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SB 327

Taxes, Ad Valorem - As introduced, revises the definition of "residential property" for purposes of classification and assessment of property taxes to include property that can be sold and purchased as a single unit fee simple title, regardless of whether it is vacant, owner-occupied, rented, or detached or attached. - Amends TCA Title 67, Chapter 5.

114th Regular Session (2025-2026) Introduced by Becky Massey

Redefines residential property to include single-unit fee simple dwellings (vacant or rented, attached or detached), shifting some from 40% to 25% tax assessment and lowering local

Assigned to General Subcommittee of Senate State & Local Government Committee
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Bill Summary · SB 327

Summary of SB 327 (Session 114) – Tennessee

Purpose and Intent

SB 327 amends Tennessee property tax classification by redefining what qualifies as “residential property.” The bill aims to treat certain properties currently taxed as commercial or other classifications as residential, for the purposes of property tax assessment and classification.

Key Provisions

  • Amends Tenn. Code Ann. § 67-5-501(11).
  • Redefinition of “Residential property” to include real property that:
    • is used or held for dwelling purposes,
    • can be sold and purchased as a single unit fee simple title,
    • may be vacant, owner-occupied, rented, or detached or attached,
    • contains not more than one rental unit.
  • The new definition applies regardless of whether the property is vacant or occupied, and regardless of whether it is detached or attached, as long as it is a single-unit title and used for dwelling purposes.

Affected Parties and Properties

  • Properties currently classified as commercial (including certain rental condominiums, townhomes, and other dwellings) that can be sold as a single unit title could be reclassified as residential.
  • This would shift these properties from a 40% assessment rate (commercial) to a 25% assessment rate (residential) under Tennessee’s property tax framework (per § 67-5-801(a)).

Fiscal and Revenue Implications

  • Expected Local Revenue Impact: A net reduction in local property tax revenue.
  • Fiscal Note estimates (using 2024 data for 86 IMPACT counties that use the state assessment system):
    • Current commercial taxes for 40,401 single-unit rental properties: $83,576,743
    • Estimated residential taxes after reclassification: $52,235,464
    • Projected decrease in revenue in IMPACT counties: $31,341,279
  • Broader statewide impact is estimated to reduce total local revenue by more than $72,886,695 in FY26-27 and subsequent years (factoring non-IMPACT counties as well).
  • The change would take effect for tax years beginning on or after the law’s enactment (first impacted tax year: 2026; fiscal year 2026-27).

Procedural and Timeline Aspects

  • Effective date: Upon becoming law (public welfare requiring it).
  • First affected tax year: 2026, with 2026 property tax notices and 2027 payments following.
  • Administrative impact: The Fiscal Note assumes counties can absorb any increased workload with existing staff; no significant new local expenditures anticipated.

Bottom Line

SB 327 redefines “residential property” to include single-unit fee simple properties used for dwelling purposes, even if vacant or rented, and regardless of being detached or attached. This reclassification from commercial to residential would lower assessed values subject to taxation for those properties, reducing local government revenue starting in the 2026 tax year.

Compiled from official sources — confirm details with the bill’s official record.

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