Tax Type
Corporation Income Tax
Description
Net Operating Loss carryover; Combined returns of affiliated corporations
Topic
Returns/Payments/Records
Date Issued
10-05-2000
October 5, 20002
Re: § 58.1-1821 Application: Corporate Income Taxation
Dear ****
This will reply to your letter in which your contest the assessment of additional corporate income tax and interest against * * * (the "Taxpayer") and an affiliate (the "Affiliate") for the taxable year ended December 31, 1995.
FACTS
The Taxpayer and the Affiliate filed a combined Virginia corporate income tax return for the taxable year ended December 31, 1995. The department disallowed the carryover of the Affiliate's net operating losses ("NOLs") from the 1990 through 1994 taxable years, inclusive, from offsetting the income of the combined group. The Taxpayer contends that the Affiliate's prior year NOLs should be allowed to reduce the 1995 income of the combined group.
DETERMINATION
Title 23 of the Virginia Administrative Code (VAC) 10-120-327 (copy enclosed) provides that if a group of corporations elects to file a combined Virginia corporate income tax return, the taxable income for each affiliate is deemed to be computed as if separate federal returns are fled. If separate returns are filed for federal purposes, prior year NOLs incurred by a taxpayer, cannot increase a current year NOL. In the instant case, the Affiliate incurred NOLs in the 1990 through 1995 taxable years. Because prior year NOLs cannot increase the Affiliate's 1995 NOL, the Taxpayer can only use the 1995 taxable year NOL for the Affiliate to compute the tax liability on the combined corporate return for the taxable year ended December 31, 1995.
Accordingly, the audit assessment is correct. Please send * * * updated interest) to at the Office of Tax Policy, Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia 23218-1880 within 30 days to avoid the assessment of additional interest. If you have any questions regarding this determination, you may contact * * * at * * *
Danny M. Payne
Tax Commissioner
Re: § 58.1-1821 Application: Corporate Income Taxation
Dear ****
This will reply to your letter in which your contest the assessment of additional corporate income tax and interest against * * * (the "Taxpayer") and an affiliate (the "Affiliate") for the taxable year ended December 31, 1995.
FACTS
The Taxpayer and the Affiliate filed a combined Virginia corporate income tax return for the taxable year ended December 31, 1995. The department disallowed the carryover of the Affiliate's net operating losses ("NOLs") from the 1990 through 1994 taxable years, inclusive, from offsetting the income of the combined group. The Taxpayer contends that the Affiliate's prior year NOLs should be allowed to reduce the 1995 income of the combined group.
DETERMINATION
Title 23 of the Virginia Administrative Code (VAC) 10-120-327 (copy enclosed) provides that if a group of corporations elects to file a combined Virginia corporate income tax return, the taxable income for each affiliate is deemed to be computed as if separate federal returns are fled. If separate returns are filed for federal purposes, prior year NOLs incurred by a taxpayer, cannot increase a current year NOL. In the instant case, the Affiliate incurred NOLs in the 1990 through 1995 taxable years. Because prior year NOLs cannot increase the Affiliate's 1995 NOL, the Taxpayer can only use the 1995 taxable year NOL for the Affiliate to compute the tax liability on the combined corporate return for the taxable year ended December 31, 1995.
Accordingly, the audit assessment is correct. Please send * * * updated interest) to at the Office of Tax Policy, Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia 23218-1880 within 30 days to avoid the assessment of additional interest. If you have any questions regarding this determination, you may contact * * * at * * *
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner