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No Sales Tax for Amazon in SC

South Carolina lawmakers have blinked in a stare-down with Internet sales giant Amazon.com over sales taxes, a development that could reverberate in Tennessee.

The House and Senate in South Carolina have voted to give Amazon a five-year exemption from collecting sales taxes, a move that comes after the company stopped a project in South Carolina because of the tax dispute.

Amazon has said South Carolina mistakenly thought the company was bluffing about stopping its activity in the state.

Amazon has reportedly made a similar threat to shut down new sites in Tennessee, where it is building distribution centers in Chattanooga and in Charleston in nearby Bradley County. The chairmen of the House and Senate finance committees in the Tennessee General Assembly — Sen. Randy McNally, R-Oak Ridge, and Rep. Charles Sargent, R-Franklin — proposed legislation this year aimed at requiring sales tax collections on the Internet sales, but both deferred the legislation until 2012.

Amazon, based in Seattle, has begun its Tennessee hiring process for its distribution centers, including a series of hiring events across the state this week.

Advocates for allowing Amazon to forgo sales tax collections are looking at the company’s presence for its value in creating jobs, which have been scarce in the troubled economy. Reports have put an estimate of 1,400 jobs on the two facilities in East Tennessee, after an investment by Amazon of $139 million.

The Tennessee State Funding Board on April 12 approved $4 million for infrastructure and $599,500 for job training for the Amazon site in Chattanooga. The same day the board approved $2.2 million in infrastructure and $102,500 in job training for Amazon in Charleston.

The original Amazon deals in Tennessee were struck during the administration of then-Gov. Phil Bredesen, although lawmakers have had difficulty finding out details of those agreements. Gov. Bill Haslam has said the state should honor its commitment to Amazon.

At issue is whether Amazon should have to collect the state sales tax of 7 percent along with the additional 2.5 percent local option sales tax, which combined make Tennessee’s sales tax among the highest in the nation.

Amazon says it is protected under the U.S. Constitution’s commerce clause from having to collect the Tennessee sales tax because its distribution centers do not constitute substantial presence, or “nexus” in the state. The company’s position is that it does not have a retail presence in Tennessee, that its “fulfillment centers” simply distribute the goods and do not conduct sales.

Some Tennessee lawmakers believe the centers do create sufficient nexus to require collection of the taxes, as do a vast number of brick-and-mortar retailers in the state. Lawmakers have requested an opinion on the issue from Tennessee Attorney General Robert Cooper.

A compromise was struck in the South Carolina legislature that provides a five-year exemption but says Amazon must include language in confirmation emails to customers on sales that the customer may owe a state tax on the transaction. At the same time, an Internet link must be provided the customer by Amazon to the South Carolina Department of Revenue. In addition, Amazon would have to inform customers of the yearly total of tax they owe on their Amazon purchases.

Amazon officials have reportedly said they will renew their construction on their South Carolina site when the legislative action becomes law.

In its most recent annual report to stockholders (pdf), Amazon said its fulfillment centers and customer service centers could result in greater tax obligations. The report notes that Supreme Court rulings have protected Amazon from sales tax collections.

“However, a number of states, as well as the U.S. Congress, have been considering or adopted initiatives that could limit or supersede the Supreme Court’s position regarding sales and use taxes on Internet sales,” the company report said.

“If these initiatives are successful, we could be required to collect sales and use taxes in additional states or change our business practices.”

Amazon has voiced its support for federal efforts to create a streamlined sales tax system that would address Internet sales tax issues, an approach Haslam has said is a better answer than having a single state tackle the matter. But questions have been raised about the willingness in Congress to enact such a measure, because it would clearly be viewed politically as a large tax increase on consumers.

Amazon has had a similar spat with Texas, where the company has yanked an expansion operation in a disagreement over collecting taxes. Texas has said it is owed $269 million. According to Site Selection magazine, which covers economic development issues, Amazon collects taxes in several states, including Kansas, Kentucky, New York, North Dakota and Washington. It does not collect sales taxes in Arizona, Indiana, Nevada, Pennsylvania and Virginia. The company has cut off arrangements in Rhode Island, North Carolina, Hawaii and Colorado, the magazine reported.

Amazon has more than 50 fulfillment centers.

