listing of

leased property. Assessors and their representatives may

conduct Uniform Commercial Code (“UCC”) searches

with the Tennessee Secretary of State’s oﬃce and local

authorities to determine whether or not any lessors

have ﬁled liens on property leased to commercial and

industrial lessees. Tangible personal property is not often

valued through an analysis of income because income is

often not easily assigned to tangible personal property.

e exception is leased property, the income of which

is shown by rent over the life of the property.

Tennessee Code Annotated § 67-5-904 requires that

taxpayers list on schedules provided by the assessor all

leased property used in the taxpayers’ businesses. Lessors

of tangible personal property who pay business tax on

the income derived from said leases are exempt from ad

valorem property taxes on the value of the leased goods.

Nissan North Am., Inc. v. Haislip, 155 S.W.3d 104, 105

(Tenn. Ct. App. 2004)(citing IBM Credit Corp. v. County

of Hamilton, 830 S.W.2d 77, 79 (Tenn. Ct. App. 1992)).

is general rule does not apply to tools and dies owned

by a manufacturer but used at a supplier’s manufactur-

ing plant. Such tools are not considered leased property

but a are deemed a bailment for mutual beneﬁt. Nissan,

155 S.W.3d at 106. Accordingly, a manufacturer is liable

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for property tax on personal property held by a supplier

for use in making parts or equipment to beneﬁt the

manufacturer/owner.

§ 43-225.9. Nonstandard Valuation - Part IV. Any tax-

payer who can demonstrate that a given item of tangible

personal property depreciates more rapidly than permit-

ted by the statutory depreciation schedules must report

such property in Part IV of its return as “OWNED

ITEMS WITH NONSTANDARD VALUE.” Rule

0600-5-.11 (setting out reporting schedule); Rule

0600-5-.07 (setting out requirements for non-standard

valuation). e State Board’s regulations require that

assessors “shall place a value on … property diﬀerent

from the value indicated by the standard valuation pro-

visions if there is suﬃcient evidence to warrant a diﬀer-

ent value.” Rule 0600-5-.07. is reﬂects the statutory

requirement that all property be assessed at its “sound,

intrinsic and immediate value.” T.C.A. § 67-5-601.

§ 43-225.10. Supporting Documentation Necessary.

Any taxpayer reporting property on Part IV should

expect to provide substantial supporting documentation

to back up all non-standard values. While the Tangible

Personal Property Schedule warns taxpayers that “the

assessor may request supportive information,” the State

Board’s rules require that “documentation of such

evidence [be] included in the ﬁle.” Rule 0600-5-.07.

Assessors must report all nonstandard valuations to the

Division of Property Assessments. Id.

§ 43-225.11. Factors Used in Valuation. An assessor

must use certain prescribed guidelines in the valuation

of tangible personal property. Manual. e guidelines

stipulate that the following factors are to be utilized in

the valuation of industrial, commercial, farm machin-

ery and other personal property: (l) “current use”; (2)

“depreciated value”; (3) “actual value after allowance for

obsolescence”; and (4) “all other factors and evidence

and values generally recognized by appraisers as having a

bearing on its sound, intrinsic and immediate economic

value at the time of assessment.” T.C.A. § 67-5-602(c).

e basis for assessment of tangible personal property

is an approximation of market value. Sales or exchanges

of property is of a type that is bought and sold in the

market regularly.

§ 43-225.12. “Value in Use” vs. “Value in Exchange.”

e Division of Property Assessments takes the position

that the statutory standard for tangible personal property

means “value in use”—the value the property has in its

current application as part of a going industrial concern.

is “value” may be diﬀerent from strict “market value

in exchange”—the value that a given piece of property

will sell for, by itself, to a “willing buyer” on the open

market.

While taxpayers should assume that Tennessee taxing

authorities will always demand “value in use” analysis

to support nonstandard valuation of tangible personal

property, they should be aware that the Division’s

“value in use” position is not supported by any reported

decision by a Tennessee court. Moreover, the statu-

tory deﬁnition of tangible personal property talks of

“machinery and equipment, separate and apart from any

real property, and the value of which is intrinsic to the

article itself.” T.C.A. § 67-5-501(12). Consistent with

this deﬁnition, the Standard on Valuation of Personal

Property promulgated by the International Association

of Assessing Oﬃcers provides that the “sales comparison

approach [to valuation] should receive primary consid-

eration when adequate data is available.” So taxpayers

may present evidence of equipment sales in the open

market, where useful, to establish value and not simply

accept taxing authorities’ “in use” valuations.

It should be noted that the State Board of Equaliza-

tion’s regulations define original cost, from which

depreciated cost is calculated, as gross capitalized

cost, which includes freight and installation charges.

is is consistent with an “in use” approach, at least

for property subject to standard valuation according

to the statutory tables. Assessors may also point to a

State Board decision in which an administrative judge

referred to “fair market value in use in place” in adjudi-

cating a property tax appeal. Bridgestone Firestone, Inc.,

No. 03-888-387-00P, Personal Property Appeal for the Tax

Years 1995 and 1996 in Rutherford County, Tennessee.

§ 43-300. ASSESSMENT PROCEDURE BY LOCAL

ASSESSING AGENCY.

§ 43-310. Assessment of Property.

§ 43-311. Equality and Uniformity in Taxation. All

property must be taxed according to its value. TENN.

CONST. art. 2, § 29; T.C.A. § 67-5-102. e ratio of

assessment to value of property in each class or subclass

must be equal and uniform throughout the state. T.C.A.

§ 67-5-503.

§ 43-312. Assessment Date. T.C.A. § 67-5-504. For

each year, all assessments of real and personal property

are made annually by January 1. e assessment of all

property in the county must be made no later than May

20 of each year.

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After May 20, the assessor has no authority to change

an assessment other than to correct obvious clerical

mistakes. Att’y Gen. Op. 07-37 (2007). An assessor can,

after May 20, recommend substantive changes to assess-

ments to the county board of equalization. Id.

§ 43-313. Assessment Authority.

§ 43-313.1. e Assessment Process. e county asses-

sor makes the assessment of property by May 20 of each

year. T.C.A. § 67-5-504(b). Within any municipality,

assessment must be completed at least forty (40) days

prior to the initial tax due date in the municipality.

T.C.A. § 67-5-303 provides the authority of property tax

assessors and their deputies to gather information useful

in the assessment of property. Speciﬁcally, the assessor

and its agents or employees have the authority to enter

buildings still under construction for purposes of making

a correct assessment of the property despite the absence

of an owner’s speciﬁc consent. Once the tenants occupy

the building, the assessor and its agents may furthermore

enter as invitees, or with the consent of the owner, to

gather such information. If the owner refuses unreason-

ably to permit such inspection, the assessor or its agents

may seek the aid of the appropriate court to gain access

to the premises. Property identiﬁed as construction-in-

progress cannot be properly assessed earlier than the

time it was completed and placed in service until the

legislative enactment of T.C.A. § 67-5-903(g). Kellogg

Co. v. Tennessee Assessment Appeals Comm’n, 978 S.W.2d

946 (Tenn. Ct. App. 1998).

No Tennessee property tax owed by a person serving in

the U.S. armed forces, including reservists and members

of the national guard called to active service, will be

due until 180 days after the person is transferred from

the theater of operations of hostilities or the hostilities

conclude, whichever is sooner. T.C.A. § 67-2-112.

Business taxpayers are required to complete and

submit tangible personal property schedules to their

local assessors prior to March 1 of each year. T.C.A.

§ 67-5-903(b). A taxpayer may amend a timely-ﬁled

tangible personal property schedule by ﬁling an amended

schedule with the assessor at any time until September 1

of the year following the tax year for which the original

schedule was submitted. T.C.A. § 67-5-903(e). e

assessor has sixty (60) days from receipt of the taxpayer’s

amended schedule to review, and accept or reject the

schedule. T.C.A. § 67-5-903(e). If the assessor does not

notify the taxpayer that the amended schedule has been

accepted or rejected, the amended schedule is deemed

not accepted. Id.

