ÿWPC, …# VUNa %¯ 0 (µbÝ 0³å4˜ ¬ 0D» 0Jÿ LI w@• 0TÕ †) 0^¯ 0h  0ru 0|ç 0†c 0é 1uyU,î 0d 0@~U,¾U>êB)(DCQ D3” AMÇU* B>6[w‘ÒžÚfx´Þ³’àE!v~%#vÓ£$ AOv*ÆÅ* 0D‹+ D/Ï+ Bþ+˜HP LaserJet 4Si/4SiMX PS 600dpiPSCRIPTÀÌÀääÀÀÌ0 'æ() Z ‹6Times New Roman Regular¼($¡¡- ù-(c(2û¯$¤¤Ý ƒ!ÝÝ  ÝÒ°ÒÒ„°ÒÓ  ÓÔ€XÅX¼¼Ôà ` àòòÚ  Ú0Ú  ÚóóGav (r43|xO(#Ã$òòÚ  Ú0Ú  Úóó2 ÿÿ0Indent1Ô2ÔÔ3  ÔHUDDLESTONTrostBursonWallerLansdenDortchCatalanonondomicilaryDreyfusAllenbergapportionable nondomiciliaryMoorman MfgUDIPTAmultistateHellerstein2dGoldbergDeptZolmanCavitch F.W. Regs CCH 352a ACFIndusTenneco RptrIntlStratton W.S.DickinsonODaniel C.C.WardellServsMcColganRamsayScarlettCrainGottesman = +>?E@ADBUCDÓ€NO2" ÿÿ0Indent2à0 àÔ2ÔÔ3  ÔDreyfus Opinion Ì  ' IB011C10IB011C1 .   2, ÿÿ0Indent3à0 àà0 àÔ2ÔÔ3  Ô26 ÿÿ0Indent4à0 àà0 àà0 àÔ2ÔÔ3  Ô2@ ÿÿ0Indent5à0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2J ÿÿ0Indent6à0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2T ÿÿ0Indent7à0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2^ ÿÿ0Indent8à0 àà0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô  ÿÿ?AGMSYaioIndent0I.A.1.a.(1)(a)i)a)< Œ 9p`(ModernP ÿÿ8Mac DefaultMac DefaultÓ ` °šXÓ("ÿÿ$££Ò  ÒÒ  Ò< Œ 9p`(Monaco< Œ 9p`(&Times New Roman% Line 7 d((((7Border 1dd----'ÿÿdxd€ )Cþÿ << Gÿÿ< Œ 9p`(Arial d ,Ý ƒ!ÝÑ  ÑÑ#€d#ÑÔ€ÔÔ€'ÔÔ€'¼ÔÝ  ÝÔ€,ÔÔ€,ÔÓ  Óò òÔ YYY ÔFILEDÔ€,XÔÌÌMay€31,€1996ÌÌCecil€W.€CrowsonÌAppellate€Court€ClerkÔ  Ôó ó mÝ ƒ!ÝÑ#€d#ÑÔ€ÔÔ€'ÔÔ€'¼ÔÝ  ÝÝ ƒ$ÝÒ  ÒÒ „ ÒÓ  ÓÔ€'XÔà àòòÚ  ÚÚ  ÚóóÝ  ÝThese€commodities€include€grain,€oil€seeds,€orange€juice,€cotton,€meat€and€livestock,Ïcoffee,€cocoa,€sugar,€and€textiles.Ì ÈÝ ƒ!ÝÑ#€d#ÑÔ€ÔÔ€'ÔÔ€'¼ÔÝ  ÝÝ ƒ$ÝÒ  ÒÒ „ ÒÓ  ÓÔ€'XÔà àòòÚ  ÚÚ  ÚóóÝ  ÝThe€six€groups€include:€(1)€the€Grain€and€Oil€Seeds€Group,€(2)€the€Orange€JuiceÏGroup,€(3)€the€Coffee€and€Cocoa€Group,€(4)€the€Meat€and€Livestock€Group,€(5)€the€CottonÏGroup,€and€(6)€the€Textiles€and€Sugar€Group.Ì ”Ý ƒ!ÝÑ#€d#ÑÔ€ÔÔ€'ÔÔ€'¼ÔÝ  ÝÝ ƒ$ÝÒ  ÒÒ „ ÒÓ  ÓÔ€'XÔà àòòÚ  ÚÚ  ÚóóÝ  ÝThe€Louis€Dreyfus€Corporation€concedes€that€the€record€supports€the€trial€courtððsÏconclusion€that€the€Bond€Trading€Groupððs€earnings€are€business€earnings.Ì \Ñ\R AØ'\Ñ ªÝ ƒ!ÝÑ#€d#ÑÔ€ÔÔ€'ÔÔ€'¼ÔÝ  ÝÝ ƒ$ÝÒ  ÒÒ „ ÒÓ  ÓÔ€'XÔà àòòÚ  ÚÚ  ÚóóÝ  ÝThe€ð ðminimal€connectionðð€requirement€of€the€due€process€analysis€differs€from€theÏð ðsubstantial€nexusðð€requirement€of€the€Commerce€Clause€analysis.€€The€Commerce€ClauseÏreflects€broader€concerns€regarding€the€effects€of€state€regulation€on€the€national€economy,€andÏthe€purpose€of€the€requirement€is€to€lighten€burdens€on€interstate€commerce.€€òòQuill€Corp.€v.ÏNorth€Dakota,óó€504€U.S.€298,€313,€112€S.€Ct.€1904,€1913€(1992).Ì ©Ý ƒ!ÝÑ#€d#ÑÔ€ÔÔ€'ÔÔ€'¼ÔÝ  ÝÝ ƒ$ÝÒ  ÒÒ „ ÒÓ  ÓÔ€'XÔà àòòÚ  ÚÚ  ÚóóÝ  ÝThe€ð ðclear€and€cogentðð€standard€is€essentially€similar€to€the€ð ðclear€and€convincingððÏstandard.€€òòSeeóó€òòPierce€v.€Flynn,óó€656€S.W.2d€42,€46€(Tenn.€Ct.€App.€1983).Ì ÖÝ ƒ!ÝÑ#€d#ÑÔ€ÔÔ€'ÔÔ€'¼ÔÝ  ÝÝ ƒ$ÝÒ  ÒÒ „ ÒÓ  ÓÔ€'XÔà àòòÚ  ÚÚ  ÚóóÝ  ÝTerm€Commodities,€Inc.€is€a€separate€corporate€affiliate€of€the€Louis€DreyfusÏCorporation.€€The€commissioner€is€not€asserting,€however,€that€its€business€is€unitary€withÏeither€the€commodities€groups€or€the€Bond€Trading€Group.ÌPtPtHHÚ(ÿáÿâùFG(üHHÚ(d'@Styl{WP}01•ÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃà Ãà Ãà Ãà Ãà ÃÃÃÃÃÃÃÃÃÃÃÐ ÐÐHHÐÐ  ÐÐ2ÐÐÿÿ¸æ$ÿÐÐHHÐÐÐÐÐÐÐÐ  ÐÐ ÐÐ ÐÑÑÑGenevaÑÑ ÑÑ € ÑÑ<Px–ÈÑÒÒÒ443!#4ÒÒ$ *$ÒÒ$*$ÒÒ ÿKK ÒÒ  Geneva ÒÒ  Geneva ÒÓ.,ÓÓÓÓ6ÓÓ ÓßßßßßßßßßßßßßßßßßßÑMonacoÑÑ ÑÒ  BA Op Monaco ÒÒ  BA Op Monaco Ò€ ‚ƒCþÿ<< CÿÿƒLevel 1Level 2Level 3Level 4Level 5($$””ò òÚ  Ú1Ú  Úó ó„„'÷ÿ dxdüÿP PdÝ ƒ!ÝÔ . ÔÔ€ÔÓ&€&&X„d&ÓÑ#€&&Xd#ÑÔ€'ÔÔ€'¼ÔÝ  ÝÒ  ÒÒ „ ÒÓ  ÓÑ Ü ÑÑ\R AØ'\ÑÑ€ÑÑ7€//¼¼ddÈ7ÑÑ  ÑÑ  ÑÑ , ÑÑ   ÑÑ  ÑÑ€( §u` ÑÔ€'„Ô›à@ àò òIN€THE€COURT€OF€APPEALS€OF€TENNESSEEÌà@ àMIDDLE€SECTION€AT€NASHVILLEó óÌÌÔ€'¼ÔÌÌLOUIS€DREYFUS€CORPORATION,à à)Ìà àà àà àà àà àà àà à)Ìà àPlaintiff/Appellee,à àœ€€€€€€€€€€€›à àà à)Ìà àà àà àà àà àà àà à)à àDavidson€ChanceryÌà àà àà àà àà àà àà à)à àNo.€93„830„IIIÌVS.à àà àà àà àà àà àà à)Ìà àà àà àà àà àà àà à)à àAppeal€No.Ìà àà àà àà àà àà àà à)à à01„A„01„9505„CH„00218ÌÙ€€ÙœßL€+.);+'h|øØ` ç `€€Lß›JOE€B.€HUDDLESTON,€Commissionerà à)Ìof€Revenue,€State€of€Tennessee,à àà à)Ìà àà àà àà àà àà àà à)Ìà àDefendant/Appellant.à àà àà à)ÌÌÌÌà@ àAPPEAL€FROM€THE€CHANCERYÏCOURT€FOR€DAVIDSON€COUNTYÌà@ àAT€NASHVILLE,€TENNESSEEÌÌà@ àTHE€HONORABLE€ROBERT€S.€BRANDT,€CHANCELLORÌÌÌÌòòFor€the€Plaintiff/Appelleeóó:à àà àà àà àòòFor€theÏDefendant/Appellantóó:ÌÌCharles€A.€Trostà àà àà àà àà àà àCharles€W.€BursonÌL.€Beth€Evansà àà àà àà àà àà àAttorney€General€andÏReporterÌWaller,€Lansden,€Dortch€&€Davisà àà àà àÌNashville,€Tennesseeà àà àà àà àà àMichael€E.€MooreÌà àà àà àà àà àà àà àà àSolicitor€GeneralÌÌà àà àà àà àà àà àà àà àMichael€W.