Variances

(1) T.C.A. §§ 67-4-2112 and 67-4-2014 provide that if the allocation and apportionment provisions do not fairly represent the extent of the taxpayer’s business activity in this state, the taxpayer may petition for or the Commissioner of Revenue may require, in respect to all or any part of the taxpayer’s business activity, if reasonable: (a) Separate accounting; (b) The exclusion of any one or more of the factors; FRANCHISE AND EXCISE TAX RULES AND REGULATIONS CHAPTER 1320-06-01 (c) The inclusion of one or more additional factors which will fairly represent the taxpayer’s business activity in this state; or (d) The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer’s capital and net earnings for purposes of computing franchise and excise taxes. §§ 67-4-2112 and 67-4-2014 permit a departure from the allocation and apportionment provisions only in limited and specific cases. §§ 67-4- 2112 and 67-4-2014 may be invoked only in specific cases where unusual fact situations (which ordinarily will be unique and nonrecurring) produce incongruous results under the apportionment and allocation provisions contained in the Franchise and Excise Tax Laws. (2) As provided by law, the Commissioner is given authority to require combined reports covering members of an affiliated group of corporations. In the event of inter-company activity in the manufacture, production or sales of products, the Commissioner may require a combined report if such is necessary to obtain an equitable and appropriate result. (3) Application for relief must be addressed to the Commissioner with the filing of a petition, in writing, setting forth the reasons why application of the statutory allocation and apportionment provisions do not fairly represent the extent of the taxpayer’s business activity in this state. It must be shown by clear and cogent evidence that peculiar or unusual circumstances exist which would cause application of the said statutory provisions to work a hardship or injustice. Such application must also include a proposed alternative method of allocation or apportionment to be used by the corporation, and be submitted by the taxpayer on or before the statutory due date of the return. In the event that a variation from the statutory provisions is adopted, then such method shall continue in effect so long as the circumstances justifying the variation remain substantially unchanged. It shall be the duty of the taxpayer to furnish each subsequent year such information with the filing of its return as will establish the fact that the circumstances remain substantially unchanged.