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IN THE SUPREME COURT OF TENNESSEE

AT NASHVILLE

June 2, 2015 Session

VODAFONE AMERICAS HOLDINGS, INC. & SUBSIDIARIES V.

RICHARD H. ROBERTS, COMMISSIONER OF REVENUE,

STATE OF TENNESSEE

Appeal by Permission from the Court of Appeals, Middle Section

Chancery Court for Davidson County

No. 071860-IV Russell T. Perkins, Judge

No. M2013-00947-SC-R11-CV – FILED MARCH 23, 2016

JEFFREY S. BIVINS, J., concurring in part and dissenting in part. 

I agree with much of the analysis in the majority opinion. Indeed, although in my 

mind it presents a close question, I can agree with the majority that the taxpayer’s 

calculation of franchise and excise taxes under the statutory apportionment formula does

not “fairly represent the extent of the taxpayer’s business activity” in Tennessee. See

Tenn. Code Ann. § 67-4-2014(a) (2015). However, where I must part company with the 

majority is on the issue of the Commissioner’s compliance with the Tennessee 

Department of Revenue’s (“Department”) own regulation applicable in this case. See

Tenn. Comp. R. & Regs. 1320-06-01-.35(1)(a)(4) (“the variance regulation”). 

I begin with the critical premise that “[t]he standard statutory apportionment 

formula is presumed to be correct, and the party seeking to employ an alternate method 

has the burden of showing that the statutory method is inappropriate.” Am. Tel. & Tel. 

Co. v. Huddleston, 880 S.W.2d 682, 691 (Tenn. Ct. App. 1994) (hereinafter “AT&T”) 

(citing Donald M. Drake Co. v. Dep’t of Revenue, 500 P.2d 1041, 1043-44 (Or. 1972); 

Donovan Constr. Co. v. Mich., Dep’t of Treasury, Revenue Div., 337 N.W.2d 297, 300 

(Mich. Ct. App. 1983)). Moreover, the variance provision “is to be interpreted narrowly

in order to carry out the purpose of uniform apportionment under the act.” Id. at 691-92

(citing Donald M. Drake Co., 500 P.2d at 1044). Indeed, “[t]here is a strong presumption 

in favor of the normal apportionment formula and against the applicability of the relief 
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provision.” Id. at 692 (citing Roger Dean Enters., Inc. v. State, Dep’t of Revenue, 387 

So. 2d 358, 363 (Fla. 1980)).

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With these principles in mind, I note importantly that the Commissioner’s variance 

letter makes no attempt whatsoever to demonstrate his compliance with the variance

regulation. In fact, the letter is devoid of even a mention of the variance regulation. 

Moreover, the majority states the following in its opinion: 

We agree with the Commissioner that the subject variance is applied 

in a “limited and specific” case. In its argument, Vodafone catastrophizes 

that the Commissioner will impose similar variances on the entire 

telecommunication industry, effectuating industry-wide change in tax 

policy. As pointed out by the trial court below, however, this is sheer 

speculation. There is no evidence in the record of other similar variances, 

or even of whether other multistate telecommunications corporations share 

the characteristics that motivated the Commissioner to impose a variance 

on Vodafone. Moreover, as discussed below, the franchise and excise tax 

statutes have been amended to address this type of situation. Vodafone’s 

argument is without any basis in the record before us.

This approach incorrectly places the burden of proof upon the taxpayer. The 

Commissioner is imposing the variance. This is not a case in which the taxpayer is 

seeking the variance. 

Additionally, as the majority correctly points out, the Department did not adopt the 

model regulation in its entirety. Whereas the Multistate Tax Commission’s model 

regulation allows the variance authority to extend to industry-wide exceptions to the 

statutory apportionment provisions, Tennessee did not adopt this provision. See

Multistate Tax Comm’n Allocation and Apportionment Regs., Reg. IV. 18(a); Tenn. 

Comp. R. & Regs. 1320-06-01-.35(1)(a)(4). The Commissioner should not be able to 

ignore his own regulation that is intentionally more limited than the model regulation. 