Failure to ﬁle a schedule will result in a forced assess-

ment. T.C.A. § 67-5-903(c).

Taxpayers should take great care in challenging forced

assessments through the appeal procedures outlined

below. Failure to properly appeal a forced assessment will

result in the assessment becoming ﬁnal. Once a forced

assessment becomes ﬁnal, it may only be reopened if the

taxpayer appeals the forced assessment prior to March 1

of the following year and is able to establish “reasonable

cause” for the failure to properly appeal the assessment.

In VN Hotel Investor v. Tenn. State Bd. of Equalization,

No. 06-2664-III, slip op. at 4 (Davidson County Chan-

cery Court Sept. 4, 2007), the court concluded that the

Board properly refused to accept an appeal after March

1 because no statutory authority exists for the Board

to accept an appeal after March 1 for any reason, irre-

spective of whether reasonable cause exists. Reasonable

cause has been found when a taxing authority misleads

a taxpayer, whether intentionally or otherwise. Industrial

Chem. & Equip. Co., Tenn. State. Bd. of Equalization

Order and Decision (Oct. 12, 2007).

§ 43-313.2. Description of Property for Tax Purposes.

In describing property, tax records must state:

(a) e number of town lots (and blocks) of a given

piece of property.

(b) e name of the street on which the property fronts

and the front feet thereof unless the property is more

easily described in acres.

size, dimensions, quantity, and front feet or acres.

(d) Where possible the surveyor’s district, range, town-

ships, section, and sectional subdivision.

(e) All lands by which the described tract is bounded.

T.C.A. § 67-5-805(b). Failure by the assessor to use

the appropriate descriptive terms to describe land does

not itself defeat the assessment. However, a truly vague

description which does not follow the statute and does

not suﬃciently describe the given property will bar

collection of tax. See e.g., City of Bristol v. Delinquent

Taxpayers, 168 S.W.2d 782 (Tenn. 1943).

§ 43-313.3. Tax Books. T.C.A. § 67-5-807. Assessors

must prepare either a bound or loose-leaf tax book or

books or unit tax ledger cards, one for each parcel of

property, and deliver said records to the trustee on or

before the ﬁrst Monday of October of each year. T.C.A.

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§ 67-5-807. Tax assessors must, in making out the tax

books, place all property within the limits of munici-

palities such that it is separate from other property so as

to enable one inspecting the books to see the aggregate

valuation of all property within each incorporated town,

city, or taxing district. Id.

§ 43-313.4. Aggregate Tax Statement. T.C.A. § 67-5-807.

e county clerk or tax assessor must make an aggregate

statement showing the value of all town lots, the number

of acres, and the value of all tracts of land, and the value

of all personal property and forward this statement to the

Commissioner of Revenue on or before the ﬁrst Monday

in November of each year. e statement must also be

forwarded to the mayor of each municipality by that

date. T.C.A. § 67-5-807.

§ 43-313.5. Property Damage. T.C.A. § 67-5-603.

If between January 1 and September 1 a building or

other improvement is moved, demolished, destroyed,

or substantially damaged by ﬁre, ﬂood, wind, or other

disaster and is not restored, an assessor must correct the

assessment of said property to reﬂect the diminution in

value caused by the damage. T.C.A. § 67-5-603. e

assessment of the improvement must then be prorated

for the portion of the year when it stood on the property

undamaged. Id.

§ 43-313.6. Improvements. T.C.A. § 67-5-603. e

rule for improvements is essentially the same as that for

damages. To the extent a new building or other improve-

ment is completed and ready for use, or the property has

been sold or leased, the assessor must value the improve-

ment at the time of its completion and then prorate that

value for the portion of the year thereafter. e key term

here, of course, is complete. An owner should be careful

to ensure that it is not assessed prior to the true date of

completion. T.C.A. § 67-5-603.

§ 43-313.7. Leases. T.C.A. § 67-5-605. Leased property

is valued by “discounting to present value the excess, if

any, of fair market rent over actual and imputed rent for

the leased premises, for the projected term of the lease

including renewal options.” T.C.A. § 67-5-605. Options

to purchase are deemed to have no value when coupled

with lease arrangements. Id.

§ 43-313.8. Pollution Control Facilities. T.C.A.

§ 67-5-604. Pollution control facilities are valued at

scrap value which, for purposes of valuation, shall

never exceed one-half percent (1/2%) of the acquisition

value of the equipment. T.C.A. § 67-5-604. A business

seeking to have machinery taxed as a pollution control

facility must obtain a certiﬁcate from the Tennessee

Department of Environment and Conservation. T.C.A.

§ 67-5-604.

§ 43-314. Notice Requirement.

§ 43-314.1. Notification of Taxpayer. T.C.A.

§ 67-5-508. At least ten days before the local or county

board of equalization commences its annual session,

which begins each June 1 and continues until all

complaints are heard (but not more than 30 days), the

assessor must notify each taxpayer by mail of any change

in the classiﬁcation or assessed valuation of his or her

property. Such notiﬁcation must show the previous year’s

assessment and classiﬁcation as well as the current year’s

assessment and classiﬁcation. e notiﬁcation date must

be included in the assessor’s records.

§ 43-314.2. Failure of Notice. When an assessor

fails to note on his or her records the assessment

prior to May 20, or fails to notify a taxpayer of any

change in the classification or assessed valuation of

his or her property, the taxpayer has no legal basis for

complaint provided the assessment is completed and a

notice of any new or changed classiﬁcation or assessed

valuation is sent to the taxpayer at least ten days before

the board of equalization ends its annual session.

T.C.A. § 67-5-508(b)(1). If the assessor fails to follow

this procedure, the validity of the assessment, classiﬁca-

tion or assessed valuation may still be eﬀective. However,

an aggrieved property owner may appeal directly to the

State Board of Equalization at its next regular session,

as opposed to ﬁling initially with the local board of

equalization, and proceedings may be undertaken to

collect any taxes based on such assessment or penalty

added, until 30 days after the Board has rendered a ﬁnal

decision on the appeal or complaint.

§ 43-315. Request for Hearing. If a taxpayer wishes

to dispute the assessment of his property, he must start

with the county board of equalization, then appeal to

the State Board of Equalization (starting with a hearing

examiner, followed by the Assessment Appeals Commis-

sion, and then the board itself) and ﬁnally, to the courts

(i.e., Chancery Court). If the taxpayer fails to protest the

assessment to the county board of equalization while it

is in session, the assessment becomes ﬁnal and the tax-

payer loses his opportunity to challenge it, but taxpayers

who were not notiﬁed of an increase in valuation by the

county assessor can appeal directly to the State Board

of Equalization. See T.C.A. § 67-5-1412; § 43-314.2

above. Appeals to the State Board of Equalization must

be made before August 1 of the tax year, or within 45

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days from the date of the decision of the county board

of equalization, whichever is later. T.C.A. § 67-5-1005.

See also T.C.A. § 67-5-1412.

§ 43.315.1. Complaints by Taxing Authorities. T.C.A.

§ 67-5-1407. Any local government or county can make

a complaint before the county board of equalization on

one or more of the following grounds:

a. The property has been erroneously classified or

subclassiﬁed.

b. Certain property has not been included on the assess-

ment lists.

c. A given property has been assessed on the basis of

appraised values less than fair market value.

§ 43-315.2. Notice to Taxpayer. When a local govern-

mental entity complains, the county board must give the

taxpayer ﬁve (5) days notice via United States mail to the

property owner’s last known address. e local govern-

mental entity can oﬀer evidence and witnesses which the

county board “may” hear. T.C.A. § 67-5-1407(c).

