The 114th Tennessee General Assembly concluded its first regular session on April 22, making it one of the most fast-paced sessions in recent years. Despite this compressed timeline, our government relations team successfully tracked and influenced key legislation throughout this productive session, which culminated in the passage of a nearly $60 billion budget reflecting both Governor Lee’s priorities and significant legislative compromises that may affect your interests.
Legislature Approves Nearly $60 Billion Budget
Governor Lee’s proposed budget outlined ambitious goals centered on infrastructure, energy innovation, farmland preservation, and education, including $1 billion to tackle a road project backlog, major investments in nuclear energy through the Tennessee Valley Authority’s small modular reactor program, a grant fund for conservation easements, and an expansion of school choice initiatives – a long-standing gubernatorial goal advanced through a special session earlier this year.
The legislature ultimately controls the final budget and while many of the governor’s initiatives received funding approval, the legislature scaled back several of his proposals by redirecting roughly $180 million toward its own priorities. This included: (1) cutting a proposed $60 million starter home revolving loan fund; (2) reducing by $35 million funds dedicated to a Duck River regionalization plan; (3) eliminating or reducing support to several nonprofits, including the governor’s long-supported partnership with Men of Valor; and (4) cutting a $20 million grant for the Nashville Zoo by replacing it with $1 million to each zoo in the state’s four largest cities. These redirected and reallocated funds were instead used to support local governments with capital projects, a $20 million grant for volunteer fire departments and $5 million grant for EMS services, $4.5 million to the attorney general for new positions and additional funding for a special litigation program, $5 million to the State Museum, and $37.5 million for the TN College of Applied Technology in Robertson County. The legislature also chose to fund almost $44 million worth of legislation that needed fiscal support to be enacted into law.
Significant Changes for Utility Companies
The legislature took significant action by passing legislation preventing state-level regulation of broadband services. This move came in direct response to the Federal Communications Commission’s (FCC) 2024 reclassification of broadband as a telecommunications service. The new law not only preempts state oversight but also bars local governments from asserting regulatory authority over broadband operations. This policy shift is particularly consequential as Tennessee ramps up its broadband infrastructure in preparation for funding and expansion under the federal Broadband Equity, Access, and Deployment (BEAD) program.
Customers will soon be able to hire third-party engineers to review and approve plans and designs for utility infrastructure within a plan of development and subsequently hire third-party contractors to install utilities. Thanks in part to coordinated advocacy among stakeholders, the new law builds in key safeguards such as utility oversight, contractor qualifications, and federal compliance protections.
A push to clarify the process for Chapter 86 reimbursements, relieve the burden of easement acquisition costs, and restructure the cap on utility relocation costs during road projects remains ongoing, though legislation filed related to these objectives spurred a fiscal analysis revealing over $94 million in annual relocation expenses. This staggering annual expense quantifies the significant financial impact these relocations impose on utility operations and underscores why meaningful reform is necessary to reduce these costs for rate payers.
Civil Liability Remains Unchanged
Our team closely monitored and actively opposed one of this session’s most consequential bills—an attempt to increase the cap on noneconomic damages—which failed to garner sufficient support for passage. The caps have been in effect since the 2011 passage of tort reform legislation. The sponsor attempted to amend the bill to varying levels, but strong opposition prevented passage. A bill seeking to increase limits on governmental entities also failed which would have increased Governmental Tort Liability Act (GTLA) limits by $100,000 each over the next two years. Our clients in the insurance and business sectors can maintain their current liability planning, as damage caps remain unchanged.
Also failing to materialize was an effort to grant civil immunity to pesticide manufacturers using EPA-approved labels in strict products liability cases based on a failure to warn. Several agricultural groups supported the legislation in an effort to maintain access to important products used statewide by farmers while some health groups opposed the bill. The bill advanced in the Senate but stalled in the House—an issue expected to resurface next session.
Environmental Regulation and Wetlands Reform
In a notable shift in environmental policy, the General Assembly approved legislation redefining and streamlining regulatory oversight of wetlands in Tennessee. The new law establishes a process by which a wetland resource inventory report submitted by a third-party wetland professional is presumed accurate unless the Tennessee Department of Environment and Conservation (TDEC) commissioner raises specific objections within a specified timeframe. The law also exempts alterations of impacts to some non-waters of the United States (WOTUS) wetlands based on size and quality, expands general permit coverage with limited mitigation for others, and prohibits the inclusion of non-WOTUS wetlands in cumulative impact assessments It also requires annual reporting by TDEC to the General Assembly of the source and amount paid for mitigation credits when mitigation is required. The legislation is expected to provide greater predictability and flexibility in land use planning for landowners, developers, and agricultural interests, while preserving protections for the state’s most valuable wetlands.