€CatalanoÌà àà àà àà àà àà àà àà àAssociate€Solicitor€GeneralÌÌÌÌÌÌÔ€'„Ôà@ àò òAFFIRMED€AND€REMANDEDó óÌÌÔ€'¼ÔÌÌÌÌà àà àà àà àà àà àà àWILLIAM€C.€KOCH,€JR.,ÏJUDGEÇÓ€ÓÔ€'„Ôà@ àò òòòO€P€I€N€I€O€Nóóó óÌÔ€'¼ÔÌà àThis€appeal€involves€the€corporate€excise€tax€liability€of€aÏnondomiciliary€corporation€that€carries€on€part€of€its€business€in€Tennessee.€ÏThe€Commissioner€of€Revenue€assessed€deficiencies€against€the€corporationÏbecause€it€had€not€included€in€its€business€income€the€investment€earningsÏfrom€the€bond€trading€activities€of€one€of€its€divisions.€€The€corporationÏdisagreed€with€the€assessment€but€paid€the€alleged€deficiencies€and€filed€suit€inÏthe€Chancery€Court€for€Davidson€County.€€Following€a€bench€trial,€the€trialÏcourt€found€that€the€income€from€the€bond€trading€activities€was€businessÏincome€but€that€the€bond€trading€activities€were€not€part€of€the€corporationððsÏunitary€business.€€Accordingly,€the€trial€court€ordered€the€commissioner€toÏrefund€$124,475.58€in€taxes€and€interest.€€The€commissioner€asserts€on€thisÏappeal€that€the€evidence€does€not€support€the€trial€courtððs€conclusion€that€theÏearnings€of€the€bond€trading€division€were€non„unitary€with€the€earnings€ofÏthe€corporationððs€other€divisions.€€We€affirm€the€judgment.ÌÌà@ àò òI.ó óÌÌà àThe€Louis€Dreyfus€Corporation€is€a€dealer€in€agricultural€commodities× ƒ/ ××  ×Ïdoing€business€in€interstate€and€foreign€commerce.€€It€is€organized€under€theÏlaws€of€the€State€of€New€York€but€is€commercially€domiciled€in€Wilton,ÏConnecticut.€€The€corporation€is€a€wholly„owned€subsidiary€of€Louis€DreyfusÍHolding€Company€which€is,€in€turn,€owned€by€S.A.€Louis€Dreyfus€&€œCie›.,€aÏFrench€company€located€in€Paris€owned€by€the€Louis€Dreyfus€family.ÌÌà àIn€1981€the€Louis€Dreyfus€Corporation€acquired€all€the€shares€of€theÏAllenberg€Cotton€Company,€a€cotton€merchant€that€had€been€doing€business€inÏMemphis€since€1921.€€Allenberg€became€a€wholly€owned€subsidiary€of€theÏLouis€Dreyfus€Corporation€in€1986.€€While€Allenberg€retained€its€name€andÏcontinued€as€a€ð ðstand€alone€operationðð€after€the€merger,€it€gained€access€toÏLouis€Dreyfus€Corporationððs€significant€capital€base,€computer€technology,Ïand€world„wide€communications€system.€€Allenberg€now€controlsÏapproximately€fifteen€percent€of€the€cotton€market€in€the€United€States.€€ÌÌà àIn€1983€one€of€the€Louis€Dreyfus€Corporationððs€executives€suggestedÏthat€the€corporation€could€generate€additional€revenue€by€buying€and€sellingÏUnited€States€Treasury€Securities.€€Accordingly,€in€1984,€the€Louis€DreyfusÏCorporation€organized€the€Bond€Trading€Group€in€Stamford,€Connecticut€toÏtrade€in€government€securities€for€its€own€account.€€The€Bond€Trading€GroupÏhas€no€customers€and€holds€no€inventory.€€Rather,€it€buys€or€sells€governmentÏbonds€of€various€maturities€and€then€immediately€enters€into€repurchaseÏagreements€with€other€bond€dealers€as€well€as€offsetting€futures€contracts€orÏoptions€to€hedge€its€position.ÌÌà àThe€Louis€Dreyfus€Corporation€conducts€its€business€through€sevenÏtrading€groups.€€Six€of€these€groups€buy€and€sell€commodities,× ƒ0 ××  ×€while€theÍseventh€group€is€the€Bond€Trading€Group.€œ€Each›€group€is€managed€by€aÏdifferent€executive.€€The€managers€of€the€six€commodities€groups€report€toÏsuperiors€in€the€Louis€Dreyfus€Corporation,€while€the€manager€of€the€BondÏTrading€Group€reports€directly€to€Gerald€Louis„Dreyfus,€the€president€ofÏS.A.€Louis€Dreyfus€&€Cie.€€The€corporation€also€provides€administrative€andÏsupport€services€to€its€groups€and€divisions.€€It€uses€a€centralized€cashÏmanagement€system,€and€it€provides€certain€centralized€accounting,€legal,€andÏpayroll€services.€€It€also€provides€health€insurance,€retirement€benefits,€andÏworkerððs€compensation€coverage€to€all€its€employees.ÌÌà àThe€corporationððs€six€commodities€groups€work€closely€together.€€TheyÏare€œconnected›€to€a€proprietary,€worldwide€telecommunications€system,€andÏthey€share€internally€designed€accounting€and€trading€software.€€They€alsoÏshare€lines€of€credit€and€have€interrelated€credit€limits.€€Thus,€when€oneÏcommodities€group€obtains€credit,€the€amount€of€credit€available€to€the€otherÏcommodities€groups€may€be€reduced.€€€€The€commodities€groups€also€workÏtogether€frequently€on€common€business€ventures.ÌÌà àThe€Bond€Trading€Group€is€physically€separated€from€the€sixÏcommodities€groups€and€does€not€use€the€telecommunications,€computer,€andÏinformation€services€shared€by€the€other€groups.€€It€maintains€its€ownÏrepurchase€lines€of€credit€with€various€bond€dealers€œthat›€are€completelyÏseparate€from€the€lines€of€credit€available€to€the€six€commodities€groups.€€TheÏBond€Trading€Group€also€maintains€its€own€telecommunications€and€computerÏfacilities.