By Evan Hamme and Marc Simonetti

The Texas Comptroller upheld a taxpayer’s separate Franchise Tax return filing position, rejecting an Administrative Law Judge’s finding that the taxpayer and its affiliate shared a strong centralized management structure that required a unitary combined report. Although the companies were commonly owned and shared an administrator, the Comptroller found that, even if the companies shared some centralized management, the companies did not meet the statutory threshold of “strong” centralized management necessary to require a combined return because: (1) the companies operated in completely separate lines of business (the taxpayer ran a cleaning business and its affiliate ran a marketing consulting business); (2) the owner did not participate in the day-to-day management of either company; (3) the companies shared no other employees besides the administrator; and (4) the companies had only one common client. Tex. Cmptl’r Dec. No. 111,557 (Oct. 22, 2015) (released April 2016).