§ 43-315.3. Documents. When the county board or

the local taxing authorities request data and documents

not otherwise available through public records from

the taxpayer, and the taxpayer neglects to supply such

information, the taxpayer forfeits his right “to introduce

information concerning the property requested by the

assessor of property or any local board of equalization.”

T.C.A. § 67-5-1407(d). Note that the taxpayer forfeits

his right, per this provision, to introduce any informa-

tion about the property in question. A county assessor’s

power to compel witnesses to appear and answer ques-

tions pursuant to T.C.A. § 67-5-303 and a county board

of equalization’s power to compel witnesses to appear to

answer questions are the functional equivalent of sub-

poena powers. Refusal to comply with the request by an

assessor is a misdemeanor. Att’y Gen. Op. No. 06-059

(April 3, 2006).

§ 43-316. Assessment Review.

§ 43-316.1. Local Board. e county assessor reports

all assessments to a county board of equalization and

makes available to the board all records pertaining to

assessments on or before the ﬁrst day of the board’s

annual session. T.C.A. § 67-5-304. e county assessor

is required to be present at the session of a county board

of equalization in an advisory capacity and assist the

board in equalizing assessments. T.C.A. § 67-5-1403.

Finally, the county assessor sends the complete record

of all assessment changes made by the county board of

equalization to the State Board of Equalization on forms

furnished by the Board. T.C.A. § 67-5-1513.

§ 43-316.2. Appeal of Assessments. e State Board

of Equalization has jurisdiction over the valuation,

classification, and assessment of all property in the

state. T.C.A. § 67-5-1501. Appeals to the Board from

initial determinations and exemption in tax relief cases

must be ﬁled within 90 days from the date notice of

the determination is sent or before August 1 of the tax

year, whichever is later. Appeals from initial decisions

of administrative judges or hearing examiners must be

ﬁled within 30 days from the date the initial decision

is sent. No hearing will be held on any appeal until the

undisputed portion of the tax has been paid, and in

some instances, failure to pay the undisputed amount

will result in a dismissal without any further right to

appeal. T.C.A. § 67-5-1512. In accordance with T.C.A.

§ 67-5-1512(b)(2), interest rates on refunds or payments

at two percentage points below composite prime rate

should be applied to payments or refunds of property

taxes accruing after April 22, 1996. Northwest Airlines,

Inc. v. Tennessee State Bd. of Equalization, 969 S.W.2d

911 (Tenn. 1998).

§ 43-320. Hearing Procedure at Local Level. A tax-

payer must ﬁrst appeal his assessment to the county

board of equalization unless the assessor fails to send

the taxpayer notice of a change in his assessment. T.C.A.

§ 67-5-1412. Upon such complaint before the county

board, the board may hear any evidence or witnesses

oﬀered by the complainant, or take such steps to investi-

gate the grounds of the complaint. T.C.A. § 67-5-1407.

Any action by the county board of equalization must

be completed and the notice of decision and appeal

procedure sent to the taxpayer no later than ﬁve days

prior to the date the taxes are due, which in the case of

counties, taxes are due on the ﬁrst Monday of October of

a tax year. T.C.A. § 67-5-1409. is procedure does not

apply to extraordinary actions or in any year in which

the county completes a reappraisal pursuant to T.C.A.

§ 67-5-1601, et seq. A taxpayer may appeal the valuation

of industrial and commercial real and tangible personal

property directly to the state board of equalization if the

assessor consents in writing. T.C.A. § 67-5-1412.

§ 43-330. Practice and Procedure at Local Level.

§ 43-331. Right to Representation. T.C.A. § 67-5-1407.

Any property owner liable for taxation in Tennessee

shall have the right to make a complaint before the

county board of equalization via personal appearance,

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representation by attorney, or by written authorization

permitting an agent to so appear. T.C.A. § 67-5-1407

allows any property owner or taxpayer liable for taxation

in Tennessee to ﬁle a complaint with the given county

board of equalization. For this purpose, “taxpayer” is

deﬁned as the owner of the property subject to the

appeal or the lessee who is liable to pay the ad valorem

taxes on the property. If the lessee is obligated only

to pay a portion of such taxes, the lessee must obtain

the property owner’s consent in writing. For purposes

of this section, a property manager, attorney, or other

authorized agent may make the complaint to the county

board of equalization so long as such authorization is

set forth in writing.

§ 43-332. Grounds for Relief. e taxpayer has sev-

eral grounds upon which relief may be requested: ﬁrst,

that the property had been erroneously classiﬁed for

purposes of taxation, second, that the property has

been assessed on the basis of an appraised value which

exceeds the value provided in T.C.A. § 67-5-601, et seq.,

and ﬁnally, that property other than property owned by

the taxpayer has been assessed on the basis of appraised

values which are less than the value provided in T.C.A.

§ 67-5-601, et seq.

§ 43-333. Taxpayer Compliance Requirements. e

owner, upon request of the assessor of property or the

county board of equalization, must provide any speciﬁc

data regarding the property that is not readily available

through public records and is necessary to making an

accurate appraisal of the property. If the owner fails,

refuses, or neglects to supply this data in a timely man-

ner, the owner forfeits his right to introduce information

concerning the property requested by the assessor of

property or any local board of equalization. Assessors’

requests for information “constitutes the functional

equivalent of a subpoena.” Tennessee Op. Att’y Gen.

06-059.

§ 43-400. ASSESSMENT PRACTICE BY

TAX-PAYERS.

§ 43-410. e Property Tax Case Summarized. e

suggestions listed below are often helpful when contest-

ing an assessment.

§ 43-411. Outline Points of Concern. In preparation

for the appeal, the taxpayer should make a list of the

points that the taxpayer wishes to have considered and

provide copies of these concerns for the assessor and the

administrative judge.

§ 43-412. Demonstrative Evidence. If beneﬁcial to

the taxpayer’s appeal, the taxpayer should bring a recent

photograph of the property to help demonstrate the

points of concern outlined in § 43-411 above.

§ 43-413. Comparables. e taxpayer should bring all

information about sales of comparable properties in the

neighborhood, if such sales occurred on or about the

assessment date. If no comparables are available, alter-

native approaches to valuation (i.e. income approach)

should be explored.

§ 43-414. Assessor’s Records. It is a good idea for the

taxpayer to check the assessor’s records for errors. e

taxpayer should make sure that such information as

house dimensions and lot size are correct. is activity

could be done when the taxpayer is checking the com-

parable properties in the neighborhood.

§ 43-420. Representation of Parties. There is no

requirement that an attorney, certiﬁed public accoun-

tant, or registered agent represent a taxpayer before

a county board of equalization. Additionally, mem-

bers of county boards of equalization are prohibited

from representing taxpayers in assessment appeals.

T.C.A. § 67-1-401.

§ 43-430. Other Persons. e following persons may

serve as agents for the taxpayer: (1) attorneys; (2) oﬃ-

cers, directors or employees of the corporation or other

oﬃcial entity; (3) certiﬁed public accountants, when

the only issue on appeal is the proper completion of a

tangible personal property schedule or the determination

of its value; and (4) in the case of a complaint, protest

or appeal primarily pertaining to the classiﬁcation or

assessment of property, persons who meet professional

and academic qualiﬁcations relating to property appraisal

or assessment. All agents authorized to appear before

the State Board of Equalization must register with the

Board and pay the biennial registration fee of $200.

T.C.A. § 67-5-1514.

§ 43-500. APPEAL OF TAX ASSESSMENT.

§ 43-510. Hearing on County Level. T.C.A. § 67-5-1412.

Generally, a taxpayer must ﬁrst appeal his assessment to the

county board of equalization. However, with the permission

of the county board, taxpayers may in some instances ﬁle

an appeal directly with the State Board of Equalization.