€€While€it€uses€a€broker€affiliated€with€the€Louis€DreyfusÏCorporation€to€buy€and€sell€futures€and€options€contracts€on€the€futuresÍexchange,€the€Bond€Trading€Group€pays€this€broker€standard€commissions€andÏhas€the€prerogative€to€use€other€brokers.ÌÌà àDuring€the€1987,€1988,€and€1989€tax€years,€the€Bond€Trading€GroupððsÏgross€income€was€$26,560,542,€$14,049,369,€and€$2,367,611€respectively.€ÏThe€Louis€Dreyfus€Corporation€treated€the€earnings€of€its€six€commoditiesÏgroups€during€these€tax€years€as€apportionable€business€earnings€for€theÏpurposes€of€paying€Tennesseeððs€corporate€excise€taxes.€€However,€it€reportedÏthe€Bond€Trading€Groupððs€earnings€as€nonbusiness€earnings€that€would€beÏneither€allocable€nor€taxable€under€Tennesseeððs€corporate€excise€tax€statutes.€ÏFollowing€an€audit€of€the€corporationððs€returns,€the€Commissioner€of€RevenueÏdetermined€that€the€Bond€Trading€Groupððs€earnings€were€taxable€and€assessedÏan€$80,504.02€deficiency€and€$42,767.76€in€interest€against€the€Louis€DreyfusÏCorporation.ÌÌà àThe€Louis€Dreyfus€Corporation€paid€the€assessment€under€protest€andÏfiled€suit€in€the€Chancery€Court€for€Davidson€County€seeking€a€refund€of€theÏadditional€excise€taxes€and€interest€assessed€by€the€commissioner.€€It€assertedÏthat€the€earnings€of€the€Bond€Trading€Group€were€not€business€earningsÏbecause€its€bond€trading€activities€were€not€part€of€its€regular€trade€orÏbusiness€as€a€commodities€dealer.€€It€also€asserted€that€the€Bond€TradingÏGroup€was€not€part€of€its€unitary€commodities€business€and,€therefore,€thatÏthese€earnings€were€unrelated€to€the€business€activities€in€conducted€inÏTennessee.€€ÌÌà àThe€trial€court€conducted€a€two„day€bench€trial€and€on€October€3,€1994Ïfiled€a€memorandum€opinion€concluding€that€the€Bond€Trading€œGroup's›Ïearnings€were€business€income€for€the€purpose€of€Tennesseeððs€corporate€exciseÏtax€statutes.€€It€also€determined€that€the€Bond€Trading€Groupððs€earnings€wereÏnot€taxable€by€Tennessee€because€the€activities€of€the€Bond€Trading€Group€andÏthe€activities€of€the€Louis€Dreyfus€Corporationððs€six€commodities€groups€didÏnot€constitute€a€unitary€business.€€Accordingly,€the€trial€court€directed€theÏcommissioner€to€refund€the€Louis€Dreyfus€Corporation€$124,475.58€in€taxesÏand€interest.€€The€commissioner€has€perfected€this€appeal.œ× ƒ1 ××  ×›ÌÌà@ àò òII.ó óÌÌà àThe€State€of€Tennessee€taxes€corporate€income€through€the€Excise€TaxÏLaw€[Tenn.€Code€Ann.€ðððð€€67„4„801,€„822€(1994€&€Supp.€1995)]€and€theÏFranchise€Tax€Law€[Tenn.€Code€Ann.€ðð€67„4„901,€„921€(1994€&€Supp.€1995)].€ÏStates€may€tax€the€interstate€income€of€nondomiciliary€corporations€but€mayÏnot€exercise€unbridled€discretion€in€their€taxing€decisions.€€State€taxation€ofÏcorporate€income€earned€in€interstate€commerce€must€be€consistent€with€theÏCommerce€Clause€and€the€Due€Process€Clause€of€the€Fourteenth€Amendment.€ÏòòMobil€Oil€Corp.€v.€Commissioner€of€Taxesóó,€445€U.S.€425,€436„37,€100€œS.€Ct.Ï1223,€1231€(1980);€òòAmerican€Tel.€&€Tel.€Co.€v.€Huddlestonóó,€880€S.W.2d€682,Ï689€(Tenn.€Ct.€App.€1994).ÌÌà àA€state€cannot,€as€a€general€rule,€tax€value€earned€beyond€its€borders.€€ÏòòBarclays€Bank€PLC.€v.€Franchise€Tax€Bd.,óó€___€U.S.€___,€___,€114€S.€Ct.Í2268,€2272€(1994);€€òòASARCO,€Inc.€v.€Idaho€State€Tax€Commððn,óó€458€U.S.Ï307,€315,€102€S.€Ct.€3103,€3108€(1982).€€However,€a€state€tax€applied€toÏinterstate€commerce€can€survive€Commerce€Clause€scrutiny€(1)€if€the€tax€isÏapplied€to€an€activity€with€a€substantial€nexus€to€the€state,€(2)€if€the€tax€isÏfairly€apportioned,€(3)€if€the€tax€does€not€discriminate€against€interstateÏcommerce,€and€(4)€if€the€tax€is€fairly€related€toÑ€2ÑÇthe€services€provided€by€the€taxing€state.€€òòComplete€Auto€Transit,€Inc.€v.ÏBrady,€óó430€U.S.€274,€279,€97€S.€Ct.€1076,€1079€(1977).€€It€will€also€beÏconsistent€with€the€Due€Process€Clause€of€the€Fourteenth€Amendment€(1)€ifÏthere€is€a€minimal€connection€between€the€interstate€activities€to€be€taxed€andÏthe€taxing€state× ƒ3 ××  ×€and€(2)€if€there€is€a€rational€relationship€between€the€incomeÏattributed€to€the€taxing€state€and€the€intrastate€value€of€the€business.€€òòAllied„Signal,€Inc.€v.€Director,€Div.€of€Taxation,óó€504€U.S.€768,€772,€112€S.€Ct.€2251,Ï2255€(1992);€òòMobil€Oil€Corp.€v.€Commissioner€of€Taxes,óó€445€U.S.€at€436„37,Ï100€S.€Ct.€at€1231.ÌÌà àThe€states€have€wide€latitude€to€devise€methods€to€attribute€businessÏearnings€to€a€taxing€state.€€òòMoorman€Mfg.€Co.€v.€Blair,óó€437€U.S.€267,€279,€98ÏS.€Ct.€2340,€2347„48€(1978);€òòAmerican€Tel.€&€Tel.€Co.€v.€Huddleston,óó€880ÏS.W.2d€at€689.€€The€three€methods€most€commonly€used€to€allocate€corporateÏearnings€for€the€purposes€of€taxation€include€(1)€separate€accounting,€(2)Ïallocation,€and€(3)€apportionment.