When a company expands and remodels its existing Tennessee headquarters, what counts toward the minimum investment threshold for the sales/use tax credit, when does the investment period start and end, and do aesthetic-only renovations like paint and carpet qualify?

Plain-English summary

The Taxpayer's Tennessee corporate headquarters is undergoing a major expansion and remodel, with total investment exceeding a substantial dollar threshold and a forecast of 100+ new full-time headquarters jobs paying at least 150% of the state's average occupational wage. It filed a business plan and application for qualified headquarters facility status under Tenn. Code Ann. § 67-6-224, which offers a credit for nearly all state sales/use tax paid on "qualified tangible personal property" purchased during the project. The Department answered seven detailed mechanical questions:

1-2. What counts, and how is the credit used. Purchases/leases of tangible personal property and construction expenditures (building materials, installation labor, furniture, computer hardware/software, equipment) all count toward the "minimum investment," as long as made during the investment period. Once earned (with proper documentation under § 67-6-224(d)), the credit can offset Tennessee sales/use tax paid on qualifying property at any of the Taxpayer's Tennessee locations — not just the headquarters site itself.

3. When does the investment period start? The statutory "investment period" runs from one year before construction/expansion/remodeling starts to one year after substantial completion (capped at 6 years total). The Department ruled that "construction, expansion, or remodeling" includes design, architectural, and engineering services — so the clock can start running as soon as the company engages an architect or engineer, even before a shovel hits the ground.

4. When is "substantial completion"? Generally marked by issuance of a certificate of occupancy (or temporary certificate of occupancy) from the local building authority. If part of the facility's build-out is delayed, the investment period extends to cover it — but never beyond the hard 6-year statutory limit.

5-6. Do cosmetic-only changes count? Yes on both fronts: aesthetic renovations (not just structural changes) count toward the minimum investment, and a building is considered "remodeled" even through purely cosmetic improvements like new paint, carpet, partitions, and lighting — the statute's language (referencing "building materials," "fixtures," etc.) doesn't require structural alteration.

7. Multiple buildings, one location. All of the Taxpayer's facilities within the same Tennessee county that operate as part of the same enterprise are treated as a single location for credit purposes — a headquarters facility can span multiple connected or separate buildings in the same county/metro area.

What this means for you

Companies planning a headquarters expansion or remodel in Tennessee

Start tracking investment-period costs as soon as you engage design/architectural/engineering services — that's when the clock can start, well before construction itself begins. And don't write off purely cosmetic work (paint, carpet, lighting) as ineligible; it counts toward the minimum investment just like structural changes.

Companies with headquarters spanning multiple buildings in one county

Multiple buildings operating as a single enterprise are aggregated as one location for the headquarters credit — useful for campus-style headquarters that split functions across several structures.

Accountants and tax professionals

This is a comprehensive mechanics ruling for § 67-6-224 that complements the more fact-specific data-center applications in LR 11-06/11-07/11-08 — read together, this cluster of 2011 rulings maps out nearly every operational question (minimum investment composition, investment-period timing, multi-building aggregation, credit utilization scope) that a company expanding a Tennessee headquarters or data center is likely to face under the related credit programs.

Common questions

Q: Does the headquarters facility investment period only start once physical construction begins?
A: No — it can start as early as when the company engages architectural or engineering services for the project, since "construction, expansion, or remodeling" includes design work.

Q: Do purely cosmetic renovations like new paint and carpet count toward the minimum investment requirement?
A: Yes — aesthetic-only changes count, not just structural alterations.

Q: Can the headquarters sales/use tax credit be used to offset tax on purchases at company locations OTHER than the headquarters building itself?
A: Yes, once earned, the credit can offset Tennessee sales/use tax paid on qualifying tangible personal property purchased by, or used at, any of the company's Tennessee locations.

Q: Can another company planning a headquarters project rely on this letter ruling?
A: No. A Tennessee letter ruling binds the Department only as to the specific taxpayer and facts it was issued to. This summary is informational only, not legal or tax advice.