Amazon has said it hopes to bring several fulfillment centers to Tennessee, which it says could mean an additional 1,500 jobs in Nashville and Knoxville. Should the state agree to allow Amazon to avoid collection of sales taxes at its two East Tennessee sites, the precedent could factor in on future arrangements under the Haslam administration.

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Press Releases

Haslam Lauds Final Passage of ‘Tennessee Civil Justice Act of 2011’

Press Release from the Office of Tennessee Gov. Bill Haslam, May 20, 2011:

Legislation will help bring predictability and certainty to businesses in state

NASHVILLE – Tennessee Gov. Bill Haslam today applauded the state House of Representative’s final approval of his Tennessee Civil Justice Act of 2011, sending it to his desk for signature.

The legislation revises the state’s civil justice system to make Tennessee more competitive for new jobs with surrounding states by bringing predictability and certainty to businesses calculating potential litigation risk and cost.

House Majority Leader Gerald McCormick, R-Chattanooga, and Rep. Vance Dennis, R-Savannah, led the House version of the legislation, and Senate Majority Leader Mark Norris, R-Memphis, Sen. Brian Kelsey, R-Collierville, and Sen. Doug Overbey, R-Maryville, guided it in the state Senate. The bill passed out of both houses of the General Assembly with bipartisan support.

“In my first legislative session as governor, I committed to focusing on the several areas – tenure reform, charter schools, lottery scholarship use for summer classes and tort reform – that would have the most significant and immediate impact, and I appreciate the efforts of the sponsors and supporters who helped guide the Civil Justice Act through the legislature,” Haslam said.

“Tennessee has many great attributes going for it as we recruit companies interested in relocating to our state or expanding here, but the global competition for jobs continues to grow,” Haslam added. “This legislation removes one of the few advantages surrounding states had and makes our state even more desirable to businesses as we go out and sell Tennessee as the best place in the Southeast to do business.”

The Tennessee Civil Justice Act is part of Haslam’s strategic legislative package focused on education reform and improvements to Tennessee’s already attractive business climate to help make the state the No. 1 location in the Southeast for high quality jobs.

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Press Releases

Governor Files Budget Amendment

Press Release from the Office of Gov. Bill Haslam, May 16, 2011:

Reflects strategic investments with reduced spending and increased reserves

NASHVILLE – Tennessee Gov. Bill Haslam has filed an amendment with the General Assembly that adjusts next year’s budget proposal to reflect new estimates on increased state revenues. The supplemental appropriations amendment (SB2090/HB2139) includes funding that was not included in the budget the governor presented in March, which was based on earlier revenue projections.

“I am pleased that because of increased revenue collections my administration is able to make strategic investments in valuable programs to assist some of Tennessee’s most vulnerable citizens,” Haslam said. “This budget amendment improves our original proposal not only with funds for key projects and services, but we also continue to reduce spending and preserve our savings.”

“We did what Tennesseans do in their households – we evaluated our needs, we evaluated our resources, and we set priorities,” Haslam continued. “Our budget decisions reflect practical, conservative principles.”

Notable funding priorities in the governor’s budget amendment include:

  • $71.3 million for disaster relief resulting from recent storms and flooding.
  • $4.7 million for the Department of Intellectual Disabilities Services to restore residential rates.
  • $1.9 million for mental health services for residents of Northeast Tennessee through the Mountain State Health Alliance.
  • $8.5 million to restore previously scheduled rate reductions of 8.5 percent to mental health providers in TennCare.
  • $5 million for payments to the Memphis Regional Medical Center, Nashville General Hospital and Jellico Community Hospital.
  • $3.5 million additional for smoking cessation assistance in TennCare.
  • $6.9 million grant for three programs at Meherry Medical College.
  • $220,000 for first-year debt service on construction bonds for $22.6 million, 108-bed State Veterans’ Home in Clarksville.
  • $2.5 million for the Civil Rights Museum in Memphis.
  • $1 million recurring to limit the impact of the Hall Income Tax on eligible seniors 65 years and older, beginning in fiscal year 2012-2013.
  • $19.9 million additional for lottery scholarships to fund students’ ability to utilize them during summer school.
  • $5 million to the University of Memphis for operations on the Lambuth campus in Jackson.
  • $21.1 million for state building maintenance, plus $1 million for a statewide capital improvements master plan for Higher Education and state facilities.
  • $16.5 million for a potential major economic development expansion project.