T.C.A. § 67-5-1412(b)(2)

Each county board of equalization consists of five

members elected by the legislative body of each county.

Each member serves for a term of two years. T.C.A.

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§ 67-1-401. e Board meets on June 1 of each year

and generally remains in session until the equalization

process has been completed. e hearing is very infor-

mal and brief. e taxpayer may present any evidence

deemed appropriate. e assessment becomes ﬁnal if the

tax payer fails to protest the assessment to the county

board of equalization while it was in session. A hearing

will not be held on any appeal until the undisputed

portion of the tax has been paid. e executive director

of a county board of equalization can not compromise

a contested assessment once the assessment has been

appealed and docketed for review by the board. Att’y

Gen. Op. No. 05-102 (July 6, 2005).

§ 43-520. Appeal to State Level.

§ 43-521. State Board of Equalization. e State Board

of Equalization is a seven-member body consisting of

ﬁve ex oﬃcio members and two members appointed by

the Governor. One gubernatorial appointee must have

knowledge and experience in tax assessments at the city

level and the other appointee must be experienced in tax

assessments at the county level. Each appointed mem-

ber serves terms for four years each. e remaining ﬁve

members are the Governor, the Treasurer, the Secretary

of State, the Comptroller of the Treasury and the Com-

missioner of Revenue. T.C.A. § 4-3-5101.

§ 43-522. Informal Administrative Hearing. e state

administrative remedy operates on three separate levels.

First, a recorded preliminary hearing is held before an

administrative judge, usually in a court room in the

county where the property is located. Hearings normally

begin about September 1. e hearing examiner, who

serves as the trier-of-fact and conducts the hearing,

adjusts the formality of the proceedings to the situation.

If an attorney or other agent is handling the case for the

taxpayer or if the taxpayer requested that the hearing be

conducted in strict accordance with the Administrative

Procedures Act, the case will be presented as a formal

evidentiary hearing. Otherwise, the hearing examiner

may simply ask questions of the taxpayer to obtain the

necessary information. A staﬀ appraiser from the State

Division of Property Assessments may assist the hearing

examiner on appraisal questions. e hearing examiner

issues an initial decision and order, which is mailed to

the taxpayer and to the assessor within approximately

ninety (90) days.

§ 43-523. Assessment Appeals Commission. The

State Board of Equalization is authorized to create an

Assessment Appeals Commission to hear complaints

and appeals. e Commission is made up of not less

than three nor more than six members appointed by

the Board. T.C.A. § 67-5-1502. An action taken by

the Commission is ﬁnal. However, the State Board of

Equalization may, under certain circumstances, elect to

review any action by the Commission.

§ 43-523.1. Appeal to Assessment Appeals Commis-

sion. If the taxpayer, assessor, or any other interested

party in the county takes exception to the initial deci-

sion, he may make a written request within 15 days for

a hearing before the Assessment Appeals Commission.

The Assessment Appeals Commission is the second

level of state administrative review. e Commission

is composed of attorneys and knowledgeable laymen.

Although the hearing examiner’s report and the technical

record from the prior hearing will be oﬀered as evidence

before the Commission, the parties are not prevented

from bringing in new evidence. e Commission hear-

ings are formal as reﬂected by the fact that about half

of the taxpayers are represented by attorneys or agents,

and a court reporter is always present. At the conclusion

of the hearing, the Commission issues ﬁndings of fact

and conclusions of law which are mailed to the tax-payer

and the assessor. e parties may ﬁle written exceptions

to the Commission’s decision with the State Board of

Equalization within 15 days.

§ 43-524. Review by State Board of Equalization.

Within 45 days, the State Board of Equalization may

decide to review the case. See § 43.521 for the composi-

tion of the Board. If the Board decides not to take the

case, the Commission’s decision becomes ﬁnal (subject

to judicial review - See § 43-530 below). e Board’s

procedures are nearly identical to those before the

Commission.

e failure to timely ﬁle property tax appeals under

established procedures will typically be dispositive. e

Tennessee Court of Appeals has held that the failure

to timely appeal an administrative law judge’s default

judgment prohibits a taxpayer from obtaining relief on

appeal. See Madison County v. Tenn. State Bd. of Equal-

ization, No. W2007-01121-COA-R3-CV, 2008 WL

2200050 (Tenn. Ct. App. 2008).

§ 43-530. Judicial Review and Appeal. T.C.A.

§ 67-5-1511. e action of the State Board of Equal-

ization shall be ﬁnal and conclusive subject to judicial

review, and taxes shall be collected according to the

assessments determined and ﬁxed by the Board. After the

decision of the Board or Commission becomes ﬁnal, it

may be appealed to Chancery Court in the county where

the property lies or Davidson County. e state attorney

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general’s oﬃce defends the Board of Equalization’s posi-

tion. e judicial review consists of a new hearing in the

Chancery Court based on the administrative record and

any additional or supplemental evidence which either

party wishes to introduce relevant to any issue. Courts

generally will defer to an agency’s administrative deci-

sion “when those agencies are acting within their area of

specialized knowledge, experience, and expertise. See Am.

Heritage Apartments, Inc. v. Bennett, 2005 Tenn. App.

LEXIS 509 (Aug. 18, 2005). e court reviewing an

agency’s administrative decision is governed by a narrow

standard of judicial review, set forth in T.C.A. § 4-5-322.

Id. As in other civil cases, the Chancellor’s decision may

be appealed by right to the appropriate appellate court

and its decision can be appealed to the Supreme Court.

In 2003, the Board of Equalization was authorized by

statute to assess costs against any non-prevailing party

up to $100 per hearing. T.C.A. § 67-5-1501.

§ 43-540. Practice and Procedure. e procedural rules

for hearings established by the Oﬃce of the Secretary

of State govern proceedings before the State Board,

Assessment Appeals Commission, and hearing examin-

ers appointed by the Board. Rule 0600-2 (adopting

rules); Rule 1360-1-7 (rules of the Secretary of State).

A detailed analysis of these rules are beyond the scope

of this chapter, but generally provide for the orderly

presentation of evidence by all parties.

§ 43-541. Use of Appraisals. e use of appraisals is

very helpful to establish the value of the assessed prop-

erty. For this purpose, certiﬁed public accountants are

often employed to render opinions as to the value of

the property.

§ 43-542. Forms and Pleadings. e forms necessary

to appeal an assessment may be obtained from the staﬀ

of the Assessment Appeals Commission and Board of

Equalization at the following phone number, (615)

401-7883.

§ 43-543. Appearances for Taxpayer. At any appeal

from the county board of equalization or hearing held

before the State Board of Equalization, taxpayers and

assessors of property may appear in person, by qualiﬁed

agent (with prior written authorization to appear on

behalf of the taxpayer) or in the case of taxpayers, by a

member of the taxpayer’s immediate family. See § 43-430

regarding those persons who may serve as agents for

taxpayers. A qualiﬁed agent for a taxpayer need not

have written authorization to appear at a conference or

hearing on the taxpayer’s behalf. T.C.A. § 67-5-1514.

See § 43-331 (written authorization still needed to ﬁle

an appeal with county board of equalization).

§ 43-550. Jurisdictional Requirements.

§ 43-561. Exhaustion of Remedies. Generally, the

administrative remedies set forth above must be exhausted

before an appeal can be heard in state courts on a pure

valuation question. Nonetheless, when a taxpayer chal-

lenges his assessment on legal grounds—such as the

availability of an exemption other than those requiring

the approval of the state board of equalization—he may

pay under protest and sue in Chancery Court without

pursuing administrative relief. e Tennessee Supreme

Court held that where the statute did not require an

exhaustion of administrative remedies, the taxpayer did

not have to exhaust her administrative remedies before

ﬁling an action in Chancery Court. omas v. State

Bd. of Equalization, 940 S.W.2d 563 (Tenn. 1997). A

taxpayer who takes no action on a purely legal property

tax issue until a delinquent tax suit is initiated by the

taxing authority may not, despite the rule in omas,

then initiate an action to challenge the legal basis of

the delinquent tax at issue. Nashville v. Cain, No.