Citations and references

Tennessee statutes (Tenn. Code Ann.):

• § 67-6-224(a) (Supp. 2010) (qualified headquarters facility sales/use tax credit)
• § 67-6-224(b)(1) (definition of "facility"); § 67-6-224(b)(3) (definition of "headquarters facility"); § 67-6-224(b)(4) (definition of "headquarters related functions and services"); § 67-6-224(b)(5) (definition of "headquarters staff employees")
• § 67-6-224(b)(6) (definition of "investment period," six-year cap)
• § 67-6-224(b)(7)(A)-(B) (definition of "minimum investment")
• § 67-6-224(b)(8) (definition of "new full-time employee job")
• § 67-6-224(b)(9) (definition of "qualified headquarters facility")
• § 67-6-224(b)(11) (definition of "qualified tangible personal property")
• § 67-6-224(d) (application/documentation requirements)
• § 67-4-2004 (referenced, average occupational wage)
• § 67-6-101 et seq. (Retailers' Sales Tax Act)

Rule and case law:

• Tenn. Comp. R. & Regs. 0780-02-03-.10(1), (3) (2005) (certificate of occupancy requirement)
• Tenn. Comp. R. & Regs. 0780-02-03-.01 (2008) (definition of "remodeling")
• Worrall v. Kroger Co., 545 S.W.2d 736 (Tenn. 1977) (statutory construction -- legislative intent)
• National Gas Distributors, Inc. v. State, 804 S.W.2d 66 (Tenn. 1991) (natural and ordinary meaning of statutory language)
• Tennessee Farmers Assur. v. Chumley, 197 S.W.3d 767, 782-83 (Tenn. 2006); Beare Co. v. Tennessee Dept. of Revenue, 858 S.W.2d 906, 908 (Tenn. 1993) (common usage of undefined statutory terms)

Source

• Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
• Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/sales/11-16.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
LETTER RULING # 11-16
Letter Rulings are binding on the Department only with respect to the
individual taxpayer being addressed in the ruling. This presentation of the
ruling in a redacted form is informational only. Rulings are made in response
to particular facts presented and are not intended necessarily as statements of
Department policy.

SUBJECT
The application of the headquarters credit under TENN. CODE ANN. § 67-6-224(a) (Supp. 2010)
for purposes of the Tennessee sales and use tax.
SCOPE
This letter ruling is an interpretation and application of the tax law as it relates to a specific set of
existing facts furnished to the Department by the taxpayer. The rulings herein are binding upon
the Department, and are applicable only to the individual taxpayer being addressed.
This letter ruling may be revoked or modified by the Commissioner at any time. Such revocation
or modification shall be effective retroactively unless the following conditions are met, in which
case the revocation shall be prospective only:
(A) The taxpayer must not have misstated or omitted material facts involved in
the transaction;
(B) Facts that develop later must not be materially different from the facts upon
which the ruling was based;
(C) The applicable law must not have been changed or amended;
(D) The ruling must have been issued originally with respect to a prospective or
proposed transaction; and
(E) The taxpayer directly involved must have acted in good faith in relying upon
the ruling; and a retroactive revocation of the ruling must inure to the taxpayer’s
detriment.
FACTS
[TAXPAYER] is headquartered and bases its [REDACTED] operations in Tennessee, which is
located in [COUNTY]. [REDACTED]. At its Tennessee headquarters, the Taxpayer conducts
[DESCRIPTION OF ACTIVITIES].
In [YEAR], the Taxpayer began increasing its Tennessee presence through an expansion and
remodeling of its corporate headquarters facility (the “Headquarters”). [REDACTED].

