The Indiana Department of State Revenue issued two letters of findings in which it concluded that a multistate corporation and its subsidiary were not entitled to source their receipts from franchise agreements based on costs of performance (COP) for corporate income tax purposes. The parent corporation entered into franchise agreements with in-state franchisees, which operated and provided hotel accommodations. The parent corporation also granted the franchisees the right to use intellectual property and receive services in Indiana. The subsidiary, which owned real estate outside Indiana that it leased to the parent corporation for use as a reservation call center, also provided Indiana franchisees with services, including corporate management functions, training, and marketing and promotion. The parent and the subsidiary, neither of which had real property or employees in Indiana, asserted that all receipts from licensing intangibles and performing services under the franchise agreements should be sourced outside Indiana because nearly all of the income-producing activity, based on COP, occurred outside Indiana. The Department rejected the taxpayers’ positions, concluding (1) the income from the intellectual property was attributable to Indiana because its value derived from the taxpayers’ ability to exploit the intellectual property in Indiana; and (2) even if the COP statutory provisions applied, the taxpayers’ income-producing activity was deemed performed in Indiana because the franchise agreements had a business situs in Indiana. Indiana State Dep’t of Revenue, Letter of Findings Nos. 02-20130047 & 02-20130048 (Jan. 29, 2014).