“While this modest growth in revenues is encouraging, it is important to remember that Tennessee has avoided more than $800 million in cuts the past couple of years with one-time funding that is no longer available,” said Haslam. “This budget includes $160 million in non-recurring dollars that won’t be available next year, so we will continue to balance the needs of our citizens with the ‘new normal’ of less revenue with which to fund our priorities.”

The budget amendment assumes a reimbursement of approximately $82 million in Medicaid funding errors, which the federal government says is owed to the state. Several healthcare-related investments are contingent on receiving those funds, as well as higher education investments:

  • $15.7 million for nursing home funding.
  • $7.9 million for TennCare enrollee services (lab and x-ray, dental, transportation).
  • $3.4 million additional for Home Health Provider Services.
  • $15.9 million in additional funding for capital outlay expenditures in Higher Education.

The General Assembly is expected to consider the budget this week.

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Press Releases

Haslam Hires Charter School Leader to Manage TN’s Failing Schools

Press Release from the Tennessee Department of Education May 10, 2011:

Tennessee Hires First Superintendent for Achievement School District

NASHVILLE, TN— The Tennessee Department of Education announced Chris Barbic, founder and chief executive officer of YES Prep Public Schools in Houston, Texas, as Superintendent of Tennessee’s Achievement School District (ASD). Barbic will lead the state’s groundbreaking efforts to turn around the State’s lowest performing schools in order to ensure that all Tennessee students have the chance to receive a high quality public education that will prepare them to be college and career-ready.

“Tennessee is at the forefront of education reform in the country, and I’m thrilled Chris will join us as we continue to build on the momentum we have,” Tennessee Gov. Bill Haslam said. “Chris brings a track record of success to this position, and I look forward to working with him as we work to improve the classroom experience for every child in every classroom.”

“I’ve been deeply inspired by Chris Barbic’s work with YES Prep Public Schools in Houston. Chris knows how to create a culture of success for at-risk students and provide them with the tools and resources they need to graduate from high school prepared for college and career,” said U.S. Secretary of Education Arne Duncan. “He’ll be a valuable asset to Tennessee as they continue the courageous work of turning around their lowest performing schools.”

Barbic created YES Prep Public Schools in 1998, a network of high-performing 6th-12th grade public charter schools that exist to increase the number of low-income students who graduate from college prepared to compete in the global marketplace and committed to improving disadvantaged communities. The system serves 4,200 students in across eight schools in the Houston, Texas area. To date, YES Prep has graduated 11 classes of seniors, 100% of whom have earned acceptance to a four-year college or university. As a result, YES Prep is currently on track to tripling the number of low-income college graduates in Houston. YES Prep’s multiple campuses have consistently been recognized among the best in the nation and ranked among the top 100 public high schools in the nation by Newsweek and US News and World Report. More information about YES Prep Public Schools is available online.

Barbic has spent the past 19 years as a teacher, school leader and leader of YES Prep Public Schools in Houston. Barbic graduated from Vanderbilt University with a bachelor’s degree in English and Human Development. Upon graduation, he joined Teach For America and taught middle school for six years in the Houston Independent School District. In 1995, Barbic was named the Houston ISD’s Outstanding Young Educator, an award given to the district’s most promising educator under the age of 29. Barbic has also been recognized as the youngest-ever recipient of Vanderbilt University’s Distinguished Alumnus Award. Last year, during an appearance on The Oprah Winfrey Show, he was awarded $1 million towards expanding YES Prep’s efforts in Houston by Oprah’s Angel Network.

“What Chris has achieved at YES Prep is remarkable. He and his team have built a network of schools that assumes all kids should go to college and delivers results that surpass expectations,” said Education Commissioner Kevin Huffman. “With Chris, the standard is excellence and I am excited to welcome his mindset and experiences to the Achievement School District.”

“I have spent my 19-year career in public education proving a simple hypothesis that all students, regardless of race or socio-economics, can achieve at high academic levels when given access to the same opportunities and resources that students receive in great private and suburban public schools,” said Chris Barbic. “I could not be more excited to return to Tennessee to invest the lessons I have learned in the well-being of the children in this great state as part of Governor Haslam and Commissioner Huffman’s team.”

