2023 Tennessee Code › Title 7 - CONSOLIDATED GOVERNMENTS AND LOCAL GOVERNMENTAL FUNCTIONS AND ENTITIES (§§ 7-1-101 — 7-91-104) › LOCAL GOVERNMENT FUNCTIONS (§§ 7-51-201 — 7-69-116) › Chapter 59 - CABLE TELEVISION (§§ 7-59-101 — 7-59-318) › Part 3 - COMPETITIVE CABLE AND VIDEO SERVICES ACT (§§ 7-59-301 — 7-59-318) › Section 7-59-306 - Franchise fee - Audits - Confidentiality of records

(a)
(1)
Except as otherwise provided in this section, a holder of a state-issued certificate of franchise authority shall be required to pay a franchise fee equal to five percent (5%) of the holder's gross revenues derived from:
(A)
The provision of cable or video service to subscribers located within the municipality or unincorporated areas of the county; and
(B)
Nonsubscribers for cable and video advertising services and as commissions for cable and video home shopping services as allocated under subsection (b).
(2)
An incumbent cable or video service provider that terminates its existing local franchise by obtaining a state-issued certificate of franchise authority shall, unless otherwise provided by ordinance or resolution duly adopted by the legislative body of a municipality or county, continue to pay the franchise fee required under the terminated local franchise until the date upon which the local franchise would have naturally expired; provided, however, that the cable or video service provider shall be required to comply with access and deployment or build-out requirements, if any, under the terms of the terminated local franchise until the date upon which the local franchise would have naturally expired.
(3)
Notwithstanding subdivision (a)(2), a municipality or county, pursuant to a duly adopted resolution, may require the holder of a state-issued certificate of franchise authority to pay the franchise fee enumerated in subdivision (a)(1). No change to the franchise fee shall be effective earlier than forty-five (45) days after the municipality or county provides the holder or the department with a copy of the resolution adopting the rate change. The adoption of such a resolution by the legislative body of a municipality or county shall relieve the provider of cable or video service from any access and deployment or build-out requirements not otherwise required by law including the provisions contained in §
7-59-304(b)(1)
.
(b)
The amount of a holder of a state-issued certificate of franchise authority's nonsubscriber revenues from cable or video home shopping services that is allocable to a municipality or unincorporated area of a county is equal to the total amount of the holder's revenue received from such advertising and home shopping services multiplied by the ratio of the number of the holder's subscribers located in the municipality or in the unincorporated area of the county to the total number of the holder's subscribers. The ratio shall be based on the number of the holder's subscriber's as of January 1 of the preceding year or more current subscriber data at the provider's option, except that in the first year in which service is provided the ratio shall be computed as of the earliest practicable date.
(c)
(1)
A franchise fee imposed pursuant to this section shall be paid to the municipality or county within forty-five (45) days after the end of the quarter to which the payment relates. The payment shall be considered complete if accompanied by a statement showing, for the quarter covered by the payment:
(A)
The aggregate amount of the holder of a state-issued certificate of franchise authority's gross revenues attributable to the municipality or unincorporated areas of the county;
(B)
The franchise fee rate for the municipality or county;
(C)
The amount of the franchise fee payment due to the municipality or county; and
(D)
A breakdown of the franchise fee by category of product or service revenues, and a designation of revenue attributable to subscribers versus nonsubscribers, and the total number of subscribers in the relevant county or municipality, but only if and to the extent that the provider's billing or accounting systems already provide a breakdown of the revenue on a location jurisdictional basis for other business or reporting purposes. At a minimum, any provider shall provide a designation of revenue attributable to subscribers versus nonsubscribers and the total number of subscribers in the relevant county or municipality.
(2)
Any supporting statements submitted pursuant to subdivision (c)(1) shall be confidential and not subject to the open records law, compiled in title 10, chapter 7.
(d)
(1)
The municipality or county may audit the business records of the holder of a state-issued certificate of franchise authority no more than once annually to the extent necessary to ensure compliance with this section. The audits may address a given period of time no more than once. The audits may not address any period less recent than three (3) years from the date the audit is commenced. The relevant business records shall be available for inspection by the employees or agents of the municipality or county at the location where the records are kept by the holder; provided, however, that insofar as practical as determined by the holder, a holder shall make the records available in the service area within which the audit relates. Any records obtained by or disclosed to a municipality or county by a holder of a state-issued certificate of franchise authority or any other cable or video service provider for the purpose of an audit or review, shall be confidential and not subject to the open records laws, compiled in title 10, chapter 7.
(2)
(A)
A municipality or county or a holder of a state-issued certificate of franchise authority may bring a complaint relating to payments of franchise fees for any quarter to the department.
(B)
A holder of a state-issued certificate of franchise authority seeking a refund of franchise fees paid with respect to any quarter may file a complaint with the department within five (5) years of the end of the quarter.