M2004-00040-COA-R3-CV, 2005 Tenn. App.

LEXIS 195 (March 2, 2005)). A taxpayer seeking

to have property tax statutes declared unconstitu-

tional need not exhaust administrative remedies

before pursuing a declaratory judgment action in

chancery court. Colonial Pipeline Co. v. Morgan, No.

M2006-00591-COA-R3-CD (Tenn. Ct. App., Nash-

ville, July 2, 2007).

§ 43-562. Payment Under Protest. As set forth above,

if the property tax issue is purely a legal question rather

than a valuation issue, a taxpayer may pay the tax under

protest pursuant to T.C.A. § 67-1-901 as an alternative

to challenging an assessment through the administrative

process outlined above. If the matter is a valuation issue,

the case must be appealed through the administrative

procedures set forth herein.

§ 43-563. Review in Chancery Court.

§ 43-563.1. New Evidence Permitted. All matters

passed on by the State Board are subject to judicial

review. T.C.A. § 67-5-1511(a). is review for locally-

assessed taxpayers is “based upon the administrative

record and any additional or supplemental evidence

which either party wishes to adduce relevant to any

issue,” T.C.A. § 67-5-1511(b). See also Am. Heritage

Apartments, Inc. v. Bennett, 2005 Tenn. App. LEXIS 509

(Aug. 18, 2005) (discussing the unique nature of prop-

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erty tax appeals of administrative decisions, which permit

admission of additional or supplemental evidence). e

Tennessee Court of Appeals has held that this provision

allows for genuine de novo review—that is, a full rehear-

ing of a dispute with full presentations of evidence not

restricted to the record before the State Board. Richard-

son v. Tennessee Assessment Appeals Comm’n, 828 S.W.2d

403 (Tenn. Ct. App. 1991).

§ 43-563.2. Initiating Judicial Review. Judicial review

is initiated with the ﬁling of a petition for review within

60 days after the entry of the State Board’s ﬁnal order

thereon. T.C.A. § 4-5-322(a)(2).

§ 43-563.3. Centrally Assessed Taxpayers. Taxpayers

aggrieved by a ﬁnal decision of the Tennessee regula-

tory authority or a ﬁnal decision of the State Board

involving centrally assessed utility property can obtain

judicial review by ﬁling a petition for review with the

Middle Division of the Court of Appeals. is is a

highly signiﬁcant distinction. Because centrally assessed

utility property taxpayers ﬁle with the Court of Appeals,

their judicial review is not de novo, but on the record

developed before the State Board. T.C.A. § 4-5-322(g).

Proof can only be taken by the court where irregulari-

ties in procedure by the agency not shown in the record

are alleged. Id.

e Court of Appeals may aﬃrm the decision of the

agency or remand the case for further proceedings. e

court may reverse or modify the decision if the rights of

the petitioner have been prejudiced because the adminis-

trative ﬁndings, inferences, conclusions, or decisions are:

(1) in violation of constitutional or statutory provisions;

(2) in excess of the statutory authority of the agency; (3)

made upon unlawful procedure; (4) arbitrary or capri-

cious or characterized by abusive discretion or clearly

unwarranted exercise of discretion; or (5) unsupported

by evidence which is both substantial and material in

light of the entire record. T.C.A. § 4-5-322(h). In deter-

mining the substantiality of the evidence, the Court of

Appeals shall take into account whatever in the record

fairly detracts from its weight, but the court shall not

substitute its judgment for that of the agency as to the

weight of the evidence on questions of fact. Id.

In Colonial Pipeline Co. v. Morgan, 231 F.R.D. 518

(M.D. Tenn. 2005), the court held that Tennessee’s

property tax appeal process did not violate Colonial’s

due process rights. Colonial appealed the constitutional-

ity of a recently enacted Tennessee law in federal court.

e state moved to dismiss, arguing that Colonial has

a “plain, speedy and eﬃcient remedy” before the Board

of Equalization. e district court dismissed the case,

holding that Colonial has adequate state administrative

remedies at its disposal. Id.

§ 43-564. Appeals. Either the taxpayer or a taxing

authority can appeal the decision of the Chancery Court

to the Tennessee Court of Appeals. T.C.A. § 4-5-323.

Appeals are initialed by ﬁling a Notice of Appeal within

30 days of order of Chancery Court.

§ 43-600. EXEMPTIONS FROM TAXATION.

Exemptions from the property tax are found in Article

2, § 28 and § 30 of the Tennessee Constitution and

T.C.A. §§ 67-5-201 through 67-5-223.

§ 43-610. Examples of Exempt Property.

§ 43-610.1. Government-Owned Property. Govern-

ment-owned property used exclusively for public, county

or municipal purposes is exempt from taxation. County

or municipality-owned property may be tax exempt even

if located in a diﬀerent county or municipality so long

as the use of the property is incidental to and consistent

with the public purpose of the property. Maury Reg’l

Hosp. v. Tenn. State Bd. Of Equalization, 117 S.W.3d

779 (Tenn. Ct. App. 2003). Persons or entities leasing

real property owned by a government for the purpose of

operating a golf course or the developing and operating

of a golf course do not pay property taxes, but do make

payments in lieu of property taxes in an amount equal

to the amount of taxes that would have been due and

otherwise payable.

§ 43-610.2. Non-Proﬁt and Performing Arts Property.

Real and tangible personal property owned and used

by certain non-proﬁt community and performing arts

organizations as charitable or educational use property

is tax exempt. T.C.A. § 67-5-223. Particular guidelines

and requirements are set forth in the statute that describe

which community and performing arts organizations are

entitled to exemption. Section is applicable to applica-

tions or appeals pending before the State Board of

Equalization on May 1, 1998.

§ 43-610.3. Public Ways. T.C.A. § 67-5-204. All

roads, streets and alleys legally dedicated and open for

public travel and used free of charge are exempt from

taxation.

§ 43-610.4. Government Bonds. T.C.A. § 67-5-205.

Government bonds and notes are not subject to the

property tax.

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§ 43-610.5. Property Used For Recycling Waste Prod-

ucts. T.C.A. § 67-5-208. Property owned by a nonproﬁt

corporation and in which the state has a reversionary

interest and is operated for the purpose of recycling or

disposing of waste products and converting it to heat

or cooling for public buildings in the state is exempt

from taxes.

§ 43-610.6. Charter or Contract Exemptions. T.C.A.

§ 67-5-211. All property protected by valid charter or

contract exemptions is exempt from taxation.

§ 43-610.7. Religious, Charitable, Scientiﬁc, and

Educational Institutions. TENN. CONST. art. 2,

§ 28; T.C.A. § 67-5-212. Real and personal property

owned by religious, charitable, scientiﬁc or non-proﬁt

educational institutions which is occupied and used by

such institutions purely and exclusively to carry out one

or more of its purposes is exempt. Contiguous property

owned by a religious institution that is used to carry

out one or more of its purposes is also exempt. is

exemption provision speciﬁcally mentions a variety of

institutions eligible for the exemption, including non-

proﬁt artiﬁcial breeding associations, fraternal organi-

zations and labor organizations exempt from federal

income taxes, or non-proﬁt county fair associations.

