In Indiana Department of Revenue Letter of Findings No. 02-20191221 (Dated June 3, 2020, published August 26, 2020), the Department concluded there was a lack of a unitary business relationship between an out-of-state holding company and a partnership that operated gas stations within the state. The Department held that the holding company could not show a unitary relationship with the gas station partnership under the “three unities” test of functional integration, centralization of management, and economies of scale. This finding was in part due to the fact that the holding company that did not have employees, property, and or any activities other than holding a minority interest in the gas station partnership:

• Centralized management: The holding company had no means to oversee or contribute to the day-to-day operations of the gas station partnership because the holding company had no employees.
• Functional integration: There were no combined functions or common operational resources since the holding company had no employees, assets or activities other than holding the partnership interest.
• Economies of scale: There could be no economies of scale because the holding company’s sole purpose was holding interests in partnerships.

 Finally, the Department found that although the partnership agreement gave the holding company some management rights over the gas station partnership, there was no evidence that the holding company actually exercised any of those rights. Additionally, the refusal of holding company representatives to sign a routine time extension waiver on behalf of the gas station partnership indicated a lack of management or operational control. Therefore, the holding company could not treat its distributive share of the partnership’s gain/loss as apportionable income.