òò€€Holiday€Inns,€Inc.€v.€Olsen,óó€692€S.W.2dÏ850,€852€(Tenn.€1985).€€Each€of€these€methods€involve€some€degree€ofÏarbitrariness;€òòBarclays€Bank€PLC.€v.€Franchise€Tax€Bd.,óó€___€U.S.€at€___,€114ÏS.€Ct.€at€2272;€òòContainer€Corp.€of€America€v.€Franchise€Tax€Bd.,óó€463€U.S.Ï159,€182,€103€S.€Ct.€2933,€2949€(1983);€however,€apportionment€does€a€betterÏjob€of€accounting€for€the€many€subtle€and€largely€unquantifiable€transfers€ofÏvalue€that€take€place€among€the€components€of€a€single€enterprise.€€òòAllied„Signal,€Inc.€v.€Director,€Div.€of€Taxation,óó€504€U.S.€at€783,€112€S.€Ct.€at€2261.€€ÌÌà àTennessee,€like€twenty„four€other€states,€has€chosen€to€tax€businessÏincome€using€the€apportionment€method€embodied€in€the€Uniform€Division€ofÏIncome€for€Tax€Purposes€Act€(ð ðUDITPAðð).€€òòAmerican€Tel.€&€Tel.€Co.€v.ÏHuddleston,óó€880€S.W.2d€at€685€(Tennesseeððs€corporate€excise€tax€statutes€areÏbased€on€UDITPA).€€Under€the€apportionment€method,€all€of€a€multistateÏcorporationððs€business€income€is€determined€and€then€apportioned€pro€rataÏamong€the€states€in€which€the€corporation€does€business.€€Each€state€isÏpermitted€to€tax€that€portion€of€the€corporationððs€income€that€is€proportionalÏto€the€portion€of€its€business€done€in€the€state.€€òòHoliday€Inns,€Inc.€v.€Olsen,óóÏ692€S.W.2d€at€852;€1€Jerome€R.€Hellerstein€&€Walter€Hellerstein,€òòStateÏTaxationóó€ðð8.5€(2d€ed.€1993)€(ð ðHellersteinðð).€€ÌÌà àThe€unitary€business€principle€is€at€the€heart€of€any€formula€toÏapportion€corporate€revenues€for€tax€purposes.€€òòMobil€Oil€Corp.€v.ÏCommissioner€of€Taxes,€óó445€U.S.€at€439,€100€S.€Ct.€at€1232;€òòPeterson€Mfg.ÏCo.€v.€State,óó€779€S.W.2d€784,€786€(Tenn.€1989).€€It€is€judicially€created,ÏòòAmerican€Tel.€&€Tel.€Co.€v.€Huddleston,óó€880€S.W.2d€at€690,€and€is€intendedÏto€balance€two€federal€constitutional€imperatives€„€first€that€the€states€haveÏbroad€authority€to€devise€methods€for€taxing€a€corporationððs€intrastate€valueÏor€income,€and€second€that€the€states€cannot€tax€value€or€income€that€cannot,Ïin€all€fairness,€be€attributed€to€the€corporationððs€activities€within€the€state.€ÏòòAllied„Signal,€Inc.€v.€Director,€Div.€of€Taxation,óó€504€U.S.€at€780,€112€S.€Ct.Ïat€2259.€€ÌÌà àThe€central€purpose€of€the€unitary€business€principle€is€to€ensure€thatÏeach€state€taxes€only€its€fair€share€of€a€corporationððs€interstate€transactions.€ÏòòOklahoma€Tax€Commððn€v.€Jefferson€Lines,€Inc.,óó€___€U.S.€___,€___€115€S.€Ct.Ï1331,€1338€(1995);€òòGoldberg€v.€Sweet,óó€488€U.S.€257,€260„61,€109€S.€Ct.€582,Ï588€(1989).€€The€principle€operates€on€the€premise€that€the€value€of€a€unitaryÏbusiness€is€apportionable€to€a€state€for€taxation€if€the€businessððs€operationsÏwithin€the€state€contribute€to€or€benefit€from€the€corporationððs€unitaryÏbusiness.€€States€may€not€include€in€a€businessððs€apportionable€tax€base€incomeÏnot€derived€directly€from€the€unitary€business.€€Thus,€the€pivotal€question€inÏcases€such€as€this€one€is€whether€the€business€income€sought€to€be€included€inÏthe€apportionable€tax€base€derives€from€an€unrelated€business€activityÏconstituting€a€discrete€business€enterprise€that€is€not€part€of€the€taxpayerððsÏunitary€business.€òòAllied„Signal,€Inc.€v.€Director,€Div.€of€Taxation,óó€504€U.S.€atÏ780,€112€S.€Ct.€at€2259;€òòExxon€Corp.€v.€Wisconsin€Depððt€of€Revenue,óó€447ÏU.S.€207,€224,€100€S.€Ct.€2109,€2120€(1980).€€ÌÌÌÌà@ àò òIII.ó óÌÌà àA€unitary€business€is€a€business€whose€components€are€too€closelyÏconnected€and€necessary€to€each€other€to€justify€division€or€separateÏconsideration€as€independent€units.€€òòSeeóó€4€Zolman€Cavitch,€òòBusinessÏOrganizationsóó€ðð€79.03[3][a]€(1996).€€It€is€operated€as€a€whole,€and€itsÏcomponents€are€substantially€interdependent.€€òòContainer€Corp.€of€America€v.ÏFranchise€Tax€Bd.,óó€463€U.S.€at€179,€103€S.€Ct.€at€2947;€òòF.W.€Woolworth€Co.Ív.€Taxation€and€Revenue€Depððt,óó€458€U.S.€354,€371,€102€S.€Ct.€3128,€3139Ï(1982).ÌÌà àThe€underlying€unity€or€diversity€of€a€business€does€not€necessarilyÏdepend€on€the€form€or€structure€of€its€organization,€òòMobil€Oil€Corp.€v.ÏCommissioner€of€Taxes,óó€445€U.S.€at€440,€100€S.€Ct.€at€1233,€or€on€theÏbusinessððs€ð ðpurpose,ðð€òòASARCO,€Inc.€v.€Idaho€State€Tax€Commððn,óó€458€U.S.€atÏ326,€102€S.€Ct.€at€3114.€€Accordingly,€a€single€corporation€may€carry€on€twoÏor€more€discrete€businesses€without€these€businesses€being€considered€unitary.€ÏòòSeeóó€Hellerstein€ðð€8.11[6];€Tenn.€Code€Ann.€ðð€67„4„804(a)(1)€(Supp.€1995);ÏTenn.€R.€&€Regs.€r.€1320„6„1„.23(1)(d)€(1993);€Multistate€Tax€CommððnÏAllocation€and€Apportionment€Regulations€reg.€IV.1.(b)€(Multistate€TaxÏCommððn€1990),€òòreprinted€inóó€1€State€Tax€Guide€(CCH)€ðð€352a€(1995).