As part of this expansion, the Taxpayer filed a business plan and an application to be approved as
a headquarters facility.1 The Taxpayer’s business plan was approved by the Department on
[DATE], and provides for an investment period of [DATE] through [DATE].
The Taxpayer’s total investment has exceeded [DOLLAR AMOUNT] with respect to the
expansion and remodeling of its corporate headquarters facility. The Taxpayer forecasts that in
[YEAR], it will have met the requirement for 100 additional new, full-time headquarters jobs
that meet or exceed 150% of Tennessee’s average occupational wage. The jobs added in
connection with the qualified headquarters facility are full-time jobs in administration, research
and development, sales, information technology, and other corporate areas. [REDACTED].
Purchases for the expansion and construction include, but are not limited to, costs of building
materials and installation labor. The furniture to be purchased for the Headquarters expansion
includes, but is not limited to, [EXAMPLES]. Planned computer hardware and software
purchases include, but are not limited to, [EXAMPLES]. The equipment to be purchased
includes, but is not limited to, [EXAMPLES].
QUESTIONS

1. Will the Taxpayer’s purchase or lease of tangible personal property and construction
   expenditures described herein qualify to be included as part of the required capital
   investment for a qualified headquarters facility as defined under TENN. CODE ANN. § 67-6224(b) (Supp. 2010), provided that the materials or equipment are purchased or leased during
   the investment period?
2. Is the Taxpayer entitled to the Tennessee sales and use tax credit set forth under TENN. CODE
   ANN. § 67-6-224(a) (Supp. 2010), equal to all state sales and use tax paid by the Taxpayer or
   its contractor on qualified tangible personal property, except tax at the rate of 0.5% on
   qualified tangible personal property? May this credit be used to offset liability for Tennessee
   sales and use taxes paid by the Taxpayer on tangible personal property purchased by, or used
   at, any Taxpayer location in Tennessee?
3. For purposes of determining the investment period defined in TENN. CODE ANN. § 67-6224(b)(6) (Supp. 2010), does “construction, expansion, or remodeling” include design work?
   Is the beginning of the investment period evidenced by the engagement of architectural or
   engineering services?
4. For purposes of determining the investment period defined in TENN. CODE ANN. § 67-6224(b)(6) (Supp. 2010), will “substantial completion” be evidenced by a certificate of
   occupancy? Will any delayed build-out of any portion of any building that is part of the
   Headquarters facility extend the investment period, provided that such extended investment
   period is not more than the maximum period provided by law?

1

Tenn. Code Ann. § 67-6-224(d) provides that a “taxpayer seeking this credit shall first submit to the commissioner
of revenue an application to qualify as a headquarters facility, together with a plan describing the investment to be
made, and, if applicable, documentation verifying employment and wage information.”

2

5. Will the Taxpayer’s investment in aesthetic renovations, furniture, computer hardware, and
telecommunications systems count toward satisfaction of the “minimum investment”
requirement in TENN. CODE ANN. § 67-6-224(b)(7) (Supp. 2010)?

6. Will a building be considered “remodeled” for purposes of the headquarters credit under
   TENN. CODE ANN. § 67-6-224(a) (Supp. 2010) if it is altered either structurally or
   aesthetically, i.e., through the addition of paint, carpet, partitions, lighting, and similar
   improvements?
7. Will all Taxpayer facilities located in [COUNTY], Tennessee, which operate as part of the
   same enterprise, be considered a single location for purposes of the qualified headquarters
   credit under TENN. CODE ANN. § 67-6-224(a) (Supp. 2010)?
   RULINGS
8. The Taxpayer’s purchase or lease of tangible personal property and the construction
   expenditures described herein are properly included as part of the minimum investment for a
   qualified headquarters facility as defined under TENN. CODE ANN. § 67-6-224(b)(7) (Supp.
   2010), provided that the purchases, leases, and expenditures are made during the investment
   period.
9. Provided that the Taxpayer submits the documentation required under TENN. CODE ANN.
   § 67-6-224(d) (Supp. 2010), the Taxpayer will be entitled to claim the Tennessee sales and
   use tax credit set forth under TENN. CODE ANN. § 67-6-224(a). Once earned, this credit may
   be used to offset Tennessee sales and use taxes paid by the Taxpayer with respect to tangible
   personal property purchased by, or used at, any Taxpayer location in Tennessee.
10. For purposes of determining the investment period defined in TENN. CODE ANN. § 67-6224(b)(6) (Supp. 2010), the term “construction, expansion, or remodeling” will include
    design, architectural, and/or engineering services. The beginning of the investment period
    may be evidenced by the engagement of such services.
11. For purposes of determining the investment period defined in TENN. CODE ANN. § 67-6224(b)(6) (Supp. 2010), “substantial completion” of the Headquarters facility will generally
    be evidenced by the issuance to the Taxpayer of a certificate of occupancy or a temporary
    certificate of occupancy. The delayed completion of a build-out of a portion of the facility
    will extend the investment period, but not beyond the six-year limitation imposed by TENN.
    CODE ANN. § 67-6-224(b)(6).
12. Yes. The Taxpayer’s investment in aesthetic renovations, furniture, computer hardware, and
    telecommunications systems will count toward satisfaction of the “minimum investment”
    requirement in TENN. CODE ANN. § 67-6-224(b)(7) (Supp. 2010).
13. Yes. A building will be considered “remodeled” for purposes of the headquarters credit under
    TENN. CODE ANN. § 67-6-224(a) (Supp. 2010) if it is altered either structurally or
    aesthetically, i.e., through the addition of paint, carpet, partitions, lighting, and similar
    improvements.

