QSBS in Tennessee: No State Income Tax, Nashville Health-Tech Exclusion Analysis, and What Tennessee Founders Need to Know
Tennessee has no state income tax — there is no Tennessee capital gains tax, no Tennessee alternative minimum tax, and no state mechanism to tax the gain from a QSBS sale. For a Tennessee resident who sells qualifying stock with federal §1202 treatment, the combined federal and state tax on excluded gain is $0. That makes Tennessee one of the simplest state-tax environments for QSBS planning: the entire analysis is federal. But that simplicity obscures three real planning challenges specific to Tennessee founders. First, Nashville is the self-described "healthcare capital of America," home to more than 900 healthcare companies — and §1202(e)(3)(A) excludes "health" businesses from QSBS eligibility. The line between qualifying healthcare technology companies and excluded clinical service businesses is one of the most litigated §1202 questions and directly relevant to Tennessee's dominant startup sector. Second, the federal 28% rate trap under OBBBA's tiered exclusion schedule applies to Tennessee founders regardless of state residency. Third, founders relocating from California to Tennessee face the same FTB domicile audit dynamics that apply to moves to Nevada, Texas, and Florida. This guide covers all three.
Tennessee's no-income-tax status and what it means for QSBS
Tennessee imposes no personal income tax on wages, capital gains, or ordinary income. The state's last income tax — the Hall Income Tax, which applied only to dividends and interest from investments — was phased out over several years and fully repealed for tax years beginning January 1, 2021.1 Capital gains, including gains from selling QSBS stock, were never subject to the Hall Tax and have been untaxed at the Tennessee state level throughout the modern era. Tennessee has no capital gains tax, no alternative minimum tax, and no investment income surtax at the state level.
For a QSBS holder domiciled in Tennessee, the tax analysis on a qualifying §1202 sale is entirely federal:
- Federal §1202 excluded gain: 0% federal tax (no LTCG, no NIIT) on gain up to the greater of $15M or 10× adjusted basis for post-OBBBA stock held 5+ years; up to the greater of $10M or 10× basis for pre-OBBBA stock.
- Tennessee state tax on excluded gain: $0 — no state income tax.
- Tennessee state tax on non-excluded gain (above the cap or below the holding threshold): $0 — even gain that does not receive §1202 treatment is untaxed at the Tennessee state level.
This is meaningfully different from conforming income-tax states like Colorado (4.4% flat rate saves founders up to $660K in state tax on a $15M qualifying exit) or Connecticut (6.99% rate saves up to $1,048,500). In Tennessee, there is no state tax on any portion of the gain regardless of whether §1202 applies. The practical consequence is that Tennessee founders do not need §1202 to avoid state tax — there is no state tax to avoid. The §1202 exclusion matters exclusively because of the federal tax it eliminates: federal LTCG plus NIIT (20% + 3.8% = 23.8% at the top rate) on a $15M gain would total approximately $3.57 million without the exclusion. Every dollar of the §1202 benefit sits at the federal level for Tennessee residents.
Tennessee also imposes no local income tax on individuals. Nashville, Memphis, Chattanooga, Knoxville, and every other Tennessee municipality do not levy personal income taxes on individuals. A founder selling QSBS from a Nashville healthcare IT company, a Chattanooga advanced manufacturing startup, or a Memphis logistics technology company has one tax obligation on the gain: federal. For the OBBBA §1202 changes in detail — the tiered exclusion schedule, the 28% rate trap on the non-excluded portion of partially excluded gain, and the pre/post-OBBBA comparison — see the OBBBA QSBS guide.
OBBBA and how its §1202 changes apply to Tennessee founders
For Tennessee-resident founders holding stock issued after July 4, 2025 (post-OBBBA), the §1202 changes create a tiered structure that is purely a federal computation:
| Holding period (post-OBBBA stock) | Federal §1202 exclusion % | Exclusion cap | Non-excluded gain: federal rate | Tennessee state tax |
|---|---|---|---|---|
| Under 3 years | 0% | N/A | LTCG rate (0/15/20%) | $0 |
| 3 years | 50% | $15M (or 10× basis) | 28% maximum rate on non-excluded portion | $0 |
| 4 years | 75% | $15M (or 10× basis) | 28% maximum rate on non-excluded portion | $0 |
| 5+ years | 100% | $15M (or 10× basis) | $0 (fully excluded) | $0 |
Pre-OBBBA stock (issued on or before July 4, 2025) follows the original §1202 structure: 100% exclusion requires a full 5-year hold, the cap is the greater of $10M or 10× adjusted basis, and the $50M gross assets threshold applied at issuance. No partial exclusion at 3 or 4 years for pre-OBBBA stock.