T.C.A. § 67-5-212(e), (f), (h), and (i). e courts have

been willing to extend this exemption to facilities that

might to some taxpayers not appear obviously within its

scope. us, for example, parking facilities provided for

personnel at Vanderbilt University Hospital in Nashville

were deemed necessary to the operation of the hospital

and, as such, exempt. Vanderbilt Univ. v. Ferguson, 554

S.W.2d 128 (Tenn. Ct. App. 1976) (noting that exemp-

tions in favor of educational institutions are liberally

construed); see also Methodist Hosps. v. Assessment Appeals

Comm’n, 669 S.W.2d 305 (Tenn. 1984) (exempting a

hospital parking lot from ad valorem taxation). Simi-

larly, a corporation created by non-proﬁt hospitals to

do hospital laundry was deemed a charitable institution

exempt from tax. Shared Hosp. Servs. Corp. v. Ferguson,

673 S.W.2d 135 (Tenn. 1984). Conversely, use of a

house as a temporary residence for visiting missionar-

ies was considered only an incidental beneﬁt and not

reasonably necessary to accomplish religious purposes,

and thereby placed it outside the statutory exemption.

First Presbyterian Church of Chattanooga v. Tenn. Bd. Of

Equalization, 127 S.W.3d 742 (Tenn. Ct. App. 2003). In

2003, the Legislature authorized the Board of Equaliza-

tion to charge fees up to $100 for processing exemption

applications. T.C.A. § 67-5-212(b)(2). Exempt entities

are now permitted to claim an exemption for a period

up to ﬁve years prior to obtaining approval of their

exemption applications where the exemption relates to

relocation of an applicant previously approved. T.C.A.

§ 67-5-212(b)(3).

§ 43-610.8. Dormitories. T.C.A. § 67-5-213. Real

estate owned by educational institutions used primarily

for dormitory purposes for its students is exempt from

taxation.

§ 43-610.9. Cemeteries. T.C.A. § 67-5-214. Non-proﬁt

cemeteries are exempt from taxation. Real property

owned by for-proﬁt cemeteries that has been prepared

and is being held for burial purposes is exempt from

taxation.

§ 43-610.10. Personal Bank Accounts and Other Per-

sonal Property. T.C.A. § 67-5-215. e entire amount

of money deposited in an individual’s personal family

checking or savings accounts as well as $7,500 worth

of personal household goods and furnishings, wearing

apparel and such other tangible personal property, in

the hands of the taxpayer is exempt from taxation. In

eﬀect, this statute negates all personal property of this

type from being taxed.

§ 43-610.11. Growing Crops. TENN. CONST. art. 2,

§ 30; T.C.A. § 67-5-216. Crops and livestock are exempt

from taxation. “All growing crops . . . including . . .

timber, nursery stock, shrubs, ﬂowers, and ornamental

trees, [and] the direct products of the soil of this state

or any other state of the union” are exempt if in the

hands of the producer or the producers’ immediate

vendee. In addition, articles which are manufactured

from such products, in the hands of the manufacturer,

are exempt. T.C.A. § 67-5-216. Livestock and poultry

in the hands of the producer or producer’s immedi-

ate vendee are also included within this exemption.

T.C.A. § 67-5-216(b) (superseding by statute Neuhoﬀ

Packing Co. v. Sharpe, 240 S.W. 1101 (Tenn. 1921)).

Coal, iron, marble, and similar products of the soil

also fall within the “agricultural goods” exemption.

Benedict v. Davidson County, 67 S.W. 806 (Tenn.

1901). However, once raw materials are reﬁned, those

products are no longer considered “direct products of

the soil.” See Alcoa, Inc. v. State Board of Equalization,

No. E2010-00001-COA-R3-CV, 2011 WL 598435

(Tenn. Ct. App. Feb. 18, 2011) (concluding that

almumina, coke, pitch and fluoride were no longer

exempt because those materials went “through a more

extensive man-initiated and controlled refinement

process”).

The inclusion of other states’ products within this

exemption is designed to avoid imposition of an uncon-

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stitutional burden on interstate commerce. Nashville

Tobacco Works v. City of Nashville, 260 S.W. 449 (Tenn.

1923). It should be noted that when a manufacturer who

is not an “immediate vendee” obtains exempt materi-

als, such as logs or tobacco, it cannot take advantage

of this exemption until the process of conversion of, or

manufacturing with, the materials has actually begun.

Moran & Hamilton Co. v. Nashville, 270 S.W. 75

(Tenn. 1924).

§ 43-610.12. Property in Transit. T.C.A. § 67-5-217.

Tangible personal property that is in transit through the

State of Tennessee is exempt from taxation. Property

which is brought to Tennessee from out of state, stored

in Tennessee, with or without repackaging, and then

forwarded to an out of state destination is “deemed not

to have acquired a situs within the State of Tennessee for

purposes of ad valorem taxation.” T.C.A. § 67-5-217(b)

(1). To the extent that this property is stored in Tennes-

see and then distributed to locations in and outside the

state, only that property distributed in state is subject

to property tax. T.C.A. § 67-5-217(b)(2). While this

statute has never been cited in a reported decision, it

in many ways parallels the import for export sales and

use tax exemption set out at T.C.A. § 67-6-313. Cases

interpreting that provision may therefore provide some

insight into the scope of this exemption. See e.g. Beecham

Labs. v. Woods, 569 SW2d 456 (Tenn. 1978) (holding

that drug samples stored in a Kingsport, Tennessee,

warehouse for free distribution to physicians in and

outside of Tennessee were only taxable to the extent they

were distributed in Tennessee).

§ 43-610.13. Historic Properties. T.C.A. § 67-5-218.

Improvements made to or restoration of any structure

of historic property is exempt from property taxa-

tion. ere are particular guidelines and requirements

within the statute. Real property owned by a charitable

institution (as determined under T.C.A. § 67-5-212) is

exempt from property tax provided it is listed on the

National Register of Historic Places the property is used

for occasional rentals lasting no more than two days at

a time; the property is not rented out more than 180

days per year with the proceeds derived therefrom used

solely for maintenance of the property, and the charitable

institution has owned the property for the preceding

ten years prior to application for exemption. e owner

must demonstrate the property tax savings will be used

to preserve and maintain the property. e exemption

is valid for ten years. T.C.A. § 67-5-222.

§ 43-610.14. Airport Runways and Aprons. T.C.A.

§ 67-5-219. Real property on private or public use

airports is exempt from tax.

§ 43-610.15. Property on Foreign Trade Zone.

T.C.A. § 67-5-220. Tangible personal property

imported from outside the United States held in a

foreign trade zone or subzone for the purposes of

sale, manufacturing, or processing is exempt from ad

valorem taxation while held in such zone or subzone if

the property is then exported to a location outside of

Tennessee.

§ 43-610.16. Foreign Trade Zones. “Tangible personal

property imported from outside the United States and

held in a foreign trade zone or foreign trade subzone, as

deﬁned in Title 7, Chapter 85, for the purpose of sale,

manufacture, processing, assembly, grading, cleaning,

mixing, or display shall be exempt from Tennessee ad

valorem taxation while held in the foreign trade zone or

subzone and thereafter, if the property is then exported

from the foreign trade zone or subzone directly to the

location outside of Tennessee.” T.C.A. § 67-5-220.

Tennessee law deﬁnes foreign trade zones to include

those zones established by federal statutes. T.C.A.

§ 7-8-102.

§ 43-610.17. Foreign Trade Subzones. A “foreign trade

subzone” is “a foreign trade zone established in an area

separate from an existing foreign trade zone for one . .

. or more of the speciﬁed purposes of storing, manipu-

lating, manufacturing, or exhibiting goods.” T.C.A.

§ 7-85-102. Such foreign trade subzones are established

pursuant to T.C.A. § 7-5-107 by Metropolitan Port

Authorities. T.C.A. § 7-5-107(7). Port authorities can

authorize the maintenance of foreign trade subzones

“upon the request of any party and the approval of

a majority of the legislative body in the county or

municipality in which such requesting party is located.”

