An administrative law judge (ALJ) upheld a ruling by the Texas Comptroller of Public Accounts (Comptroller) that a taxpayer was not entitled to use an alternative three-factor apportionment formula under Article IV of the Multistate Tax Compact for determining its liability under the Texas franchise tax. Tex. Tx. Code Ann. Section 171.016(a) provides that a taxable entity’s liability is to be apportioned by a single-factor fraction. Despite being a full member of the Multistate Tax Commission, Texas has refused to allow taxpayers to use the three-factor apportionment method set forth under Article IV of the Multistate Tax Compact. In previous rulings, Texas has taken the position that the three-factor method is inapplicable because the Texas franchise tax is not an income tax. The ALJ’s ruling cited Texas law as controlling, but ultimately did not address any issues raised by the taxpayer.
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