The 28% rate trap is federal, not Tennessee-specific. Under §1(h)(4)(A)(i), gain that is partially excluded under §1202 — i.e., 50% excluded at the 3-year OBBBA tier means 50% is not excluded — is subject to a 28% maximum capital gains rate on the non-excluded portion. For a Tennessee founder at the 4-year OBBBA tier (75% exclusion, 25% taxable), the 25% non-excluded gain is taxed at 28% federal plus NIIT at 3.8%, for a combined federal rate of approximately 31.8% on the taxable slice. Tennessee adds nothing to that figure, but the federal cost of selling one year early on a $15M exit exceeds $1.18 million. The planning implication is the same regardless of state: reach the 5-year mark on post-OBBBA stock before closing any transaction. See the OBBBA guide for the full rate-trap mechanics.
Tennessee QSBS worked examples
Example 1: Nashville healthcare IT founder, post-OBBBA QSBS, $15M exit, 5-year hold, $50K adjusted basis
| Total sale proceeds | $15,000,000 |
| Adjusted basis | $50,000 |
| Total gain | $14,950,000 |
| §1202 exclusion — 100%, 5-yr hold; 10× basis = $500K < $15M flat cap; full gain excluded | $14,950,000 |
| Federal capital gains tax | $0 |
| Federal NIIT (excluded §1202 gain is not net investment income) | $0 |
| Tennessee state tax | $0 |
| Total tax on $15M exit | $0 |
Without §1202 on the same $15M exit: federal LTCG at 20% + NIIT at 3.8% on ~$14.95M ≈ $3,558,100. Tennessee state: $0 regardless. The §1202 exclusion eliminates $3.56M in federal tax; Tennessee's lack of income tax means there is no state component. Use the QSBS exclusion calculator to model different basis and cap positions.
Example 2: Post-OBBBA QSBS, $15M exit, 4-year hold — the 28% rate trap
| Total gain | $14,950,000 |
| §1202 exclusion at 75% (4-year OBBBA tier, $15M cap) | $11,212,500 |
| Non-excluded gain (25% of total gain) | $3,737,500 |
| Federal tax at 28% maximum rate — §1(h)(4)(A)(i) applies to partially excluded §1202 gain | $1,046,500 |
| Federal NIIT at 3.8% on non-excluded gain | $142,025 |
| Tennessee state tax | $0 |
| Total tax at 4-year hold | $1,188,525 |
Waiting one year to the 5-year mark saves approximately $1.19M in federal tax. Tennessee's $0 state tax means no state component adds to this cost, but the federal 28% rate trap is a dominant planning constraint regardless of state residency. The entire cost of selling one year early is federal.
Example 3: Pre-OBBBA QSBS, $10M exit, 5-year hold, $80K adjusted basis
| Total gain | $9,920,000 |
| §1202 exclusion — 100%, 5-yr hold; 10× basis = $800K < $10M flat cap; full gain excluded | $9,920,000 |
| Federal capital gains tax | $0 |
| Federal NIIT | $0 |
| Tennessee state tax | $0 |
| Total tax on $10M exit | $0 |
Without §1202: federal LTCG + NIIT ≈ $2,360,960. Tennessee state: $0. The pre-OBBBA rules — $10M cap, all-or-nothing 5-year hold, $50M gross assets at issuance — apply to stock issued on or before July 4, 2025.
Example 4: Post-OBBBA QSBS, $30M exit above the $15M cap, 5-year hold
| Total gain | $29,950,000 |
| §1202 exclusion — 100%, 5-yr hold, OBBBA $15M flat cap (10× basis at $200K = $2M < $15M) | $15,000,000 |
| Taxable gain (above the $15M cap) | $14,950,000 |
| Federal LTCG at 20% | $2,990,000 |
| Federal NIIT at 3.8% on taxable gain | $568,100 |
| Tennessee state tax on taxable gain | $0 |
| Total tax on $30M exit | $3,558,100 |
Without §1202 on $29.95M gain: federal LTCG + NIIT ≈ $7,128,100. Tennessee state: $0. The §1202 exclusion saves approximately $3.57M in federal tax on the first $15M, and Tennessee adds nothing. For exits significantly above the cap, gifting shares before a transaction to use additional exclusions per donee is the primary planning lever — each donee has a separate $15M cap. See the gifting and stacking guide.