Id. erefore, practitioners faced with ﬁrms importing

goods on a regular basis from foreign countries for

subsequent export may want to bring this exemption to

the attention of their clients even if the clients are not

already taking advantage of opportunities presented by

foreign trade zones and foreign trade subzones.

§ 43-610.18. Family Wellness Centers. Property

owned by a charitable institution, which is a nonproﬁt

corporation, that is used to provide “physical exercise

opportunities for children and adults,” is exempt from

taxation. T.C.A. § 67-5-225. To qualify for exemption,

the charitable institution must promote physical, mental,

and spiritual health. e institution also must provide

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programs for improving the community. e fact that

a property is used for physical exercise, without more,

is insuﬃcient to support an exemption. Club Sys. of

Tennessee, Inc. v. YMCA of Middle Tennessee, 2005 Tenn.

App. LEXIS 793 (Dec. 19, 2005). To qualify for the

exemption under T.C.A. § 67-5-225, the property must

be a family wellness center and its operation must have

a charitable nature. Id.

§ 43-620. Exempt Taxpayers.

§ 43-621. Tennessee Educational Institution. All prop-

erty of an educational institution owned, operated or oth-

erwise controlled by the State of Tennessee as trustee or

otherwise is exempt from taxation.

§ 43-622. Trust Estates. Every trust estate is entitled

to the same exemption as if the property was owned by

single taxpayer.

§ 43-623. Housing Authorities. Property of housing

authorities is exempt from property taxes. However, in

lieu of such taxes, the housing authority must make pay-

ments to the municipality for services, improvements of

facilities furnished by such county or municipality for

the beneﬁt of the housing project owned by the housing

authority. Such payment is not to exceed the estimated

cost of such county or municipality for the services,

improvements or facilities provided. is exemption also

applies to bonds and notes of the housing authority.

§ 43-624. Low Cost Housing Generally. T.C.A.

§ 67-5-207. Property of not-for-proﬁt organizations

used as housing for low income and very low income

persons and funded as a special needs project under

the HOME and HOUSE Programs are exempt from

taxation. T.C.A. § 67-5-207 was amended in 2002 to

state that it did not preclude § 67-5-212—the chari-

table exemption—to transitional or temporary housing

qualifying as a charitable use.

§ 43-625. Low Cost Housing for Elderly. All Tennes-

see non-proﬁt corporations who provide low cost elderly

housing which are ﬁnanced by a grant or a loan, made,

insured or guaranteed by the United States Government

are exempt from tax. ere are other technical require-

ments that must be met. (Any such project that exceeds

twelve units must make payments to the county and

municipality in lieu of taxes). e non-proﬁt corpora-

tion must also be a tax-exempt charitable organization

with certain requirements with regard to directors and

oﬃcers serving without compensation.

§ 43-626. Tax Relief for Certain Taxpayers. T.C.A.

§§ 67-5-701 to -704. Elderly low income homeowners,

disabled homeowners, and disabled veteran homeowners

may receive vouchers to be used as credit for payment

of property taxes imposed upon their residence (includ-

ing a mobile home) provided such person meets certain

eligibility requirements.

§ 43-627. Senior Citizens’ Tax Deferral. T.C.A.

§ 67-5-702 (effective July l, 1998). Senior citizens

(deﬁned as persons 65 years of age or older) with house-

hold income for the year no greater than $25,000 may

defer all of or part of their property tax for a period

not to exceed one year from the date of death of the

taxpayer. e current year deferral and all prior year

deferrals may not exceed 80% of the taxpayer’s equity

interest in the property. e deferred taxes are a lien on

the property until paid.

An amendment to the Tennessee constitution was rati-

ﬁed in November 2006, authorizing cities and counties

to set maximum property taxes for senior citizens. is

amendment overturned case law that had found such

maximum property tax rates unconstitutional. Accord-

ingly, in 2007, the Tennessee Legislature adopted the

Property Tax Freeze Act. is Act authorizes counties

and municipalities to set maximum property tax lev-

els. T.C.A. § 67-5-705. us, eﬀective for tax years

January 1, 2008 and after, local jurisdictions, including

municipalities and counties can set maximum property

tax levels for senior citizens who meet certain income

limitations. T.C.A. § 67-5-705. e eﬀect of this law

may vary depending on the local jurisdiction. Special

school districts may not adopt a property tax freeze. Ten-

nessee Op. Att’y Gen. 07-109. In addition to applying

to senior citizens, the property tax freeze also applies to

homeowners who are totally and permanently disabled,

irrespective of age. Tennessee Op. Att’y Gen. 07-156.

§ 43-628. Active Duty Armed Forces. T.C.A.

§ 67-5-2011. Any armed forces member, whether active

duty, reserve duty, or national guard, who is called up

to active military service in an area outside the United

States, may apply to the commissioner of revenue for a

tax deferral. No tax will be due for any property until

180 days after the end of the hostilities or 180 days after

such person transfers from the theater of operations,

whichever is sooner. is statute does not dismiss the tax,

but rather, only defers the tax to a later date free of inter-

est. e armed forces member must present copies of

original orders or other satisfactory proof of deployment

to the county trustee to be eligible for the deferral.

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§ 43-630. Constitutional Issues. All exemptions from

the property tax are provided in the Tennessee Constitu-

tion. e Attorney General for the State of Tennessee

has historically questioned the constitutionality of any

statute that provides a property tax exemption that is

outside the scope of the exemptions provided in the

Tennessee Constitution.

§ 43-640. Practice and Procedure [in exemption

cases]. e local property assessor provides forms for

purposes of a taxpayer requesting property to be deter-

mined exempt. e State Board of Equalization reviews

the applications. Applications for exemption should be

ﬁled by May 20 or within 30 days after an exempt use

begins in order to maximize the exemption. e Chan-

cery Court for Davidson County or the Chancery Court

where the property is located reviews the board’s deci-

sion. Once an exemption is obtained, such exemption

applies for future years without the necessity of apply-

ing again; provided, however, that property owners are

responsible for reporting any changes in the use of the

exempt property to the local property assessor.

§ 43-700. MISCELLANEOUS ITEMS.

§ 43-710. Jurisdiction of State and Local Agencies.

Inquiries to any state or local agencies should be ad-

dressed as follows: State Board of Equalization, 505

Deaderick Street, Suite 1700, James K. Polk State Oﬃce

Building, Nashville, Tennessee 37243-0280, Telephone:

(615) 401-7883; Telecopier: (615) 253-4847

§ 43-720. List of Forms. e forms needed for ﬁling

an appeal are: (1) appeal form; (2) instruction sheet; and

(3) publication. You can get these forms by writing or

calling the State Board of Equalization at the number

and address listed above in § 43-710.

§ 43 - 8 00 . DE L IN QU E NT TAX E S AN D

PENALTIES.

§ 43-801. County Remedies in General. T.C.A.

§ 67-5-2003. In order to recover delinquent taxes, the

county trustee may collect the taxes by distraint (dis-

tress warrant) and sale of any personal property liable

therefore, by suit at law against the taxpayer, and/or by

garnishment.

§ 43-802. Notice Requirement. T.C.A. § 67-5-2401.

As a preliminary step toward enforcing the lien, the

trustee shall insert in one or more newspapers of

the county once a week for two consecutive weeks a

notice of the intent to ﬁle suit. Newspapers that qualify

for publication of property tax sale notices are news-

papers that contain matters of general interest and are

intended for circulation among the general public. e

newspaper must also be published at least weekly. Ten-

nessee Op. Att’y Gen. 07-71. In Smith v. Gregory, the

Tennessee Court of Appeals held that a process server’s

numerous attempts to serve the owner at his address and

then publication of notice in local newspapers amounted

to suﬃcient due diligence to defeat a challenge of a tax

sale. Smith v. Gregory, 2007 Tenn. App. LEXIS 676

(Tenn. Ct. App. August 17, 2007).

