Recently, in Tate & Lyle Ingredients Americas, Inc.,[1] Alabama’s Chief Administrative Law Judge Thompson held that a taxpayer’s gain from its sale of its one-third interest

in a foreign corporation to its parent, which owned the other two-thirds of the foreign corporation, was not apportionable “business income” under the Alabama statute, and that Alabama is constitutionally barred from taxing the income “earned in the course of activities unrelated to the

Taxpayer’s business in Alabama.”

The Department, citing Container,[2] relied on “an administrative presumption that corporations engaged in the same line of business are unitary” and the fact that the taxpayer and the foreign company, Amylum Group (“Amylum”), were owned by the same parent holding company. Judge

Thompson, however, rejected the Department’s presumptions and view of Container and, based upon a complete analysis of the facts, determined that not only were the taxpayer and Amylum not unitary, but also the Amylum stock did not serve an operational function under Allied-Signal.[3]

The facts relied on by Judge Thompson were as follows. In 1960, the taxpayer, Tate & Lyle Ingredients Americas, Inc., formerly known as A.E. Staley Manufacturing Co., an Illinois-based manufacturer of cereal sweeteners and starch products used by food manufacturing and industrial

companies, acquired a one-third interest in Amylum, a family-run Belgium manufacturer of cereal sweeteners. The taxpayer produced its products from corn and served the North American market, while Amylum produced its products from wheat and served the European market. In 1988, the taxpayer was acquired by Tate & Lyle PLC (“Tate & Lyle”), a U.K. holding company that owned numerous industrial ingredients manufacturing businesses, including a one-third interest in Amylum. (See article for more).