Nashville healthcare IT and the §1202(e)(3)(A) excluded-industry analysis
Nashville is home to more than 900 healthcare companies, HCA Healthcare (one of the world's largest for-profit hospital systems), HealthStream, Ardent Health, Envision Healthcare, and a dense ecosystem of healthcare IT startups spanning revenue cycle management, clinical analytics, value-based care platforms, digital therapeutics, and healthcare SaaS. This makes Nashville's startup sector simultaneously one of the most vibrant in the South — and one of the most exposed to the §1202(e)(3)(A) excluded-industry analysis.
IRC §1202(e)(3)(A) excludes any business in "the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, or brokerage services" from the definition of a qualified trade or business. The health exclusion does not contain a definition of what "health" means, which has produced a substantial body of IRS guidance, private letter rulings, and professional commentary drawing the line between qualifying healthcare technology companies and excluded clinical service businesses.
The general principle: what does the company primarily do?
The §1202(e)(3)(A) health exclusion targets businesses whose principal activity is providing health services — clinical care, medical procedures, diagnosis, therapy, counseling, and similar direct patient-care activities where the company's product is the healthcare itself. It does not categorically exclude every business that operates within the healthcare industry. The IRS, in PLR 201436001 and related guidance, has indicated that the exclusion turns on the nature of the company's business activities, not merely the sector it serves.
- Likely excluded: Companies whose principal business is delivering clinical services — physician group practices, hospital management companies, telehealth platforms where the company employs licensed clinicians and the product is clinical consultation, home health agencies, mental health therapy practices, and similar businesses whose revenue derives from providing healthcare services directly to patients. These are businesses in the "field of health."
- Likely qualified: Companies that develop and sell technology products or software platforms used by healthcare organizations as B2B customers. Examples include: electronic health record (EHR) software licensed to hospitals, revenue cycle management platforms sold as SaaS subscriptions, clinical analytics and data products licensed to health systems, population health management software, prior authorization automation tools, healthcare IT integration middleware, medical billing software, hospital supply chain platforms, and clinical trial management systems. These companies' revenue comes from software licenses, subscriptions, API usage, or implementation fees — not from delivering clinical care. Their primary business is developing and selling technology, not providing health services, and they generally fall outside the §1202(e)(3)(A) health exclusion.
- Gray area requiring legal analysis: Telehealth platforms that both provide the technology infrastructure and directly employ or contract with licensed clinicians to deliver care (where the company earns revenue from patient visits rather than software licenses), digital therapeutics companies with FDA-cleared prescription devices that function as medical treatment (the "product" is arguably a health service delivered via software), AI diagnostic tools where the company renders the clinical interpretation and bills per read, and companies straddling software and direct care delivery models. These require fact-specific §1202(e)(3)(A) legal analysis addressing the company's primary revenue source, whether it holds health licenses, and whether its principal activity is technology or clinical services. See the excluded industries guide.
Music and entertainment technology in Nashville
Nashville's music industry has produced a secondary tech sector: music rights management platforms, streaming analytics tools, digital distribution infrastructure, music licensing marketplaces, fan engagement SaaS, ticketing technology, and live event operations platforms. These companies are generally not subject to the §1202(e)(3)(A) performing arts exclusion. The performing arts exclusion targets businesses whose principal activity is the performance of performing arts — artists, entertainment companies whose product is the artistic performance itself. A SaaS company that sells music rights management software to record labels, a data analytics platform that provides streaming metrics to artists and labels, or a ticketing technology company are businesses in the technology or software industry that happen to serve the music sector. Their product is software or data, not performing arts. The §1202(e)(3)(A) "performing arts" exclusion does not reach technology companies that service the entertainment industry as customers.
Knoxville defense and national security technology
Oak Ridge National Laboratory — one of the largest U.S. science and energy laboratories — anchors a defense technology and national security research ecosystem in east Tennessee. Companies in cybersecurity, advanced materials, nuclear technology, AI for defense applications, and quantum computing spinouts from ORNL represent a distinct and generally qualifying category of §1202 businesses. The key excluded-industry trap for defense-adjacent companies is the §1202(e)(3)(A) consulting exclusion — pure defense advisory and management consulting firms whose principal asset is personnel expertise rather than a technology product are excluded. ORNL spinouts commercializing a licensed technology or IP are typically on the qualifying side; government advisory firms providing subject matter experts to agencies are more exposed to the consulting exclusion. See the qualification requirements guide.