While I certainly realize that the variance imposed upon Vodafone in this case technically 

applies only to Vodafone, to deny that the imposition of this variance on this taxpayer in 

this industry is tantamount to imposing an industry-wide variance is to leave our common 

 

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 The majority claims that AT&T “is not helpful in deciding this appeal.” For support of this 

proposition, the majority notes that AT&T is factually different from the instant case in that AT&T

involved a request from the taxpayer to require the Commissioner to grant a variance, as opposed to the 

Commissioner’s imposing a variance at his initiative here. Indeed, that case is factually different. 

However, the same legal principles set forth above should apply to the Commissioner in this case, just as 

they applied to the taxpayer in AT&T.
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sense at the door. See State ex rel. Maner v. Leech, 588 S.W.2d 534, 540 (Tenn. 1979) 

(“[S]tatutes must be construed with the saving grace of common sense.” (internal 

quotation marks omitted)).2

Finally, the variance regulation provides, “[Tennessee Code Annotated sections 

67-4-2014 and 67-4-2112] may be invoked only in specific cases where unusual fact 

situations (which ordinarily will be unique and nonrecurring) produce incongruous results 

under the apportionment and allocation provisions contained in the Franchise and Excise 

Tax Laws.” Tenn. Comp. R. & Regs. 1320-06-01-.35(1)(a)(4). The majority spends very 

little time addressing the important issue of whether the Commissioner’s variance in this 

case extends beyond his limits to issue variances “only in specific cases where unusual 

fact situations (which ordinarily will be unique and nonrecurring) produce incongruous 

results.” Id. Rather, the majority relies heavily on the term “ordinarily” as effectively a 

blanket extension of the Commissioner’s variance authority. Given that the industrywide language was not adopted in Tennessee, the “unusual fact situations” language of 

the regulation then should require the Commissioner, as the party with the burden of 

proof, to demonstrate that this was not an industry-wide practice. See id.; AT&T, 880 

S.W.2d at 691.

While this case might present a situation that is “ordinarily . . . nonrecurring,” 

there is no basis to demonstrate why there should be an exception to the requirement that 

it be “ordinarily . . . unique.” See Tenn. Comp. R. & Regs. 1320-06-01-.35(1)(a)(4). 

Once again, the Commissioner did not even attempt to satisfy this requirement in his 

variance letter. Also, on multiple occasions at oral argument, counsel for the 

Commissioner was asked what facts in this case satisfied the variance requirement that 

this situation is “unique.” At no point did counsel answer the questions other than to take 

the position, in essence, that “unique” under the variance is not the same as the general 

use of the word “unique.” Yet, he offered no other working definition of the word. See

State v. Flemming, 19 S.W.3d 195, 197 (Tenn. 2000) (“We determine legislative intent 

from the natural and ordinary meaning of the statutory language within the context of the 

entire statute without any forced or subtle construction that would extend or limit the 

statute’s meaning.” (citing State v. Butler, 980 S.W.2d 359, 362 (Tenn. 1998))). Given 

this situation, I simply cannot agree with the majority’s conclusory determination that 

this case presents an exception to the “ordinarily . . . unique” requirement of the variance 

 

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“Generally, rules and regulations promulgated pursuant to statutory directive and not inconsistent 

with such statutes have the force of law.” Kogan v. Tenn. Bd. of Dentistry, No. M2003-00291-COA-R3-

CV, 2003 WL 23093863, at *5 (Tenn. Ct. App. Dec. 30, 2003) (citing Houck v. Minton, 212 S.W.2d 891 

(Tenn. 1948); Parkridge Hosp., Inc. v. Califano, 625 F.2d 719 (6th Cir. 1980)).
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regulation because the Commissioner has provided no factual basis to support such a

conclusion. 

I certainly recognize the unfairness that would occur if, in fact, portions of 

Vodafone’s Tennessee revenue were to become “phantom” income that would go

untaxed in any state. I also clearly recognize that Vodafone is wearing no white hat in 

this case. I am loath to conclude that Tennessee may not be able to tax proceeds 

appropriately that may “fairly represent the extent of the taxpayer’s business activity” in 

Tennessee. Tenn. Code Ann. § 67-4-2014(a). However, I will not agree to a “forced”

interpretation of the variance regulation to avoid this result. See Flemming, 19 S.W.3d at 

197. In short, I cannot conclude that the Commissioner has carried his burden or that the 

regulation allows the result reached by the majority. For these reasons, I respectfully 

dissent.

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JEFFREY S. BIVINS, JUSTICE