Walnut Company does business only in Tennessee and has $3,500,000 in net worth and $4,000,000 in the book value of property owned at December 31. They also rented a building during the year with an annual rental of $25,000. Their income subject to federal income tax is $1,500,000 for the year. They deducted $100,000 of Tennessee excise tax on its federal return. They made four quarterly payments of $25,000 each for the year, overpaid franchise and excise taxes by $5,000 for the prior year with no refund claimed, had an industrial machinery credit in the current year for $2,000, paid dividends to its stockholders of $500,000, and paid premiums for its insurance policies of $40,000.

What is the Tennessee excise tax rate to be used?

6.0%

7.0%

4.0%

6.5%