3

7. All of the Taxpayer’s facilities located in [COUNTY], Tennessee that operate as part of the
same enterprise will be considered a single location for purposes of the qualified
headquarters credit under Tenn. Code Ann. § 67-6-224(a) (Supp. 2010).
ANALYSIS
Under the Retailers’ Sales Tax Act, TENN. CODE ANN. § 67-6-101 et seq., the retail sale of
tangible personal property in Tennessee is generally subject to the Tennessee sales and use tax.
However, a credit is available against a taxpayer’s sales and use tax liability for state sales or use
taxes paid to the state of Tennessee. Specifically, TENN. CODE ANN. § 67-6-224(a) (Supp. 2010)
provides that a taxpayer “who establishes a qualified headquarters facility in this state shall be
eligible for a credit of all state sales or use taxes paid to the state of Tennessee, except tax at the
rate of one-half percent (0.5%), on the sales or use of qualified tangible personal property.”
TENN. CODE ANN. § 67-6-224(b)(11) defines “qualified tangible personal property” as “building
materials, machinery, equipment, furniture and fixtures used exclusively in the qualified
headquarters facility and purchased or leased during the investment period and computer
software used primarily in the qualified headquarters facility and purchased or leased during the
investment period.”2
TENN. CODE ANN. § 67-6-224(b)(9) defines the term “qualified headquarters facility” as “a
headquarters facility where the taxpayer has made the minimum investment during the
investment period.”3 “Headquarters facility” is in turn defined under TENN. CODE ANN. § 67-6224(b)(3) as “a facility4 in this state that houses the international, national, or regional
headquarters of a taxpayer, where headquarters staff employees5 are located and employed, and

2

“Qualified tangible personal property” does not include supplies or repair parts. TENN. CODE ANN. § 67-6224(b)(11). “Qualified tangible personal property” does not include any payments with respect to leases of
qualifying tangible personal property that extend beyond the investment period. Id. “Qualified tangible personal
property” does not include any materials, machinery, equipment, furniture, or fixtures that replace tangible personal
property that previously generated a credit under TENN. CODE ANN. § 67-6-224(a). Id.
3

TENN. CODE ANN. § 67-6-224(b)(6) defines “investment period” to mean that “the investment must be made during
the period beginning one (1) year prior to the start of the construction, expansion, or remodeling and ending one (1)
year after substantial completion of the construction, expansion, or remodeling of the facility.” However, in no
event shall the investment period exceed six years. Id.
4

TENN. CODE ANN. § 67-6-224(b)(1) defines the term “facility” as “a building or buildings, either newly
constructed, expanded, or remodeled, housing headquarters staff employees and located in a county or metropolitan
statistical area in this state.” TENN. CODE ANN. § 67-6-224(b)(1) further provides that a facility “may include
parking facilities exclusively for the use of headquarters staff employees and visitors; provided that the parking
facilities are built in conjunction with the newly constructed, expanded, or remodeled building or buildings. An
expansion of a headquarters facility may be connected to or separate from a headquarters facility or other facilities
located in a county or metropolitan statistical area in this state. The facility must be utilized as a headquarters
facility for a period of at least ten (10) years beginning from the date of substantial completion.”