(3)
(A)
An action may be brought in a court of competent jurisdiction by either party to determine the correct amount of the franchise fee due to a municipality or county under this section. Any such action must be brought within the later of:
(i)
Six (6) months after a final determination by the department; or
(ii)
One (1) year after the complaint was filed with the department; provided, however, that no such action shall be brought more than six (6) years following the end of the quarter to which the disputed amount relates.
(B)
Any such action shall be tried by the court de novo.
(4)
Any of the time periods set forth in subdivision (d)(1) or (d)(2) may be extended by written agreement between the holder of a state-issued certificate of franchise authority and the municipality or county, and any extension of a time period in subdivision (d)(3)(A)(i) and (ii) shall automatically extend any subsequent time periods by the same amount of time.
(5)
Each party shall bear the party's own costs incurred in connection with any such audit or review or dispute, except that in the event that an audit or review of a holder's records by a county or municipality that takes place out-of-state due to the impracticality to the holder of making the records available within the state, results in a final and unappealable determination by the department that the holder underpaid the franchise fee by more than ten percent (10%) for the period audited or reviewed, then the holder shall be obligated to reimburse the travel costs incurred by the auditors or reviewers. The amount of travel costs reimbursed pursuant to this subdivision (d)(5) shall not exceed amounts that would be allowed under the comprehensive travel regulations as promulgated by the department of finance and administration and approved by the attorney general and reporter.
(e)
(1)
An action may be brought in a court of competent jurisdiction by either party appealing a final determination by the department of the amount of the franchise fee due to a municipality or county under this section; provided, however, that any such action must be brought within six (6) years following the end of the quarter to which the disputed amount relates. This time period may be extended by written agreement between the holder of a state-issued certificate of franchise authority and the municipality or county.
(2)
Except as provided in subdivision (e)(3), each party shall bear the party's own costs incurred in connection with any such audit or review, or both the audit and review, or dispute.
(3)
In the event that an audit or review of a holder's records by a county or municipality that takes place out-of-state due to the impracticality to the holder of making the records available within the state, results in a final and unappealable determination by the department that the holder underpaid the franchise fee by more than ten percent (10%) for the period audited or reviewed, then the holder shall be obligated to reimburse the travel costs incurred by the auditors or reviewers. The amount of travel costs reimbursed pursuant to this subdivision (e)(3) shall not exceed amounts that would be allowed under the comprehensive travel regulations as promulgated by the department of finance and administration and approved by the attorney general and reporter.
(f)
A municipality or county may contract with the comptroller of the treasury or a third party for the audit or review of records or for the collection of the franchise fees and enforcement of this part; provided, however, that neither the comptroller nor a third party shall be compensated on a contingency fee basis with regard to any such activities.
(g)
Notwithstanding any provision of this section to the contrary, upon a credible indication or allegation that the holder of a state issued certificate of franchise authority has engaged in accounting fraud, the comptroller of the treasury, with the concurrence of the attorney general and reporter, may conduct an audit of the business records of the holder of a state-issued certificate of franchise authority to determine compliance with this section without regard to the limitations included in subsection (d). The relevant business records shall be available for inspection by the employees or agents of the comptroller at the location where the records are kept by the holder. Any information obtained by or disclosed to the comptroller shall be considered working papers of the comptroller and, therefore, are confidential and are not subject to the open records laws compiled in title 10, chapter 7.
(h)
The cable or video service provider may designate that portion of a subscriber's bill attributable to any franchise fee imposed pursuant to this section, and recover such amount from the subscriber as a separate item on the bill.
(i)
No municipality or county may levy any additional tax or revenue enhancement measure or impose any additional fee on a cable or video service provider or its subscribers not authorized under state law, other than a franchise fee provided either under this part or under a local franchise agreement, that is intended as a form of compensation for the provider's occupancy of the public rights-of-way within a municipality or county.
(1)
Nothing in this part shall be construed to limit any authority of the municipality or county to impose any tax, fee, or assessment of general applicability. The franchise fee payments required by this part shall be in addition to any and all taxes or fees of general applicability.
(2)
A holder of a state-issued certificate of franchise authority shall not have or make any claim for any deduction or other credit of all or any part of the amount of the franchise fee payments from or against any municipal or county taxes or other fees of general applicability, except as expressly permitted by applicable law.
(3)
A holder of a state-issued certificate of franchise authority shall not apply nor seek to apply all or any part of the amount of the franchise fee payments as a deduction or other credit from or against any municipal or county taxes or fees of general applicability, except as expressly permitted by applicable law.
(4)
A holder of a state-issued certificate of franchise authority shall not apply or seek to apply all or any part of the amount of any municipal or county taxes or fees of general applicability as a deduction or other credit from or against any of its franchise fee obligations, except as expressly permitted by law.
Acts 2008, ch. 932, § 7; 2012, ch. 651, § 1.