Senate Bill 405, also known as the "CEO Pay Disparity Tax Act," amends Tennessee Code Annotated by introducing a new section that imposes a pay disparity surcharge on companies whose top executive earns at least 100 times more than the median income of their employees. The surcharge will be an additional 0.1% added to the excise tax rate on the company's net earnings for the preceding fiscal year, applicable to business conducted in Tennessee.

The bill mandates that the Department of Revenue create necessary rules for implementation, which must comply with the Uniform Administrative Procedures Act. The act will take effect upon becoming law for the purpose of rule promulgation, while the tax provisions will be effective starting July 1, 2025, and will apply to tax years beginning on or after that date.