5

The term “headquarters staff employees” means “executive, administrative, or professional workers performing
headquarters-related functions and services.” TENN. CODE ANN. § 67-6-224(b)(5).

4

where the primary headquarters related functions and services6 are performed.”
TENN. CODE ANN. § 67-6-224(b)(7)(A) provides that the term “minimum investment” means:
(i)
A minimum investment by the taxpayer and lessor to the taxpayer of fifty million
dollars ($50,000,000) or more in a building or buildings, either newly constructed,
expanded, or remodeled; or
(ii)
A minimum investment by the taxpayer and the lessor to the taxpayer of ten
million dollars ($10,000,000) in a building or buildings, either newly constructed,
expanded, or remodeled, along with the creation of not fewer than one hundred (100) net
new full-time employee jobs7 created during the investment period, that pay at least one
hundred fifty percent (150%) of the state’s average occupational wage, as defined in
§ 67-4-2004, for the month of January of the year in which the full-time employee jobs
are created.
The minimum investment “may include, but is not limited to, the purchase price of an existing
building and the cost of building materials, labor, equipment, furniture, fixtures, computer
software, parking facilities and landscaping, but shall not include land or inventory.” TENN.
CODE ANN. § 67-6-224(b)(7)(B).
1.

Minimum investment

The Taxpayer’s purchase or lease of tangible personal property and the construction expenditures
described herein are properly included as part of the minimum investment for a qualified
headquarters facility as defined under TENN. CODE ANN. § 67-6-224(b)(7) (Supp. 2010),
provided that the purchases, lease payments, and expenditures are made during the investment
period.
TENN. CODE ANN. § 67-6-224(b)(7)(A) provides that the taxpayer’s “minimum investment” must
be made in “a building or buildings, either newly constructed, expanded, or remodeled.” The
minimum investment “may include, but is not limited to, the purchase price of an existing
building and the cost of building materials, labor, equipment, furniture, fixtures, computer
software, parking facilities and landscaping, but shall not include land or inventory.” TENN.
CODE ANN. § 67-6-224(b)(7)(B).

6

“Headquarters related functions and services” means “those functions involving administrative, planning, research
and development, marketing, personnel, legal, computer or telecommunications services performed by headquarters
staff employees on an international, national, or regional basis.” TENN. CODE ANN. § 67-6-224(b)(4). “Headquarters
related functions and services” does not include functions involving manufacturing, processing, warehousing,
distribution, wholesaling, or operating a call center. Id.

7

TENN. CODE ANN. § 67-6-224(b)(8) defines “new full-time employee job” to mean “full-time headquarters staff
employee jobs that are new to the state of Tennessee and, for at least ninety (90) days prior to being filled by the
taxpayer, did not exist in Tennessee as a job position of the taxpayer or of another business entity.” The new fulltime employee jobs must be created and filled within the investment period. Id. An employee in a new full-time
employee job may be employed at a temporary location in this state, pending completion of construction or
renovation work at the qualified headquarters facility. Id.

5

The Taxpayer has stated that the Headquarters expansion includes additions to [EXAMPLES].
Purchases for the expansion and construction include, but are not limited to, costs of building
materials and installation labor. [REDACTED].
All such items are properly characterized as furniture, fixtures, equipment, computer software,
labor, and/or building supplies. All such items are located or installed in the Headquarters
facility. Labor services are rendered at the Headquarters facility.
According, the Taxpayer’s purchase or lease of tangible personal property or computer software
and the construction expenditures described herein are properly included as part of the minimum
investment for a qualified headquarters facility as defined under TENN. CODE ANN. § 67-6224(b)(7), provided that the purchases, leases, and expenditures are made during the investment
period.
2.