Tennessee manufacturing and the automotive technology sector
Tennessee hosts one of the largest automotive manufacturing footprints in the United States: Volkswagen's Chattanooga assembly plant (producing ID.4 and Atlas models), Nissan's Smyrna assembly plant and Decherd powertrain facility, GM's Spring Hill manufacturing complex, and Ford's BlueOval City in Stanton — a $5.6B EV megasite that began production operations in 2025 and 2026. This manufacturing base has produced a growing ecosystem of automotive technology startups and EV supply chain companies.
Manufacturing businesses — battery cell producers, EV component manufacturers, advanced materials companies, powertrain electronics, and automotive hardware — are paradigmatically within the qualified trade or business definition under §1202. The excluded-industry traps under §1202(e)(3) generally do not apply to manufacturers. The more common limiting factor for Tennessee manufacturing startups is the gross assets test: the $75M threshold for post-OBBBA stock (or $50M for pre-OBBBA stock) is measured at the time of original issuance. Capital-intensive manufacturing companies that raised significant venture or growth equity before a liquidity event may find that the gross assets test was exceeded at a prior funding round, disqualifying the shares issued in that round or earlier from §1202 treatment. See the qualification requirements guide for the gross assets test mechanics and the original issuance rule.
Automotive technology software companies — fleet management platforms, V2X connectivity software, autonomous vehicle simulation tools, EV charging network management SaaS — are generally qualifying businesses for §1202 purposes. Their primary business is developing and selling technology products; automotive manufacturers are customers rather than the company's business model itself.
The CA-to-TN domicile consideration
Tennessee's no-income-tax status has attracted founders and high-income individuals from California, which taxes capital gains at up to 13.3% and does not conform to §1202. On a $15M qualifying QSBS exit, the state tax difference between California and Tennessee domicile is approximately $1.995 million. That gap creates a recurring question in founder tax planning — and a recurring audit target for the California Franchise Tax Board.
California's residency rules under R&TC §17014 center on domicile — a qualitative legal determination, not an arithmetic day-count. The FTB's closest-connections test evaluates where the center of a taxpayer's life actually sits: primary residence, spouse and family, voter registration, professional and financial relationships, and daily activities. A founder who establishes a Nashville address but maintains a primary California home, California-based family, California physicians, and California financial advisors will fail a residency audit. A genuine Tennessee domicile requires severing California ties across most of these categories — purchasing or leasing primary housing in Tennessee, selling or converting the California home, transferring voter registration and driver's license, and physically relocating the center of life to Tennessee.
The FTB has escalated residency audit activity and has dedicated teams focused on founders with large liquidity events on the horizon. The CA-to-TN domicile audit risk is identical to the CA-to-NV, CA-to-TX, and CA-to-FL risk. The mechanics of a genuine domicile change and the FTB's closest-connections test are covered in detail in the California QSBS guide. For Tennessee-specific guidance, consult both a Tennessee tax attorney and an FTB residency audit specialist before the transaction closes.
Tennessee versus peer states: QSBS comparison
| Feature | Tennessee | California | Texas | Florida | Nevada | Oregon |
|---|---|---|---|---|---|---|
| §1202 exclusion at state level? | N/A — no state income tax | No — repealed 2013 | N/A — no state income tax | N/A — no state income tax | N/A — no state income tax | No — SB 1507 decoupled (Apr 2026) |
| State tax on QSBS-excluded gain? | $0 (no state income tax) | Full rate — up to 13.3% | $0 (no state income tax) | $0 (no state income tax) | $0 (no state income tax) | Up to ~13.9% (incl. Portland surcharges) |
| State tax on non-QSBS LTCG? | $0 (no state income tax) | Up to 13.3% | $0 | $0 | $0 | Up to ~13.9% (Portland) |
| Hall Tax / dividend-income tax? | Repealed — effective Jan 1, 2021 | N/A | N/A | N/A | N/A | N/A |
| CA transplant FTB domicile audit risk? | Yes — same FTB domicile analysis applies | N/A | Yes — same FTB risk applies | Yes — same FTB risk applies | Yes — highest audit activity | N/A |
| Primary §1202(e)(3) excluded-industry trap | §1202(e)(3)(A) health exclusion — Nashville healthcare IT gray area | Same federal traps | Healthcare/oil & gas traps | Healthcare/fintech traps | Gaming/hospitality (§1202(e)(3)(E)) | Same federal traps |
| State savings on $15M §1202 exclusion (vs. non-QSBS same-state LTCG) | N/A — $0 LTCG tax even without §1202 | $0 — state taxes full gain | N/A | N/A | N/A | $0 — state taxes full gain (decoupled) |
Tennessee, Texas, Florida, Nevada, Washington (on capital gains), Wyoming, South Dakota, and Alaska are equivalent for QSBS purposes at the state level: $0 state tax on excluded gain and $0 state tax on any non-excluded taxable gain. The CA-to-TN domicile audit risk is identical to CA-to-TX and CA-to-FL — the FTB applies the same domicile analysis regardless of which no-tax state the founder moves to. Oregon is included because it decoupled from §1202 in April 2026 and now taxes QSBS gain at up to approximately 13.9% for Portland-area founders. See the Oregon QSBS guide and the California QSBS guide.