€€ÌÌà àComponents€that€operate€as€discrete€business€entities€are€not€part€of€aÏunitary€business€even€if€the€business€could€operate€them€as€integratedÏdivisions.€€òòAllied„Signal,€Inc.€v.€Director,€Div.€of€Taxation,óó€504€U.S.€at€781,Ï112€S.€Ct.€at€2260.€€òòF.W.€Woolworth€Co.€v.€Taxation€and€Revenue€Depððt,óó€458ÏU.S.€at€362,€102€S.€Ct.€at€3134.€€Thus,€the€proper€inquiry€focuses€on€theÏunderlying€unity€or€diversity€of€the€business,òò€Mobil€Oil€Corp.€v.ÏCommissioner€of€Taxes,óó€445€U.S.€at€440,€100€S.€Ct.€at€1233,€and€on€theÏrelationship€between€the€activities€of€the€component€in€the€taxing€state€and€theÏactivities€occurring€elsewhere,€not€just€on€the€common€relationships€betweenÏthe€various€components€and€the€central€structure€of€the€business.€ÏòòCommonwealth€v.€ACF€Indus.,€Inc.,óó€271€A.2d€273,€280€(Pa.€1970).€€ÌÌà àLikewise,€the€unity€or€diversity€of€a€business€does€not€depend€onÏwhether€the€earnings€of€its€components€ultimately€add€value€to€the€entireÏbusiness.€€òòF.W.€Woolworth€Co.€v.€Taxation€and€Revenue€Depððt,óó€458€U.S.€atÏ363,€102€S.€Ct.€at€3135.€€A€business€is€unitary€when€the€operation€of€one€of€itsÏcomponents€depends€upon€and€contributes€to€the€operation€of€its€otherÏcomponents.€€òòBarclays€Bank€PLC.€v.€Franchise€Tax€Bd.,óó€___€U.S.€at€___€n.1,Ï114€S.€Ct.€at€2272€n.1;€òòTenneco€West,€Inc.€v.€Franchise€Tax€Bd.,óó€286€Cal.ÏRptr.€354,€361€(Ct.€App.€1991);€òòChampion€Intððl€Corp.€v.€Bureau€of€Revenue,óóÏ540€P.2d€1300,€1302€(N.M.€Ct.€App.€€1975).€€Conversely,€it€is€not€unitaryÏwhen€the€income€producing€activities€of€one€of€its€components€are€notÏoperationally€linked€to€the€income€producing€activities€of€its€otherÏcomponents.€€òòAllied„Signal,€Inc.€v.€Director,€Div.€of€Taxation,óó€504€U.S.€atÏ786„87,€112€S.€Ct.€at€2262„63;€òòMobil€Oil€Corp.€v.€Commissioner€of€Taxes,óóÏ445€U.S.€at€439,€100€S.€Ct.€at€1232.ÌÌà@ àò òIV.ó óÌÌà àTax€assessments€are€presumed€to€be€valid.€€òòStratton€v.€Jackson,óó€707ÏS.W.2d€865,€867€(Tenn.€1986);€òòAce€of€Clubs€v.€Huddleston,óó€872€S.W.2d€679,Ï681€(Tenn.€Ct.€App.€1993).€€Accordingly,€a€taxpayer€who€challenges€aÏfranchise€tax€assessment€must€show€by€clear€and€convincing€evidence€that€theÏcommissionerððs€application€of€the€apportionment€formula€has€causedÏextraterritorial€value€to€be€taxed.€€òòContainer€Corp.€of€America€v.€FranchiseÏTax€Bd.,óó€463€U.S.€at€164,€103€S.€Ct.€at€2939„40;€òòW.S.€Dickey€Clay€Mfg.€Co.Ïv.€Dickinson,óó€200€Tenn.€25,€35,€289€S.W.2d€533,€537€(1956);€òòAmerican€Tel.Ï&€Tel.€Co.€v.€Huddleston,óó€880€S.W.2d€at€690.ÌÌà àThis€heightened€burden€of€proof€defies€precise€definition,€òòseeóó€òòMajors€v.ÏSmith,óó€776€S.W.2d€538,€540€(Tenn.€Ct.€App.€1989),× ƒ4 ××  ×€but€it€is€intended€toÏinstruct€the€fact„finder€concerning€the€degree€of€confidence€it€should€have€inÏthe€correctness€of€its€decision.€€òòSee€OððDaniel€v.€Messier,óó€905€S.W.2d€182,€187Ï(Tenn.€Ct.€App.€1995).€€Clear€and€cogent€evidence€is€more€than€aÏpreponderance€of€the€evidence,€òòseeóó€òòGray€v.€Todd,óó€819€S.W.2d€104,€108Ï(Tenn.€Ct.€App.€1991).€€It€need€not,€however,€be€uncontradicted,€òòseeóóÏòòAlexander€v.€C.C.€Powell€Realty€Co.,óó€535€S.W.2d€154,€158€(Tenn.€Ct.€App.Ï1975),€and€it€need€not€remove€all€reasonable€doubt.€€òòSeeóó€òòIn€re€Estate€ofÏWardell,óó€674€S.W.2d€293,€295€(Tenn.€Ct.€App.€1983).€€In€the€context€of€thisÏcase,€the€clear€and€cogent€evidence€must€be€sufficient€to€overcome€theÏopposing€evidence€and€the€presumed€validity€of€the€assessment€and€mustÏproduce€in€the€fact„finderððs€mind€a€firm€belief€that€its€decision€is€correct.ÌÌà àThe€legal€principles€reviewed€in€the€preceding€sections€provide€theÏconceptual€framework€for€determining€whether€a€particular€commercialÏenterprise€is€a€unitary€business€for€taxation€purposes.€€Applying€the€unitaryÏbusiness€principle€is,€however,€a€fact„sensitive€process€requiring€a€carefulÏanalysis€of€the€operation€of€the€business€enterprise.€€òòAllied„Signal,€Inc.€v.ÏDirector,€Div.€of€Taxation,óó€504€U.S.€at€785,€112€S.€Ct.€at€2262;€òòASARCO,ÏInc.€v.€Idaho€State€Tax€Commððn,óó€458€U.S.€at€329€n.24,€102€S.€Ct.€at€3116Ïn.24;€òòInternational€Paper€Co.€v.€Commissioner€of€Revenue€Servs.,óó€621€A.2dÏ330,€332€(Conn.€Super.€Ct.€1992).€€Because€of€the€endless€variety€of€businessÍenterprises,€the€precedents€from€other€jurisdictions,€or€even€from€thisÏjurisdiction,€provide€only€limited€assistance€in€this€factual€inquiry.ÌÌà àWe€review€the€trial€courtððs€findings€of€fact€in€these€cases€in€accordanceÏwith€Tenn.€R.€App.€P.€13(d),€and€thus€we€will€presume€that€the€trial€courtððsÏfindings€of€fact€are€correct€unless€the€evidence€preponderates€to€the€contrary.€ÏòòPeterson€Mfg.€Co.€v.€State,óó€779€S.W.2d€at€787.