Utilization of the credit

Provided that the Taxpayer submits the documentation required under TENN. CODE ANN. § 67-6224(d) (Supp. 2010), the Taxpayer will be entitled to claim the Tennessee sales and use tax credit
set forth under TENN. CODE ANN. § 67-6-224(a). Once earned, this credit may be used to offset
Tennessee sales and use taxes paid by the Taxpayer with respect to tangible personal property
purchased by, or used at, any Taxpayer location in Tennessee.
TENN. CODE ANN. § 67-6-224(a) provides that a taxpayer “who establishes a qualified
headquarters facility in this state shall be eligible for a credit of all state sales or use taxes paid to
the state of Tennessee, except tax at the rate of one-half percent (0.5%), on the sales or use of
qualified tangible personal property.” TENN. CODE ANN. § 67-6-224(b)(11) defines “qualified
tangible personal property” as “building materials, machinery, equipment, furniture and fixtures
used exclusively in the qualified headquarters facility and purchased or leased during the
investment period and computer software used primarily in the qualified headquarters facility
and purchased or leased during the investment period.” (Emphasis added.)
Thus, the Taxpayer may claim the credit described under TENN. CODE ANN. § 67-6-224(a) with
respect to sales and use taxes paid on sales of qualified tangible personal property purchased or
leased during the investment period.
TENN. CODE ANN. § 67-6-224(d)(3) sets forth the requirements for receiving the credit: in order
to receive the credit, the taxpayer “must submit a claim for credit, along with documentation as
required by the commissioner showing that Tennessee sales or use taxes have been paid to the
state on qualified tangible personal property.” The taxpayer’s claim for credit of sales or use
taxes paid to Tennessee may include such taxes paid by the taxpayer, lessor, in the case of a
leased facility, contractors, and subcontractors on sales or use of qualified tangible personal
property. Id..
Once earned, the credit may be used to offset Tennessee sales and use taxes paid by the Taxpayer
with respect to tangible personal property purchased by, or used at, any Taxpayer location in
Tennessee.

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3.

The investment period and design, architectural, and engineering services

For purposes of determining the investment period defined in TENN. CODE ANN. § 67-6224(b)(6) (Supp. 2010), the term “construction, expansion, or remodeling” will include design,
architectural, and/or engineering services. The beginning of the investment period may be
evidenced by the engagement of such services.
TENN. CODE ANN. § 67-6-224(b)(6) defines “investment period” to mean that “the investment
must be made during the period beginning one (1) year prior to the start of the construction,
expansion, or remodeling and ending one (1) year after substantial completion of the
construction, expansion, or remodeling of the facility.”
The statute does not define the term “construction, expansion, or remodeling.” However, it is
difficult to conceive of how a taxpayer could undertake a construction, expansion, or remodeling
project without engaging design, architectural, and/or engineering services. Therefore, for
purposes of determining the investment period defined in TENN. CODE ANN. § 67-6-224(b)(6)
(Supp. 2009), the construction, expansion, or remodeling of the headquarters facility will include
design, architectural, and/or engineering services. Additionally, the beginning of the investment
period may be evidenced by the engagement of such services.
4.

