Court Cases
Franchise Tax
Apportionment
Conagra Brands, Inc. v. Hegar, No. 03-21-00111-CV (Tex. App.—Austin Aug 24, 2022, no pet. h.)—The Third Court of Appeals held that a taxpayer could not include gross receipts from certain securities in its apportionment-factor denominator for purposes of calculating its Texas franchise tax.[1]
- The taxpayer in question was in the business of producing food products for sale to grocery stores, convenience stores and food service businesses. In order to mitigate the risks associated with potential fluctuations in the price of necessary components and raw materials, the taxpayer bought and sold commodity futures contracts.
- The taxpayer argued that these securities were inventory for federal tax purposes and that the gross proceeds from the sale of these securities should be included in its apportionment factor denominator. On appeal, however, the taxpayer didn’t dispute the trial court’s finding that the securities weren’t inventory as defined in the Internal Revenue Code. Instead, the taxpayer argued that the securities were in substance inventory under the U.S. Supreme Court’s decision in Corn Products Refining Co. v. Comm’r, 350 U.S. 46 (1955).
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