Senate Bill 405, also known as the "CEO Pay Disparity Tax Act," amends Tennessee Code Annotated, Title 67, Chapter 4, by introducing a new section that imposes a pay disparity surcharge on companies whose top executives earn 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. The bill mandates that the Department of Revenue promulgate necessary rules for implementation in accordance with the Uniform Administrative Procedures Act.

The act will take effect upon becoming law for the purpose of rule promulgation, while all other provisions will be effective starting July 1, 2025, and will apply to tax years beginning on or after that date. This legislation aims to address income inequality within companies operating in Tennessee by imposing a financial penalty on those with significant pay disparities between executives and their employees.