Substantial completion

For purposes of determining the investment period defined in TENN. CODE ANN. § 67-6224(b)(6) (Supp. 2010), “substantial completion” of the Headquarters facility will generally be
evidenced by the issuance to the Taxpayer of a certificate of occupancy or a temporary certificate
of occupancy. The delayed completion of a build-out of a portion of the facility will extend the
investment period, but not beyond the six-year limitation imposed by TENN. CODE ANN. § 67-6224(b)(6).
The headquarters credit under TENN. CODE ANN. § 67-6-224(a) is available with respect to
qualified tangible personal property, which is defined in pertinent part as tangible personal
property “purchased or leased during the investment period.” TENN. CODE ANN. § 67-6224(b)(11). Thus, to claim the credit, the Taxpayer’s purchases must be made during the
investment period. TENN. CODE ANN. § 67-6-224(b)(6) defines “investment period” to mean that
“the investment must be made during the period beginning one (1) year prior to the start of the
construction, expansion, or remodeling and ending one (1) year after substantial completion of
the construction, expansion, or remodeling of the facility.” (Emphasis added.) However, in no
event shall the investment period exceed six years. Id.
The issuance of a certificate of occupancy, or a temporary certificate of occupancy, by a local
government authority will generally indicate that the building in question is substantially
completed. A certificate of occupancy is a document issued by a local government agency or
building department certifying a building’s compliance with applicable building codes and other
laws, and indicating it to be in a condition suitable for occupancy. See TENN. COMP. R. & REGS.
0780-02-03-.10(1) (2005) (requiring a certificate of occupancy before a new building may be
occupied). In Tennessee, a temporary certificate of occupancy may be issued for the completed
portion of a facility even though another portion still requires completion. TENN. COMP. R. &
REGS. 0780-02-03-.10(3).

7

If the build-out of any portion of a headquarters facility is incomplete, the investment period will
be extended until such build-out is completed, but in no case will the six-year limitation imposed
by TENN. CODE ANN. § 67-6-224(b)(6) be extended. In other words, the headquarters buildings
and the qualified headquarters facility are not considered to be “substantially completed” until
the remaining build-out portion of a headquarters building is substantially completed.
Thus, for purposes of determining the investment period defined in TENN. CODE ANN. § 67-6224(b)(6), “substantial completion” of the Headquarters facility will generally be evidenced by
the issuance to the Taxpayer of a certificate of occupancy or a temporary certificate of
occupancy. However, the delayed completion of a build-out of a portion the Headquarters
facility will extend the investment period, but not beyond the six-year limitation imposed by
TENN. CODE ANN. § 67-6-224(b)(6).
5.

Aesthetic renovations

The Taxpayer’s investment in aesthetic renovations will count toward satisfaction of the
“minimum investment” requirement in TENN. CODE ANN. § 67-6-224(b)(7) (Supp. 2010).8
The Taxpayer’s expenditures related to aesthetic renovations of the Headquarters facility will be
included in the minimum investment as well. TENN. CODE ANN. § 67-6-224(b)(7)(A) provides
that the taxpayer’s “minimum investment” must be made in “a building or buildings, either
newly constructed, expanded, or remodeled.” (Emphasis added.) The minimum investment “may
include, but is not limited to, the purchase price of an existing building and the cost of building
materials, labor, equipment, furniture, fixtures, computer software, parking facilities and
landscaping, but shall not include land or inventory.” TENN. CODE ANN. § 67-6-224(b)(7)(B).
The statute does not define the term “remodeled.” The most basic rule of statutory construction is
to ascertain and give effect to the intention and purpose of the legislature. Worrall v. Kroger Co.,
545 S.W.2d 736 (Tenn. 1977). Legislative intent or purpose is to be ascertained primarily from
the natural and ordinary meaning of the language used, without forced or subtle construction that
would limit or extend the meaning of the language. National Gas Distributors, Inc. v. State, 804
S.W.2d 66 (Tenn. 1991). The Tennessee Supreme Court has stated that when a statute does not
define a term, it is proper to look to common usage to determine the term’s meaning. See, e.g.,
Tennessee Farmers Assur. v. Chumley, 197 S.W.3d 767, 782-83 (Tenn. 2006); Beare Co. v.
Tennessee Dept. of Revenue, 858 S.W.2d 906, 908 (Tenn. 1993).
The term “remodeling” is generally understood to refer to changes to an existing structure,
including aesthetic changes. See, e.g., TENN. COMP. R. & REGS. 0780-02-03-.01 (2008) (referring
to “remodeling” as an activity that takes place in an existing building). Common sense dictates
that a remodeling project may involve structural changes. Additionally, the language of TENN.
CODE ANN. § 67-6-224(b)(7)(B) indicates that such changes may be aesthetic. This subdivision
states that the minimum investment may include the “purchase price of an existing building” as
well as the cost of building materials, labor, fixtures, and landscaping. Each of these items may
be used to alter the aesthetic appearance of a facility.