Where There’s Smoke, There’s Regulation
The legislature enacted significant reforms affecting hemp-derived cannabinoids over strenuous objections from industry stakeholders and hemp farmers. As of January 1, 2026, regulation of hemp-derived cannabinoid products (HDCPs)—such as delta-8 THC, delta-10 THC, and other derivatives—will move from the Department of Agriculture to the Alcoholic Beverage Commission (ABC). The new law specifically bans synthetic cannabinoids and certain derivatives, including THCa and THCp, which had been unclear under the prior regulatory framework. The law also removes HDCPs from grocery and convenience stores by limiting their retail sales to businesses that limit entry to individuals that are 21 years of age or older. Other key aspects of the new law regulate the emerging market of THC and CBD beverages. These beverages currently have little regulation, and the new law imposes strict potency limitations and a wholesale tax structure on par with traditional alcoholic beverages. These actions signal a strict stance on intoxicating products without formal legalization of recreational marijuana.
Also, among the largest regulatory developments this session was the overhaul of nicotine vapor product taxation and compliance. The legislation, which goes into effect immediately for rulemaking purposes and August 1, 2025, for all other purposes, imposes several key reforms on the vapor products industry. These measures include a new 10% wholesale tax on vapor products, carding requirements for anyone appearing under the age of 50, and a state registry of allowable products that may be sold in the state. The law also prohibits vapor manufacturers from utilizing marketing tactics aimed at individuals under 21, including the use of cartoon imagery, candy branding, or advertisements near schools and childcare facilities. The Department of Revenue and the ABC will have concurrent enforcement authority, particularly for underage sales. Strict penalties are in place with a $2,500 fine for a first offense of selling to underage customers which escalates to $20,000 for a second offense. Importantly, retailers may continue to sell unregistered vapor products until January 1, 2027. These sweeping reforms signal a major compliance shift for vape retailers, manufacturers, and importers.
Health Coverage Flexibility for Financial Institutions
In a move to enhance regulatory flexibility and expand access to health benefits, lawmakers opted to allow certain out-of-state Multiple Employer Welfare Arrangements (MEWAs) to operate as domestic entities in Tennessee under specified conditions. The law applies exclusively to MEWAs composed of banks and their affiliated plan-sponsoring organizations, provided they are licensed in a contiguous state, enroll no more than 2,500 Tennessee residents, and are subject to adequate oversight in their home state. The commissioner of the Department of Commerce and Insurance is empowered to issue certificates of authority and waive certain state insurance requirements, provided the MEWA is regulated to a standard deemed “reasonable and adequate.” This targeted reform enables bank-affiliated associations to offer health benefits in Tennessee under a streamlined regulatory model, potentially reducing administrative burdens while maintaining consumer protections.
Hospital Employment Restrictions Lifted
The General Assembly stunned some observers this year by significantly expanding the ability of hospitals to employ certain physicians and establishing a regulatory framework for employment of anesthesiologist assistants (AAs), two objectives that were pipe dreams in the not-too-distant past.
Historically, hospitals could not directly employ radiologists, anesthesiologists, pathologists, or emergency room physicians. Under the new law, hospitals in counties with populations under 105,000 may employ licensed physicians regardless of specialty, but in more populous counties, hospitals are still prohibited from direct employment of those four categories of physicians unless they are employed at a designated children’s or research hospital. Children’s hospitals may employ these specialists if they are board certified or board eligible, and research hospitals are granted broader authority to employ these roles under the same terms as other physicians.
In parallel, the law creates a licensure system for anesthesiologist assistants requiring them to be certified by a recognized national body, operate under supervision agreements with anesthesiologists, and work within the bounds of delegated authority. The law sets clear guidelines for AA education, licensing, temporary licensure, supervision, and disciplinary procedures. Unlicensed practice or hiring of unlicensed AAs is now a Class B misdemeanor.
This legislation takes effect July 1, 2025, with the licensure provisions for anesthesiologist assistants taking effect January 1, 2026. It is expected to broaden medical staffing options in underserved areas and ensure high standards for anesthesia services statewide.
Task Force to Review Innovation Processes for Solid Waste
Newly enacted legislation creates a 15-person task force co-chaired by the chairmen of the Senate Energy, Agriculture and Natural Resources Committee and House Agriculture and Natural Resources Committee to examine and review innovative processes for the disposition of solid waste, including landfilling, recycling, incineration, agricultural uses, and energy production. Twelve of the 15 seats are appointed by the speakers of the House and Senate, two seats are held by the respective chairs of relevant legislative committees, and the governor or his designee will hold the remaining seat. The task force is required to submit a report to the General Assembly by June 15, 2026, and each June 15 thereafter until 2029 when the task force will terminate.
More to Come…
In total, lawmakers filed over 1,700 pieces of legislation with over 600 of those becoming law in the span of just over three months. This broader base of bills included high-profile, often contentious issues along with numerous non-controversial bills that passed with little more than a brief introduction.
With the General Assembly set to reconvene in January 2026, stakeholders across all sectors should monitor interim developments, including departmental rules effectuating these legislative enactments, and begin preparing for next year’s policy landscape. As always, our team will continue to advocate for our clients’ interests and provide timely updates as the next legislative chapter unfolds.