Planning priorities for Tennessee founders
1. For Nashville healthcare IT founders: resolve the §1202(e)(3)(A) health exclusion question first
The most important §1202 question for Nashville founders is not the holding period or the cap — it is whether the company's primary business activity is a qualifying trade or business. Healthcare IT founders should obtain a written §1202(e)(3)(A) legal opinion from tax counsel with healthcare industry experience before planning around the exclusion. The opinion should address the company's primary revenue model (software licenses, SaaS subscriptions, and implementation fees point toward qualifying; clinical service revenue, patient encounter billing, and per-visit fees point toward excluded), whether the company holds clinical licenses that require it to operate as a health services provider, and the 80% active business test compliance for any company with mixed software and clinical revenue. See the excluded industries guide and the qualification requirements guide.
2. Confirm all eight §1202 qualification tests — the state tax analysis is secondary
For Tennessee residents, there is no state tax complexity around §1202. The qualification analysis is the entire game: does the stock meet all eight §1202 tests? C-corporation requirement, gross assets at issuance below $75M (post-OBBBA) or $50M (pre-OBBBA), original issuance, active business test, eligible shareholder, qualified trade or business (including the §1202(e)(3) excluded-industry question), holding period, and no §1202(c)(3) redemption disqualification. Use the Section 1202 checklist to work through all eight tests systematically.
3. Reach the 5-year mark for post-OBBBA stock
For stock issued after July 4, 2025, the OBBBA tiered structure creates a dominant planning constraint: hold 5 years for 100% exclusion rather than 4 years for 75% exclusion. On a $15M exit, the cost of selling at year 4 instead of year 5 exceeds $1.18M in federal tax (28% rate trap on the 25% non-excluded portion). Tennessee's $0 state tax means the entire cost sits at the federal level. If any transaction timeline flexibility exists, reaching the 5-year mark is the primary consideration.
4. Use the pre-LOI planning window before any binding obligation
The most valuable planning moves — gifting shares to family members to use additional §1202 exclusion caps per donee, contributing pre-sale shares to a donor-advised fund (DAF) or charitable remainder trust (CRT), or reviewing the §1045 rollover window if §1202 treatment is unavailable — must all occur before a binding obligation to sell has been created. A letter of intent, term sheet, or signed merger agreement that commits the company to a sale terminates the gifting and charitable planning window. The pre-LOI period is when a fee-only financial advisor and estate attorney need to be engaged. See the gifting and stacking guide and the charitable planning guide.
5. CA-to-TN domicile: plan 12–24 months before a transaction
If you are a California-domiciled founder who has relocated or plans to relocate to Tennessee before a major liquidity event, the domicile change must be genuine and must precede the transaction by a meaningful period. Begin 12 to 24 months before a planned transaction: establish primary Tennessee residence, transfer ties comprehensively (voter registration, driver's license, financial accounts, primary service providers), and maintain a contemporaneous record of Tennessee-based life activities. Engage both Tennessee tax counsel and an FTB residency audit specialist before the transaction closes. The $1.995M state tax difference on a $15M qualifying exit makes proper domicile planning cost-effective. See the California QSBS guide for FTB domicile audit mechanics.
