News

New Tennessee Law on Discounts for Lack of Marketability (DLOM)

June 14th, 2017

Click Here for a PDF of the New Law.

The 110th Tennessee General Assembly passed House Bill 348 during the 2017 session. As enacted, the law requires courts in making equitable division of marital property to consider all relevant evidence, including valuation methods typically used with regard to such assets without regard to whether the sale of the asset is reasonably foreseeable, in determining the value of an interest in a closely held business or similar asset. - Amends TCA Title 36, Chapter 4. Becomes effective July 1, 2017.

The new law effectively overrides Bertuca [2007 WL 3379668 (Tenn.Ct.App.)] which suggested that a DLOM should not be deducted in a business valuation in a divorce case unless the business was for sale or there was a plan to sell.

The text of the law:

State of Tennessee
PUBLIC CHAPTER NO. 309
HOUSE BILL NO. 348
By Representative Farmer
Substituted for: Senate Bill No. 424
By Senator Stevens

AN ACT to amend Tennessee Code Annotated, Title 36, Chapter 4, relative to equitable division of marital property.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:

SECTION 1. Tennessee Code Annotated, Section 36-4-121(c), is amended by adding the following new subdivision (10) and renumbering the current subdivision (10) and subsequent subdivisions accordingly:

(10) In determining the value of an interest in a closely held business or similar asset, all relevant evidence, including valuation methods typically used with regard to such assets without regard to whether the sale of the asset is reasonably foreseeable. Depending on the characteristics of the asset, such considerations could include, but would not be limited to, a lack of marketability discount, a discount for lack of control, and a control premium, if any should be relevant and supported by the evidence;

SECTION 2. This act shall take effect July 1, 2017, the public welfare requiring it, and shall apply to actions filed on or after that date.

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