In his role as ASD superintendent, Barbic will implement turnaround efforts at the state’s lowest performing schools, oversee efforts that create the conditions under which teachers and students can succeed, and work toward sustainable progress.

The Department of Education proposes to begin by taking in and co-managing five schools under the Achievement School District in 2011-2012 with expansion in the following years. The schools have been identified based on a definition including the U.S. Department of Education’s Persistently Lowest Achieving status, the state accountability status and a statewide lowest five percent designation. Going forward, the Department will work with each district, schools and communities to identify the best option to support continuous improvement in at-risk schools.

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Press Releases

Haslam Outlines ‘Innovation’ Strategy for Economic Development

Press Release from Gov. Bill Haslam, May 5, 2011:

NASHVILLE – Tennessee Gov. Bill Haslam today announced a $50 million initiative designed to support innovation across the state. The goal of the program, called INCITE for its focus on innovation, commercialization, investment, technology and entrepreneurship, is to raise Tennessee’s profile in innovation-based economic development and drive growth in the creation of knowledge-based jobs. INCITE is a component of Haslam’s recently announced Jobs4TN strategy and will be managed by the Tennessee Department of Economic and Community Development (ECD).

“In a global economy, a focus on innovation along with raising our achievements in education is the best approach to moving our state’s economy forward,” Haslam said. “Tennessee has remarkable assets in research and development. We need to do a better job of leveraging these assets and growing innovative new companies to reach our goal of becoming the No. 1 location in the Southeast for high quality jobs.”

Haslam outlined four areas of focus for the INCITE initiative:

Innovation Coordination– Haslam’s Jobs4TN strategy created nine distinct economic development regions across the state. ECD will work with each of the nine regions to develop a strategic plan for economic development, each containing a strategy for developing innovation using the region’s unique assets. The Tennessee Technology Development Corporation (TTDC) will play a key role in assisting with the development of these plans and will partner with ECD to hold an annual Governor’s Conference on Innovation to share best practices.

Commercialization– ECD will launch a series of initiatives designed to help move new products and technologies from the research lab to the marketplace faster. In March 2011, Haslam announced $10 million in funding for the Memphis Research Consortium to enhance commercialization partnerships as a first step in this process. ECD will work with TTDC to identify other opportunities to enhance technology commercialization activities across the state.

Entrepreneurship – ECD will fund a new or existing business incubator in each of the state’s nine economic development regions. To receive funding, business incubators will commit to meeting critical benchmarks, such as raising specific amounts of private sector capital for its tenant companies. ECD will also create a statewide incubator network to share best practices and support efforts to raise private capital. As part of this effort, a Governor’s Award for Entrepreneurship will be created and awarded each year at the Governor’s Conference on Innovation.

Co-Investment Funds– Tennessee will target $30 million toward the creation of early stage, seed, and mezzanine capital co-investment funds. These funds will be designed to be self-sustaining and to compliment Tennessee’s existing TNInvestco and Pathway Lending programs. ECD is currently in discussions with the U.S. Treasury Department to provide funding for these programs through the State Small Business Credit Initiative. ECD expects the co-investment fund to be operational by fall 2011.

The remainder of the investment is made up of a combination of state and federal funds.

“We feel INCITE is the best approach for the state in leveraging the energy and capital of the private sector to grow innovative companies in Tennessee,” ECD Commissioner Bill Hagerty said. “Tennessee has a great entrepreneurial spirit and great innovation assets, we simply need to enhance the environment for those ideas to take root, grow and create new jobs.”

About the Tennessee Department of Economic and Community Development

The Tennessee Department of Economic and Community Development’s mission is to develop strategies which help make Tennessee the No. 1 location in the Southeast for high quality jobs.The department seeks to attract new corporate investment in Tennessee and works with Tennessee companies to facilitate expansion and economic growth. To find out more, go to www.tn.gov/ecd or www.investtennessee.org.