6. Post-exit investing: design the portfolio before the proceeds arrive
Tennessee's $0 state income tax on investment returns — dividends, interest, and capital gains — means that post-exit portfolio decisions for Tennessee residents are driven entirely by federal considerations and personal financial objectives. The §1045 rollover window (60 days from a qualifying QSBS sale to reinvest in replacement QSBS stock) can defer gain that falls outside the §1202 cap. After a major liquidity event, the post-sale challenges — concentrated cash, absence of earned income, estate and charitable integration, tax reserve management — are the domain of a fee-only financial advisor who specializes in founder liquidity events. See the post-exit investing guide.
Talk to a QSBS advisor about your Tennessee situation
Tennessee's no-income-tax status simplifies the state tax picture — but QSBS planning for Tennessee founders still requires professional review of all eight §1202 qualification tests, the §1202(e)(3)(A) health exclusion for Nashville healthcare IT companies, the OBBBA tiered exclusion structure and 28% rate trap, and, for California transplants, the FTB domicile analysis. A fee-only financial advisor who specializes in founder liquidity events and QSBS can confirm qualification, coordinate the pre-transaction planning window, and design the post-exit portfolio and estate plan.
Sources
- Tennessee Hall Income Tax repeal — the Hall Income Tax, which applied to dividends and interest income from investments (not capital gains), was phased down from 6% in 2016 by one percentage point per year and fully repealed for tax years beginning on or after January 1, 2021; Tennessee has never taxed capital gains at the state level; effective January 1, 2021, Tennessee has no individual income tax of any kind: Tennessee Department of Revenue — Hall Income Tax [Repealed for Tax Years Beginning January 1, 2021]; Tax Foundation — Tennessee to Phase Out the Hall Tax.
- IRC §1202 statutory text — exclusion cap (§1202(b)(1)), gross assets test (§1202(d)), active business test (§1202(e)), qualified trade or business definition (§1202(e)(3)) including §1202(e)(3)(A) health-field exclusion; 28% maximum rate on non-excluded gain under §1(h)(4)(A)(i); post-OBBBA tiered exclusion schedule and $15M cap for stock issued after July 4, 2025: 26 U.S. Code § 1202 — Cornell LII; Baker Tilly — Changes to Section 1202, QSBS, in the One Big Beautiful Bill Act.
- §1202(e)(3)(A) health exclusion and healthcare IT — excluded-industry line between clinical service businesses and healthcare technology software companies; PLR 201436001 (activities-based analysis, not sector-based); 80% active business test under §1202(e)(2); IRS guidance on qualifying trade or business: 26 U.S.C. § 1202(e)(3)(A) — Cornell LII; QSBS Expert — Section 1202 Active Business Requirement.
- Nashville healthcare and technology ecosystem — 900+ healthcare companies; HCA Healthcare headquarters; Nashville Entrepreneur Center; Jumpstart Foundry; Frist Cressey Ventures; HealthStream, Ardent Health, and health IT startup density; Tennessee venture activity and startup ecosystem overview: Built In — Nashville Health Tech Companies 2026; LaunchTN — Tennessee Midyear Venture Report 2026.
- Tennessee no state income tax — QSBS state conformity moot for no-income-tax states; Tennessee's QSBS treatment fully federal; state comparison for QSBS planning: Keystone Global Partners — 2026 QSBS by State: Eligibility Index; Taxstra — Tennessee Capital Gains Tax: What You Actually Owe (0% State).
Values and legislative status verified as of September 2026. Tennessee has no personal income tax; QSBS gain is $0 at the Tennessee state level for Tennessee-domiciled individuals regardless of §1202 exclusion status. The Tennessee Hall Income Tax (which applied only to dividends and interest, not capital gains) was fully repealed for tax years beginning January 1, 2021. Post-OBBBA (One Big Beautiful Bill Act, signed July 4, 2025) §1202 enhancements — $15M exclusion cap, tiered 3/4/5-year exclusion schedule at 50/75/100%, $75M gross assets threshold for stock issued after July 4, 2025 — apply as a matter of federal law for Tennessee residents without state legislative action. IRC §1(h)(4)(A)(i) 28% maximum rate applies to the non-excluded portion of partially excluded §1202 gain at the 3- and 4-year OBBBA tiers. §1202(e)(3)(A) health-field exclusion requires fact-specific analysis for Nashville healthcare IT and telehealth companies. California FTB domicile audit risk applies to all no-tax state relocation strategies, including Tennessee. Consult a fee-only financial advisor and qualified tax attorney before relying on §1202 for a specific transaction.