I say “property law,” you think “intellectual property law.” But, what about that other area of property law — regarding real estate?
While publications everywhere give intellectual property law the limelight, commercial real estate property law is a well-established practice area.
But, the mishandling of property law issues in Tennessee causes countless confrontations between municipalities and developers, developers and residents, residents and landlords, landlords and tenants, tenants and property owners, property owners and prospective purchasers, prospective purchasers and municipalities.
Anyone who has driven through or around Nashville lately would easily recognize the number of cranes in the Nashville skyline as an indication of the significant commercial real estate activity our town is undergoing. (Check out the latest activity on NBJ's Crane Watch.) But, whether you are considering a commercial deal in Tennessee, as a new occupant or perhaps as a developer, there are a couple of Tennessee issues to consider before engaging in any commercial real estate project.
Franchise and Excise Taxes
As defined by the Tennessee Department of Revenue, “if you are a corporation, limited partnership, limited liability company, or business trust chartered/organized in Tennessee or doing business in this state, then you must register for pay franchise and excise taxes.”
The franchise tax is a 0.25 percent annual tax on the value of your assets. In other words, if you own a piece of commercial property worth a million dollars then you’re going to pay $25,000 a year in franchise tax.
The excise tax is a 6.5 percent income tax. I have heard it said that Tennessee doesn’t have an income tax, but that is not exactly true. We do have an income tax, it just happens not to be a personal income tax, but rather a tax on limited liability entities.
Planning and Zoning
Planning and zoning administrators at Metro are working very hard to keep up with Nashville’s fast growth pace, but navigating zoning issues can be challenging. There are a number of avenues to accomplish your commercial development goals, whatever they may be, but talking to a zoning expert should be your first step.
For example, a project on property less than five acres in size requires the property to be subdivided, which is a process, but not necessarily an obstacle. Also, we have largely been fortunate to avoid impact fees and exactions, but the infrastructure costs are burdensome and Metro has shifted many of these costs to the developers of property.
Nashville and Tennessee remain open to development, and while there are inevitably bumps in the road, the climate for collaborative development with respect to commercial real estate is a good one. But, careful planning and understanding applicable laws is the first step.
Republished with permission. This article first appeared in the Nashville Business Journal on September 16, 2015.