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Press Releases

Haslam Requests Presidential Disaster Declaration

Press Release from Gov. Bill. Haslam,  April 30, 2011:

NASHVILLE – Tennessee Gov. Bill Haslam has asked President Obama to declare four Tennessee Counties as federal disaster areas following the severe storms, flash flooding and tornadoes that struck the state beginning on April 25, 2011.

Should this initial request for assistance be granted Bradley, Greene, Hamilton and Washington counties would have access to varying levels of federal assistance programs.

As local officials and responding agencies complete damage assessments, other counties are expected be added to the April 25 declaration request.

“Our thoughts and prayers are with those who have lost loved ones in this emergency, and I commend the first responders who have spent many days engaged in search and rescue operations to save lives,” Haslam said. “I am confident the federal government will expedite our major disaster request so we can get to the work of helping people rebuild their lives as quickly as possible.”

As a result of the severe weather, Tennessee suffered 34 fatalities and more than 500 homes were destroyed or sustained major damage. At the height of the emergency, up to 18 shelters provided essential needs for 233 people.

In the request, Haslam seeks Public Assistance for debris removal and emergency protective actions and Individual Assistance, including the Individuals and Households Program (IHP), Disaster Unemployment Assistance, Crisis Counseling, Disaster Food Stamp Program, American Bar Association Young Lawyers Legal Aid, and Small Businesses Administration disaster loans. The request also seeks assistance through the Statewide Mitigation Grant Program.

The Department of Military/Tennessee Emergency Management Agency, Department of Agriculture, Department of Environment & Conservation, Department of Health (EMS), Department of Human Services, Department of Transportation, Department of Safety, Tennessee Wildlife Resources Agency, Civil Air Patrol and American Red Cross responded and provided emergency protective services to supplement local efforts.

Additional information about state and federal assistance for affected counties will be released as details become available.

For more updates regarding the state’s response, visit the TEMA website at www.tnema.org.

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Business and Economy Education News

Senate Version of Ban on Teacher Collective Bargaining Advances

As expected, Senate Republicans had no trouble approving the latest version of a bill to ban collective bargaining among Tennessee teachers.

The Senate Education Committee voted 6-3 Wednesday to adopt fresh wording requiring school boards to create a policy manual outlining how they’ll determine issues like teachers’ salaries and benefits in an attempt to alleviate concerns about cutting out teacher input.

“This will basically assure statutorily that the door cannot be closed on these teachers and they’ll have the ability to provide that input,” said Sen. Jack Johnson who is spearheading the push to eliminate unions’ ability to negotiate teachers’ working contracts.

The newest incarnation of the bill requires school boards to seek public comment on the policy manuals, which will outline the process for deciding labor issues, including pay rates, benefits, student discipline procedures, working conditions and leaves of absence.

The state Board of Education, Department of Education and Department of Human Resources will all have a hand in developing a sample manual local school systems can adopt.

Democrats remain unsatisfied with the bill, despite the new language. Sen. Andy Berke said the new bill swaps out voices of teachers for input from Nashville “bureaucrats.”

“It would be hard to imagine, but I actually think I like this version of the bill worse than I liked the first one, and believe me I did not think that was possible,” said the Chattanooga lawmaker.

Teachers feel betrayed, according to Tennessee Education Association Lobbyist Jerry Winters, who said the new bill creates “some illusion of input” from teachers.

“We view that no one really is a winner here. Certainly I don’t think school boards are a winner. I know that teachers are not a winner and frankly students are not winners here because what you are doing with this process is taking the biggest advocate for students who are their teachers and actually diminishing, significantly diminishing, their role in policy,” he told the committee.

Berke and the TEA both admit they can’t stop Senate Republicans from voting to ban collective bargaining. But House GOP members have been more skeptical of a repeal and have yet to take up the amendment. The House Finance Ways and Means Committee is set to hear the bill May 3.

The House version allows teachers unions to negotiate scaled-back labor contracts, a concession backed by Speaker Beth Harwell and Gov. Bill Haslam and designed to attract broader support from lawmakers hesitant to delete collective bargaining from state code. Harwell hinted earlier this month that she likes the Senate’s amendment.

Haslam said Wednesday he still hasn’t taken a position on the Senate’s amendment but plans to meet with legislative leaders Thursday to discuss it.