€€Based€on€the€facts€found€byÏthe€trial€court,€we€must€also€determine€whether€the€Louis€DreyfusÏCorporation€has€come€forward€with€clear€and€cogent€evidence€that€the€BondÏTrading€Group€was€not€part€of€its€unitary€business€and€that€the€income€earnedÏby€the€Bond€Trading€Group€was€unrelated€to€the€sale€of€cotton€in€TennesseeÏby€Allenberg.ÌÌà àThe€courts€have€devised€several€tests€for€determining€whether€a€businessÏis€unitary.€€The€earliest€of€these,€the€so„called€ð ðthree€unitiesðð€test€required€theÏcourts€to€examine€the€unity€of€ownership,€the€unity€of€operation€as€evidencedÏby€central€purchasing,€advertising,€accounting,€and€management,€and€the€unityÏof€a€centralized€executive€force€and€general€system€of€operation.€€òòButler€Bros.Ïv.€McColgan,óó€315€U.S.€501,€508,€62€S.€Ct.€701,€704„05€(1942);€òòPeterson€Mfg.ÏCo.€v.€State,óó€779€S.W.2d€at€786;€òòW.S.€Dickey€Clay€Mfg.€Co.€v.€Dickinson,óóÏ200€Tenn.€at€34„35,€289€S.W.2d€at€537.€€The€second€test€employed€by€theÏUnited€States€Supreme€Court€requires€the€courts€to€examine€the€record€forÏevidence€of€functional€integration,€centralization€of€management,€andÏeconomies€of€scale.€€òòF.W.€Woolworth€Co.€v.€Taxation€and€Revenue€Depððt,óó€458ÏU.S.€at€364,€102€S.€Ct.€at€3135;€òòMobil€Oil€Corp.€v.€Commissioner€of€Taxes,óóÏ445€U.S.€at€438,€100€S.€Ct.€at€1232.€€Other€courts€have€used€the€ð ðdependencyÍand€contributionðð€test€to€determine€whether€the€business€components€underÏconsideration€contribute€to€each€other€and€the€operation€of€the€business€as€aÏwhole.€€òòA.M.€Castle€&€Co.€v.€Franchise€Tax€Bd.,óó€43€Cal.€Rptr.€2d€340,€346Ï(Ct.€App.€1995);€òòRamsay,€Scarlett€&€Co.€v.€Comptroller,óó€490€A.2d€1296,Ï1302€(Md.€1985);€òòSilent€Hoist€&€Crain€Co.€v.€Director,€Div.€of€Taxation,€óó494ÏA.2d€775,€784€(N.J.€1985).€€These€tests€are€not€mutually€exclusive€but€ratherÏare€alternative€ways€to€determine€whether€the€components€of€the€businessÏoperate€under€ð ðan€umbrella€of€central€management€and€controlledÏinteraction,ðð€òòExxon€Corp.€v.€Wisconsin€Depððt€of€Revenue,óó€447€U.S.€at€224,Ï100€S.€Ct.€at€2120.ÌÌà àNo€single€factor€is€controlling€under€any€of€the€tests.€€Instead,€the€courtsÏexamine€these€factors€in€combination€to€determine€whether€the€business€isÏunitary.€€Since€states€may€only€tax€value€having€substantial€connection€with€theÏstate,€the€courts€must€consider€not€only€the€relationship€between€the€non„resident€business€and€the€non„resident€component€whose€income€is€sought€toÏbe€taxed€but€also€the€relationship€between€the€in„state€component€and€the€non„resident€component.€€òòSeeóó€òòCentral€National„Gottesman,€Inc.€v.€Director,€Dir.Ïof€Taxation,óó€14€N.J.€Tax€545,€556„57€(Tax.€Ct.€1995);€òòIn€re€Income€TaxÏProtest€of€Griffin€Television,€Inc.€(Griffin€Television,€Inc.€v.€State€ex€rel.ÏOklahoma€Tax€Commððn),óó€877€P.2d€588,€593€(Okla.€1994).ÌÌà àThe€evidence€in€this€record€demonstrates€significant€connectionsÏbetween€the€Louis€Dreyfus€Corporation€and€the€Bond€Trading€Group.€€It€doesÏnot,€however,€demonstrate€significant€connections€or€a€significant€flow€ofÏvalue€between€the€Bond€Trading€Group€and€Allenberg.€€Since€Allenberg€is€theÍLouis€Dreyfus€Corporationððs€only€connection€with€Tennessee,€there€is€noÏevidence€of€a€substantial€connection€between€Tennessee€and€the€income€earnedÏby€the€Bond€Trading€Group.€€There€is€likewise€clear€and€cogent€evidenceÏsupporting€the€trial€courtððs€conclusion€that€the€activities€of€the€Bond€TradingÏGroup€were€not€part€of€the€Louis€Dreyfus€Corporationððs€unitary€business.€ÌÌà@ àò òA.ó óÌà@ àòòò òOwnership€and€Controló óóóÌÌà àThere€is€no€factual€dispute€concerning€unity€of€ownership€in€this€case.€ÏThe€Louis€Dreyfus€Corporation€owns€both€the€Bond€Trading€Group€andÏAllenberg.€However,€a€businessððs€choice€of€structure€does€not€control€whetherÏthe€business€is€unitary.€€òòAllied„Signal,€Inc.€v.€Director,€Div.€of€Taxation,óó€504ÏU.S.€at€784,€112€S.€Ct.€at€2261;€òòCentral€National„Gottesman,€Inc.€v.€Director,ÏDiv.€of€Taxation,óó€14€N.J.€Tax€at€558.€€If€it€did,€unity€of€ownership€wouldÏtrump€all€other€considerations€when€the€taxpayer€is€a€single€corporation.€ÏUnity€of€ownership€alone€does€not€necessarily€indicate€that€the€variousÏcomponents€of€a€business€are€substantially€interdependent€on€each€other.ÌÌà àA€more€significant€inquiry€concerns€the€control€of€the€businessððÏactivities.€€This€inquiry€should€consider€not€only€the€extent€of€centralizedÏcontrol€of€the€business€but€also€the€existence€and€extent€of€control€that€theÏbusinessðð€components€have€over€the€activities€of€the€other€components.€€WhileÏthere€are€some€managerial€links€between€the€Louis€Dreyfus€Corporation€andÏthe€Bond€Trading€Group,€there€are€no€managerial€links€between€the€BondÏTrading€Group€and€Allenberg.ÌÌà àJames€Wayne€is€the€executive€officer€of€the€Bond€Trading€Group€and€isÏalso€a€vice€president€of€the€Louis€Dreyfus€Corporation.