I have it set to never combine but this behavior is still present. I've tried switching between the options just in case another program changed whatever registry value or setting that controls this. Still no luck. What is killing me is I can't even find a mention of this feature anywhere on the internet.
EDIT
I
found this spreadsheet created by Microsoft which details the Group Policy Editor settings functions and what each setting actually changes in the registry. Listed in here is "" which affects the taskbar grouping functionality. When I set the key it described to be active (versus default) the grouping setting in my Taskbar settings was grayed out completely. I think we can safely rule out that this functionality has anything to do with Taskbar Grouping feature.
Registry Location 1. HKCU\Software\Microsoft\Windows\CurrentVersion\Policies\Explorer
2. Create New DWORD (32-bit) Value: NoTaskGrouping
3. Set ValueData to "1"
Taskbar Preference Window After Change Is Applied