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Press Releases

TN Tax Deadline Extended

Press Release from the Tennessee Department of Revenue, April 13, 2011:

Taxpayers Filing Franchise and Excise Tax Returns, Gift Tax Returns, and Hall Income Tax Returns Have Until April 18, 2011 to File

Nashville – Taxpayers who normally file their franchise and excise taxes by April 15th, as well as those filing their individual income taxes and gift taxes by April 15th, have a few extra days to file this year, due to recently passed legislation.

House Bill 1992 / Senate Bill 1520, passed in the legislature April 11, 2011 and signed by Gov. Bill Haslam on April 13, officially extends the due date for franchise and excise tax returns, Hall income tax returns and gift tax returns to match the federal due date. For 2011, this date is April 18. Returns normally due on April 15th that are postmarked on or before April 18, 2011 will be considered timely filed.

Taxpayers should note that franchise and excise tax estimated payments are still due on April 15.

The official due date for filing individual federal tax forms with the Internal Revenue Service is April 18 instead of April 15 due to observance of Emancipation Day in Washington, DC. This legislative change in Tennessee allows taxpayers to effectively have the same due dates for their state tax returns as they have for their federal 1040 series return.

“This legislative action makes good sense for taxpayers in Tennessee,” said Revenue Commissioner Richard H. Roberts. “Allowing our state’s citizens the same extended due date available to them at the federal level will help eliminate confusion on part of our taxpayers and ensure they are given credit for filing timely.”

The Department of Revenue is responsible for the administration of state tax laws and motor vehicle title and registration laws established by the legislature and the collection of taxes and fees associated with those laws. The Department of Revenue collects approximately 91 percent of total state tax revenue. During the 2009-2010 fiscal year, the department collected $10.1 billion in state taxes and fees. In addition to collecting state taxes, the Department of Revenue collects taxes for local, county and municipal governments. During the 2009-2010 fiscal year, local government collections by the Department of Revenue exceeded $1.9 billion. In collecting taxes, the department enforces the revenue laws fairly and impartially in an effort to encourage voluntary taxpayer compliance. The department also apportions revenue collections for distribution to the various state funds and local units of government. To learn more about the department, log on to www.TN.gov/revenue.

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TN Medical Assn: Haslam’s Tort Reform Would Aid Physicians, Help Economy

Press Release from the Tennessee Medical Association, March 23, 2011:

Tort Reform Needed To Boost Physician Impact On TN Economy

A new national survey shows office-based physicians play a vital role in Tennessee’s economy, contributing $17.5 billion in economic activity and supporting over 75,000 jobs in 2009 alone. The TMA said tort reforms proposed by Gov. Bill Haslam would be the shot in the arm needed to further boost their economic impact in the Volunteer State.

“This survey by the American Medical Association shows that Tennessee’s physician offices are big contributors to our state’s economic engine,” said TMA President B W. Ruffner, MD. “If we are going to keep the doctors we have and attract new ones, we must pass these additional reforms to help reduce the threat of lawsuits and improve our overall business climate. The health of our citizens and our economy depend on it.”

Results of the AMA 2011 Economic Impact Study of Office-Based Physicians, conducted by The Lewin Group, were released nationally on Wednesday, March 23. The study found that, compared to other industries, office-based physicians almost always contribute more to state economies than the hospital, legal, nursing home and home health segments. Tennessee figures showed the benefits of creating a positive practice environment for physicians:

Jobs: Office-based physicians support 75,191 jobs in Tennessee; on average each individual physician supported 5.9 jobs, including his own

Output: Office-based physicians contribute $17.5 billion in economic output or sales revenue, representing 7.2 percent of the total GDP in Tennessee

Wages & Benefits: Office-based physicians in Tennessee generate $10.7 billion in wages and benefits

Taxes: Office-based physicians generate $542.7 million in state and local tax revenue for Tennessee communities

Charity Care: Office-based physicians also give back to their communities, providing an estimated $24.4 billion in charity care nationwide in 2008 alone.

“There are some heavy-hitters fighting these reforms, but Tennesseans and especially lawmakers must not lose sight of the common-sense benefits in Gov. Haslam’s proposal. This will help strengthen the practices of office-based physicians who are caring for you and your family members and, at the same time, supporting local economies in a powerful way,” said Dr. Ruffner.