As we move further into budget season and prepare for upcoming fiscal years, there are several important updates Tennessee municipalities should be aware of. Some involve new federal reporting requirements; others affect local fee documentation and budget preparation. Taking a little time now to review these items can help avoid headaches later. 

Overtime Reporting Changes Are Coming 

The recently passed One Big Beautiful Bill Act of 2025 includes a provision titled “No Tax on Overtime.” While implementation details continue to unfold, municipalities need to begin preparing now for reporting changes that will take effect in 2026.

Specifically, municipalities will be required to track Fair Labor Standards Act (FLSA) overtime premiums separately for reporting purposes. The provision does not apply to all overtime pay. It only applies to the extra premium of FLSA overtime. 

If you haven’t already, now is the time to:

• Review how your payroll system tracks overtime.
• Confirm that FLSA overtime premiums are clearly identified.
• Work with your payroll or software vendor to ensure your system can capture and report the necessary data.
• Double-check that payroll entries are being coded correctly and consistently.

Getting ahead of these changes now will make the 2026 reporting process much smoother. 

A resource document can be found here: https://www.mtas.tennessee.edu/system/files/mrln/mknowledge/main/MTAS%20No%20tax%20on%20overtime%20Jan%202026.pdf

Development Fees Over $250? Be Sure You Have Documentation 

On April 3, 2025, Governor Bill Lee signed Public Chapter No. 140 into law. This Act amended Titles 5, 6 and 7 of the Tennessee Code by introducing a new requirement for municipalities that charge development-related fees exceeding $250. If your city assesses these types of fees, you must now document the cost justification behind them. 

In simple terms, municipalities need to be able to demonstrate the fee is reasonably related to the actual cost of providing the service. Proper documentation is essential and should be maintained in case of audits, public inquiries, or legal scrutiny. 

Now is a good time to review your current fee schedule and ensure supporting cost analyses are on file and up to date. 

Additional information can be found in the publication below:

Policy Guide for Local Governments: Documentation and Justification of Development Fees in Compliance with Public Chapter No. 140 

FY 2027 Budget Planning: Check the Updated MTAS Revenue Projections 

Budget season is upon us, and accurate revenue projections are key to building a sound financial plan. 

MTAS Finance Consultant Brad Harris has updated the publication State-Shared Taxes and Appropriations for the Coming Fiscal Year (MTAS-545). Population figures are available on the MTAS website under each municipality’s dedicated city page. This document is an important resource for estimating state-shared revenues for FY 2027.

Municipal officials are encouraged to:

• Review the updated MTAS-545 during budget preparation.
• Check the website periodically for any updates.
• Use the projections to strengthen revenue estimates for the upcoming fiscal year.

You can find the publication: https://www.mtas.tennessee.edu/reference/state-shared-taxes-and-appropriations-coming-fiscal-year 

Comptroller’s Required Budget Worksheet: Review Before You Submit 

The Tennessee Comptroller’s Office has made revisions to the Required Budget Submission Worksheet for FY 2027. Before submitting your budget, be sure to review the updated version carefully. 

Particular attention should be given to:

• Unrestricted Fund Balance
• Unrestricted Cash Balance 

These areas are receiving increased focus, so accuracy and completeness are especially important. 

The revised worksheet can be accessed here: https://comptroller.tn.gov/content/dam/cot/lgf/documents/templates/RequiredBudgetSubmissionWorksheet.pdf 

The Bottom Line 

A little preparation now can save significant time and stress later. Whether it’s adjusting payroll systems for new overtime reporting, documenting development fee justifications, reviewing state-shared revenue projections, or carefully completing updated budget worksheets, staying informed is key. 

As always, thoughtful planning and attention to detail will help Tennessee municipalities remain compliant, financially stable, and well-positioned for the coming fiscal years.