€€Unlike€the€managersÏof€the€other€commodities€groups,€Mr.€Wayne€reports€directly€to€GerardÏLouis„Dreyfus€and€occasionally€to€Ernst€Steiner,€Mr.€Louis„Dreyfusðð€principalÏassistant.€€Neither€Mr.€Louis„Dreyfus€nor€Mr.€Steiner€play€a€significant€roleÏin€the€day„to„day€operations€of€the€Bond€Trading€Group.€€They€do€not€adviseÏMr.€Wayne€or€his€staff€concerning€investment€strategies€or€specific€tradingÏdecisions.€€Accordingly,€the€Bond€Trading€Group€has€complete€autonomy€toÏdetermine€its€own€policies€with€regard€to€its€primary€business€activities.€€TheÏLouis€Dreyfus€Corporation€exercises€only€occasional€management€oversightÏover€the€Bond€Trading€Group,€and€this€oversight€is€extremely€general€when€itÏis€exercised.ÌÌà àLikewise,€the€record€contains€no€evidence€of€the€existence€of€anyÏmanagerial€links€between€the€Bond€Trading€Group€and€Allenberg.€€ThomasÏMalone,€Jr.,€Allenbergððs€executive€vice€president,€testified€that€he€had€met€Mr.ÏWayne€only€once€and€that€his€reporting€relationship€to€the€Louis€DreyfusÏCorporation€differed€from€Mr.€Wayneððs.€€Neither€Mr.€Wayne€nor€Mr.ÏMalone€has€any€significant€knowledge€concerning€each€otherððs€activities€orÏbusiness€strategies.ÌÌà@ àò òB.ó óÌà@ àòòò òFunctional€Integrationó óóóÌÌà àFunctional€integration€among€a€businessððs€components€is€anotherÏearmark€of€a€unitary€business.€€In€order€for€a€business€to€be€unitary,€thereÏmust€be€a€substantial€interrelationship€or€interdependence€among€its€basicÏoperations.€€òòSeeóó€òòState€ex€rel.€Arizona€Depððt€of€Revenue€v.€Talley€Indus.,€Inc.,óóÏ893€P.2d€17,€24€Ariz.€Ct.€App.€1994).€€While€there€is€substantialÏinterdependence€among€the€Louis€Dreyfus€Corporationððs€six€commoditiesÏgroups,€the€record€contains€clear€and€cogent€evidence€that€the€Bond€TradingÏGroup€does€not€have€a€similar€relationship€either€with€the€Louis€DreyfusÏCorporation€or€with€Allenberg.€€ÌÌà àThe€Bond€Trading€Group€has€no€operational€relationships€with€theÏLouis€Dreyfus€Corporationððs€six€commodities€groups.€€Its€business€activitiesÏare€discrete€from€the€other€groups.€€In€addition,€its€offices€are€geographicallyÏseparated€from€the€other€corporate€offices;€it€uses€separateÏtelecommunications€and€computer€systems;€and€it€maintains€separate€financialÏrelationships€that€are€not€available€to€the€other€groups.€€It€does€not€shareÏemployees€with€the€other€groups€or€participate€in€common€training€programs,Ïand€its€employees€do€not€rotate€to€and€from€the€commodities€groups.€€TheÏBond€Trading€Group€could€easily€exist€and€operate€without€the€commoditiesÏgroups.€€It€neither€depends€on€nor€contributes€to€the€business€operations€of€theÏcommodities€groups,€especially€Allenberg.ÌÌà àThe€strongest€operational€link€between€the€Bond€Trading€Group€andÏAllenberg€results€from€the€Louis€Dreyfus€Corporationððs€cash€managementÏpolicy.€€At€the€end€of€every€day,€the€corporation€ð ðsweepsðð€the€excess€funds€inÏall€its€groupsðð€accounts€into€a€corporate€central€account.€€When€a€groupÍrequires€funds,€the€corporation€transfers€money€from€its€central€account€intoÏthe€groupððs€account.€€Since€the€funds€are€commingled€and€theoreticallyÏavailable€to€all€the€groups,€the€commissioner€insists€that€the€cash€managementÏpolicy€is€strong€evidence€that€the€Louis€Dreyfus€Corporationððs€business€isÏunitary.€€We€do€not€agree.ÌÌà àThe€United€States€Supreme€Court€has€recognized€that€one€componentÏmay€ð ðadd€to€the€richesðð€of€the€corporation€and€yet€remain€a€discrete€businessÏenterprise.€€òòASARCO,€Inc.€v.€Idaho€State€Tax€Commððn,óó€458€U.S.€at€328,€102ÏS.€Ct.€at€3115.€€Accordingly,€the€Tax€Court€of€New€Jersey€has€determined€onÏat€least€two€occasions€that€a€division€managing€a€corporationððs€investments€wasÏnot€unitary€with€the€corporationððs€other€operating€divisions.€€òòCentral€National„Gottesman,€Inc.€v.€Director,€Div.€of€Taxation,óó€14€N.J.€Tax€at€559„60;ÏòòAmerican€Home€Prods.€Corp.€v.€Taxation€Div.€Director,óó€11€N.J.€Tax€287,Ï307€(Tax€Ct.€1990).ÌÌà àThe€director€made€the€same€argument€in€the€òòCentral€National„Gottesman,€Inc.óó€case€that€the€commissioner€is€making€in€this€case.€€He€insistedÏthat€the€commingling€of€funds€was€evidence€that€the€corporationððs€non„resident€investment€division€was€unitary€with€another€division€located€in€NewÏJersey.€€After€noting€that€it€was€not€unusual€for€a€corporation€to€have€aÏdivision€devoted€to€managing€its€investments€that€is€unrelated€to€theÏcorporationððs€operational€divisions,€the€tax€court€determined€that€theÏcommingling€of€interest€and€dividend€income€with€the€other€divisionsððÏoperating€income€was€not€necessarily€indicative€of€a€unitary€business€when€theÏinvestment€income€was€sufficient€to€provide€the€funds€needed€to€operate€theÍinvestment€division.€€òòCentral€National„Gottesman,€Inc.€v.€Director,€Div.