Doesn the Commissioner of Revenue have the authority to require “combined reporting”?
A. Yes, but only on a case-by-case basis and when he has reason to believe the taxpayer has underreported income. Exercising that authority would almost surely lead to litigation and the cost-benefit ratio would be too high to make it worthwhile. Mandatory “combined reporting” would be much more efficient and place the responsibility for the law where it belongs, on the citizens of Tennessee. In an article in the prestigious National Tax Journal, Economists William F. Fox, Matthew N. Murray, and LeAnn Luna wrote: “[W]e argue for “combined reporting” in all states. This conclusion is based in part on economic considerations that are independent of any tax planning opportunities, such as the practical problems associated with measuring economies of scope across related firms. But “combined reporting” can also lessen tax planning distortions based only on corporate form that waste resources through avoidance and government oversight activities. William F. Fox, Matthew N. Murray, and LeAnn
