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HB 397

Taxes, Sales - As introduced, authorizes an entity designated to operate a stadium designed to host games of an intercollegiate football team that competes in the NCAA Division I Football Championship Subdivision (FCS) to receive a special allocation of state and local sales tax revenue derived from the sale of admission to events occurring within the stadium and from all sales of food, drinks, merchandise, and parking sold on the premises of the stadium to fund capital and operation expenses for the stadium. - Amends TCA Title 67, Chapter 6.

114th Regular Session (2025-2026) Introduced by Greg Vital

reallocates stadium sales tax revenue to fund capital and operating costs for the stadium, with potential municipal payments, lasting until debt is retired or 2056.

Transmitted to Governor for his action.
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Bill Summary · HB 397

Summary of HB 397 (Session 114) – Tennessee

Note: This bill, as amended, reallocates certain state and local sales tax revenues from a designated stadium to fund stadium capital projects and operations, with potential municipal payments in limited circumstances.

1) Purpose and Intent

  • The bill authorizes an entity that governs a specific stadium to receive a dedicated allocation of state and local sales tax revenue derived from activities at the stadium (admissions, on-premises sales of food, drinks, merchandise, parking, and related services) beginning July 1, 2026.
  • The purpose of the allocation is to fund debt service for capital projects and ongoing operating expenses for the stadium.
  • The provision is structured as a reallocation from existing state and local tax distributions to the stadium entity, subject to certain conditions and timelines.

2) Key Provisions and Changes

  • New allocation (d)(1)(A)(ix)(a):

    • In a specified county (population between 366,200 and 366,300 per the 2020 census or later), an entity designated to operate the stadium would, beginning July 1, 2026, receive an amount of state and local sales tax revenue—specifically the revenue from:
    • Admission sales to events at the stadium
    • All sales of food, drinks, merchandise, and parking sold on the premises or on-adjacent ancillary facilities (including a pavilion)
    • The funds are limited to the on-site revenue and are allocated exclusively to the stadium entity to fund capital projects (including debt service) and stadium operating expenses.
    • The allocation would continue until debt service is retired or July 1, 2056, whichever occurs sooner.
    • The portion of local sales taxes that would otherwise be allocated to schools is excluded from this reallocation.

  • Municipality payments (d)(1)(A)(ix)(b):

    • If a portion of the revenue reallocation would have previously been allocated to a municipality under the TDZ Act (Convention Center and Tourism Development Financing Act of 1998) before July 1, 2026, the affected municipality can negotiate annual payments from the stadium entity.
    • These payments shall be substantially equal to what would have been allocated to the municipality under the TDZ act but for the new stadium allocation.
    • The agreement must expire on June 30, 2032.

  • Agreement submission (d)(1)(A)(ix)(c):

    • In order to receive the allocation, the stadium entity must provide the Department of Revenue a copy of the agreement with the municipality.

  • Effective date:

    • The act takes effect upon becoming law.

  • Additional context included in fiscal notes:

    • The fiscal memorandum indicates initial projected recurring revenue reductions to the General Fund and local governments due to the reallocation, with specific dollar estimates depending on year and existing tax rates. For example, the amended version shows:
    • State General Fund impact: around an $84,300 reduction annually (FY26-27 through FY55-56)
    • Local government impact: around $17,200 annually (same period)
    • The analysis notes the requirement for reimbursement by the stadium entity to cover state costs associated with the reallocation and acknowledges the Department of Revenue’s budgeting authority constraints.

3) Affected Parties

  • Primary beneficiary: The designated stadium entity that governs Finley Stadium (or another qualifying stadium) would receive the reallocated sales tax revenue to fund capital projects and operations.
  • Municipalities within the TDZ framework:
    • If applicable, municipalities that would have received TDZ allocations prior to July 1, 2026 may receive negotiated annual payments from the stadium entity, per the agreement under the bill.
  • State and local governments:
    • The reallocation reduces, on a recurring basis, revenue available to the General Fund and to local governments (to the extent that such revenues were previously allocated there).

4) Procedural and Timeline Considerations

  • Commencement: July 1, 2026 for the new allocation to begin, provided all statutory requirements are met (including debt service and reimbursement of reallocation costs).
  • Termination: The allocation continues until debt service is retired or July 1, 2056, whichever occurs first.
  • Agreement requirement: Stadium must share any TDZ-related municipal agreement with the Department of Revenue as part of the eligibility process.
  • Legislative status:
    • The bill includes amendments and is linked to Senate Bill 211 / House Bill 397.
    • It has an explicit fiscal note outlining potential state and local revenue impacts and administrative considerations.

5) Summary Assessment

  • The bill creates a targeted, time-limited reallocation of specific stadium-related sales tax revenue to fund capital and ongoing stadium costs.
  • It introduces a potential municipal revenue-sharing arrangement if pre-existing TDZ allocations would have benefited a municipality.
  • It imposes an obligation on the stadium entity to reimburse state costs associated with the reallocation.
  • The fiscal impact is modest on an annual basis but represents a shift in long-term revenue streams from state/local budgets to a stadium entity, with a sunset tied to debt retirement or 2056.

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

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