€ofÏTaxation,óó€14€N.J.€Tax€at€556€(citing€òòAmerican€Home€Prods.€Corp.€v.€TaxationÏDiv.€Director,óó€11€N.J.€Tax€at€307).€ÌÌà àWe€take€the€same€view€of€the€commingling€of€the€Bond€TradingÏDivisionððs€revenues€with€those€generated€by€Allenberg.€€The€Bond€TradingÏDivisionððs€investment€activities€are€self„funded€and€self„contained.€€When€theÏdivision€purchases€a€bond,€it€immediately€enters€into€an€offsetting€futuresÏcontract€or€option€to€hedge€its€position.€€Little€cash€is€required€because€theseÏtransactions€are€essentially€simultaneous€purchases€and€sales.€€When€credit€isÏrequired,€the€Bond€Trading€Group€relies€on€its€own€repurchase€lines€of€creditÏthat€are€not€available€to€the€commodities€divisions,€and€these€borrowings€areÏfully€secured€by€the€bonds€being€purchased.ÌÌà àAllenberg€has€not€invested€any€of€its€working€capital€with€the€BondÏTrading€Group,€nor€has€the€Bond€Trading€Group€invested€any€of€its€workingÏcapital€with€Allenberg.€€Accordingly,€the€Bond€Trading€Groupððs€transactionsÏwere€passive€investments€and€were€not€apportionable€to€Tennessee€since€theyÏwere€operationally€unrelated€to€any€of€Allenbergððs€activities€in€Tennessee.€€òòSeeóóÏòòAllied„Signal,€Inc.€v.€Director,€Div.€of€Taxation,óó€504€U.S.€at€787,€112€S.€Ct.Ïat€2263;€òòASARCO,€Inc.€v.€Idaho€State€Tax€Commððn,óó€458€U.S.€at€327,€102€S.ÏCt.€at€3114;€òòExxon€Corp.€v.€Wisconsin€Depððt€of€Revenue,óó€447€U.S.€at€223,Ï100€S.€Ct.€at€2120.€ÌÌà@ àò òC.ó óÌà@ àòòò òEconomies€of€Scaleó óóóÌÌà àWe€finally€turn€to€the€evidence€with€regard€to€the€economies€of€scale€orÏthe€unity€operation.€€There€is€no€question€that€the€Louis€Dreyfus€CorporationÏprovides€certain€central€staff€functions€and€common€operational€resources€toÏall€its€trading€groups,€including€the€Bond€Trading€Group€and€Allenberg.€ÏHowever,€the€provision€of€these€central€services€does€not€undermine€the€BondÏTrading€Groupððs€operational€independence€from€the€Louis€DreyfusÏCorporation€and€certainly€from€Allenberg.ÌÌà àThe€Louis€Dreyfus€Corporation€pays€the€salaries€of€employees€of€all€itsÏtrading€groups€and€also€provides€a€company„wide€pension€plan,€an€employeeÏbenefits€package,€and€workmenððs€compensation€coverage.€€It€also€providesÏpayroll€services,€and€pays€for€the€lease€of€the€premises€occupied€by€the€BondÏTrading€Group€as€well€as€the€other€groups.€€The€corporation€also€makes€legalÏservices€available€to€the€trading€groups€as€well€as€centralized€accountingÏservices,€primarily€for€the€preparation€of€the€annual€consolidated€corporateÏreports.ÌÌà àThe€Bond€Trading€Group€does€not€necessarily€use€the€same€centralÏservices€used€by€the€commodities€divisions.€€It€employs€its€own€accountantÏwho€performs€the€more€complex€accounting€activities€relating€to€the€day„to„day€activities€of€the€division.€€It€also€has€chosen€to€obtain€its€own€legalÏassistance,€and€it€does€not€use€any€of€the€common€credit€resources€shared€byÏthe€commodities€groups.ÌÌà àThe€Bond€Trading€Group€also€buys€and€sells€bond€futures€and€optionsÏcontracts€through€Term€Commodities,€Inc.,× ƒ5 ××  ×€the€same€securities€broker€thatÏprovides€futures€trading€and€clearing€facilities€to€the€commodities€groups.€ÏThe€Bond€Trading€Group€must€use€a€broker€for€these€transactions,€but€it€isÏnot€required€to€use€Term€Commodities,€Inc.€€The€Bond€Trading€Group€doesÏnot€depend€on€this€brokerððs€expertise€in€its€investment€decisions€and€couldÏeasily€use€another€broker€to€provide€the€needed€clearing€services.€€The€BondÏTrading€Groupððs€dealings€with€Term€Commodities,€Inc.€are€at€arms€length,Ïand€it€pays€Term€Commodities,€Inc.€a€standard€commission€for€its€services.ÌÌà àThe€record€contains€no€evidence€of€any€interdependence€between€theÏBond€Trading€Group€and€Allenberg.€€The€Bond€Trading€Group€has€benefittedÏto€some€extent€from€its€affiliation€with€the€Louis€Dreyfus€Corporation,€butÏthese€benefits,€considered€in€light€of€the€other€factors,€are€not€significantÏenough€to€€require€the€courts€to€find€that€the€activities€of€the€Bond€TradingÏGroup€were€unitary€with€those€of€the€corporationððs€six€commodities€divisions.ÌÌà@ àò òV.ó óÌÌà àWe€find€that€the€record€contains€clear€and€cogent€evidence€supportingÏthe€trial€courtððs€conclusion€that€the€activities€of€the€Bond€Trading€Group€wereÏnot€unitary€with€those€of€the€Louis€Dreyfus€Corporation€and€the€AllenbergÏCotton€Company.€€Accordingly,€we€affirm€the€judgment€and€remand€the€caseÍfor€whatever€other€proceedings€may€be€required.€€We€also€tax€the€costs€of€thisÏappeal€to€the€Commissioner€of€Revenue.€ÌÌÌÓÓà àà àà àà àà àà à__________________________________Ìà àà àà àà àà àà àWILLIAM€C.€KOCH,€JR.,€JUDGEÌÌÌCONCUR:ÌÌÌ__________________________________ÌHENRY€F.€TODD,€P.J.,€M.S.ÌÌÌ__________________________________ÌBEN€H.€CANTRELL,€JUDGE