§ 43-803. Tax Sale. T.C.A. § 67-5-2501. At a sale of the

land, the clerk of the court shall bid the debt ascertained

to be due for taxes, interests, penalties, and costs.

§ 43-804. Notice of Sale. T.C.A. § 67-5-2502. Notice

to parties is governed by the Tennessee Rules of Civil

Procedure. e property shall be advertised in a sales

notice, which provides a description. e delinquent

tax attorney is required to make “a reason-able search

of the public records in the oﬃces of the assessor of

property, trustee, local oﬃce where wills are recorded,

and register of deeds and give notice to persons identi-

ﬁed by the search as having an interest in the property

to be sold. e court shall set a reasonable fee for this

service.” T.C.A. § 67-5-2502(c). Notice of a tax sale by

regular mail, as opposed to certiﬁed mail, is not required

by the Due Process Clause of the United States Constitu-

tion. Beneﬁcial Tennessee, Inc. v. Metropolitan Gov’t, No.

M2004-0171-COA-R3-CV, 2006 Tenn. App. LEXIS

164 (March 8, 2006).

§ 43-805. Personal Liability. “In addition to the lien

on property, property taxes are a personal debt of the

property owner or property owners as of January 1,

and, when delinquent, may be collected by suit as any

other personal debt.” T.C.A. § 67-5-2101(b). is debt

encompasses the tax due, penalties, interest, and attor-

neys’ fees. Id. Claims to satisfy this debt can be joined

with claims for enforcement of the accompanying lien in

the same complaint. See e.g., White v. Kelly, 387 S.W.2d

821 (1969) (emphasizing that both the property and the

owner become liable for taxes owed).

§ 43-806. Tax Liens. A tax lien is imposed on all per-

sonal and real property for the full amount of tax due

on said property on January 1 of the year of assessment.

In other words, every taxpayer has a lien on its property

up until the date it pays its taxes. T.C.A. § 67-5-2101.

e lien is for the amount of any tax owed plus “all

penalties, interest, and costs accruing thereon.” Id. e

lien extends to every part of a given tract of land or

item of personal property, notwithstanding any divi-

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sion or alienation thereof. T.C.A. § 67-5-2102. e

only exception to this rule is that no lien is imposed on

leased personal property assessed to a lessee. Id. Subject

to that exception, the lien is a lien upon the fee—the

property itself—and not just the assessed owner’s inter-

est. us, the interests of lienors and remaindermen are

subjugated to the lien. T.C.A. § 67-5-2102. A tax lien

under T.C.A. § 67-5-2101 will not attach to a mobile

home because the land underlying the mobile home

“has the ultimate liability for the taxation of the mobile

home’s assessed value.” CMH Homes, Inc. v. McEachron,

No. E2004-02189-COA-R3-CV, 2005 Tenn. App.

LEXIS 627 (July 12, 2005). A redemptioner need

only pay for repairs made to preserve property in its

condition at the time of a tax sale; additional improve-

ments need not be paid for. State v. Delinquent Taxpay-

ers, No. M2004-00951-COA-R3-CV (November 2,

2006).

§ 43-807. Collectable Judgment. All delinquent per-

sonal property taxes can be immediately collected by

the county trustee, with the assistance of the delinquent

tax attorney where required, and the deputy trustees

appointed for the purpose. e delinquent lists provided

by the trustee to deputy trustees, sheriﬀs, and constables

in any county where a taxpayer or any property liable for

tax have “the force and eﬀect of a judgment and execu-

tion from a court of record” and thus provide authority

for such oﬃcers to seize and sell suﬃcient personal prop-

erty to satisfy the delinquent taxes, interest, penalties,

costs, and attorneys’ fees. T.C.A. § 67-5-2003. Leased

personal property assessed to a lessee and delinquent

cannot be distrained and sold to satisfy delinquent tax

obligations, however. Id. Prior to seizure of personal

property, the trustee or his deputy must provide ten days

notice to the taxpayer by delivering the notice in person,

leaving the notice at the taxpayer’s dwelling place, or

usual place of business, or mailing such notice to the

taxpayer’s last known address. T.C.A. § 67-5-2003. Ten

days notice must also be posted in three public places,

including the courthouse door. Id.

§ 43-808. Superiority of Tax Lien Over Security

Interests. Where a party owning a security interest in

personal property sells the personal property to satisfy

a debt, the selling party must withhold suﬃcient funds

from the proceeds of the sale to satisfy personal property

taxes assessed on the property being sold, but not col-

lected. T.C.A. § 67-5-2003(h). If the party forecloses

on personal property and sells it without withholding

such taxes owed, the selling party becomes personally

liable to the trustee or other taxing authority to which

the property taxes are due. Id.

§ 43-809. Suits for Unpaid Taxes. e attorney who

receives the list of delinquent real property taxpay-

ers must ﬁle suits to collect the delinquent taxes on

April 1, as well as interest, penalties, and costs. T.C.A.

§ 67-5-2405(a). Suit can be ﬁled in either Circuit or

Chancery Court. Id. e attorney can ﬁle a single law-

suit containing the names of all delinquent taxpayers

in a county without regard to joinder issues that might

be raised pursuant to the Tennessee Rules of Civil Pro-

cedure. T.C.A. § 67-5-2405(b). e attorney can add

additional defendants as a matter of right. Id. Courts

must by statute accord priority to suits for the collec-

tion of delinquent taxes. T.C.A. § 67-5-2405(c). e

Tennessee Attorney General has opined that courts may

not amend or alter the statutory scheme for enforcement

of tax liens through use of equitable remedies. Tenn.

Op. Att’y. Gen. No. 86-130. Any party who seeks to

challenge a tax sale on this or any other basis must ﬁrst

pay the amount bid for property and all taxes accrued

since the date of sale before ﬁling suit. Ewell v. Hill,

No. 02A01-9608-CH-00178, 1998 WL 18142 (Tenn.

Ct. App., Jan. 21, 1998). Tennessee Code Annotated

§ 67-5-2504(d) creates a three year statute of limita-

tions for all actions to invalidate any tax title to land.

A purchaser at a tax sale cannot circumvent this three

year limitations period by initiating a suit to quiet title

prior to the expiration of the three year period. Inman

v. Raymer, No. E2003-01964-COA-R3-CV, 2004 Tenn.

App. LEXIS 304 (February 26, 2004).

A purchaser at a tax sale owns the property purchased

subject to the statutory right of redemption. erefore,

the only notice that a purchaser need be provided to

satisfy his right to due process is the statutory notice

of redemption provided for in T.C.A. § 67-5-2704. A

purchaser at a tax sale who does not, upon receipt of

said notice, ﬁle a motion seeking additional compensa-

tion for “moneys expended to preserve the value of the

property or otherwise protest the redemption” has no

other remedy to recover such costs. State v. Ferger, No.

M2001-00531-COA-R3-CV, 2004 Tenn. App. LEXIS

327 (May 20, 2004). An attempt to transfer the right

to redemption must be at fair market value because

such an assignment for nominal consideration would

amount to fraud. State of Tennessee v. Delinquent Tax-

payers, 2007 Tenn. App. LEXIS 370 (Tenn. Ct. App.

June 11, 2007).

§ 43-810. Statute of Limitations. Property taxes

are uncollectible after ten years from the April 1 fol-

lowing the October date the taxes were due. T.C.A.

§ 67-5-1806. Sale of the property or purchase by a

county or municipality tolls the statute of limitations.

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Mere ﬁling suit does not toll the statute of limitations.

Tenn. Op. Atty. Gen. No. 94-122.

§ 44-100. Effective Date. This material is current

through December 31, 2010.

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