8

In Question #5, the Taxpayer also inquired regarding the inclusion in its minimum investment of expenditures
related to the acquisition of furniture, computer hardware, and telecommunications systems. The inclusion of these
items was addressed in the response to Question #1.

8

The Taxpayer’s investment in aesthetic renovations therefore will count toward satisfaction of
the “minimum investment” requirement in TENN. CODE ANN. § 67-6-224(b)(7).
6.

Remodeling

A building will be considered “remodeled” for purposes of the headquarters credit under TENN.
CODE ANN. § 67-6-224(a) (Supp. 2009) if it is altered either structurally or aesthetically, i.e.,
through the addition of paint, carpet, partitions, lighting, and similar improvements.
As discussed in the response to Question #5, the Taxpayer’s expenditures related to aesthetic
renovations of the Headquarters facility will be included in the minimum investment as well.
TENN. CODE ANN. § 67-6-224(b)(7)(A) provides that the taxpayer’s “minimum investment” must
be made in “a building or buildings, either newly constructed, expanded, or remodeled.”
(Emphasis added.) The minimum investment “may include, but is not limited to, the purchase
price of an existing building and the cost of building materials, labor, equipment, furniture,
fixtures, computer software, parking facilities and landscaping, but shall not include land or
inventory.” TENN. CODE ANN. § 67-6-224(b)(7)(B).
Paint, carpet, partitions, lighting, and similar improvements are properly characterized as
building materials, furniture, and fixtures. As such, a Headquarters building in which such items
are placed, installed, or otherwise used as an improvement will be considered to have been
“remodeled” for purposes of TENN. CODE ANN. § 67-6-224.
7.

Buildings located in [COUNTY], Tennessee

All of the Taxpayer’s facilities located in [COUNTY], Tennessee that operate as part of the same
enterprise will be considered a single location for purposes of the qualified headquarters credit
under TENN. CODE ANN. § 67-6-224(a) (Supp. 2010).
TENN. CODE ANN. § 67-6-224(b)(9) defines the term “qualified headquarters facility” as “a
headquarters facility where the taxpayer has made the minimum investment during the
investment period.” “Headquarters facility” is in turn defined under TENN. CODE ANN. § 67-6224(b)(3) as “a facility in this state that houses the international, national, or regional
headquarters of a taxpayer, where headquarters staff employees are located and employed, and
where the primary headquarters related functions and services are performed.”
TENN. CODE ANN. § 67-6-224(b)(1) defines the term “facility” as “a building or buildings, either
newly constructed, expanded, or remodeled, housing headquarters staff employees and located in
a county or metropolitan statistical area in this state.”9 (Emphasis added.) An expansion of a
headquarters facility may be connected to or separate from a headquarters facility or other
facilities located in a county or metropolitan statistical area in Tennessee. Id.
Thus, a headquarters facility may include multiple buildings, provided that all such buildings are
used to house the international, national, or regional headquarters of the taxpayer.
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TENN. CODE ANN. § 67-6-224(b)(1) further provides that a facility “may include parking facilities exclusively for
the use of headquarters staff employees and visitors; provided that the parking facilities are built in conjunction with
the newly constructed, expanded, or remodeled building or buildings.

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Here, the Taxpayer’s Headquarters buildings are located in [COUNTY], Tennessee. All such
buildings that house the Taxpayer’s headquarters operations will therefore be considered part of
the Headquarters facility for purposes of TENN. CODE ANN. § 67-6-224.

Kristin Husat
Senior Tax Counsel

APPROVED:

Richard H. Roberts
Commissioner of Revenue

DATE:

June 6, 2011

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