Tax Type
Corporation Income Tax
Description
Combined return for all affiliates doing business in Virginia
Topic
Corporate Distributions and Adjustments
Date Issued
02-17-1982
February 17, 1982
Re: §58-151.079 - Permission to file Consolidated Return
************************(Parent)
Dear**************
**************** (Parent) has applied for permission to file a consolidated Virginia return for its 100% owned subsidiaries referenced above. The subsidiaries have filed separate returns in the past for fiscal years ending April 30. Although not stated in its request, I will assume for purposes of this ruling that the parent corporation does not itself do business in Virginia and that the subsidiaries listed above are all of the affiliated corporations eligible to file a consolidated Virginia return within the meaning of § 58-151.081.
As it existed in prior years, §58-151.079 allowed corporations to elect to file either separate or consolidated returns in the first year that two or more affiliated corporations were required to file Virginia returns. The corporations involved in this request elected to file separate returns.
In a consolidated return inter-affiliate transactions are eliminated and the apportionment factors of multistate corporations are combined. As a result the income subject to Virginia income tax on a consolidated return may be significantly different than the total shown on separate returns, especially if any of the affiliates do business in more than one state. For this reason the Department of Taxation very rarely grants permission for corporations-to change to or from consolidated returns once the election has been made. Although it appears that the corporations involved in this request have in the past done business only in Virginia, one or more of the corporations may have expanded into another state or be contemplating such an expansion.
Accordingly permission to file a consolidated return for the fiscal year ended April 30, 1981 is denied.
§ 58-151.079 has been amended to permit affiliated corporations to file a combined return for taxable years beginning on or after January 1, 1981. A change from separate returns to a combined return does not affect the computation or apportionment of income except that losses of one corporation may offset the income of an affiliated corporation.
Permission is hereby granted to file a combined return for all affiliates doing business in Virginia upon the following conditions:
1. Schedules shall be filed with the combined return which contain all information which would be contained in a separate Virginia return for each and every eligible member of the affiliated group. See §§58-151.079 and 58-151.
2. In computing the Virginia Taxable Income of each eligible member of the affiliated group there shall be added to federal taxable income the amount of any net operating loss deduction or other deduction which has been recognized for Virginia income tax purposes and offset other income in a Virginia consolidated or combined return for other taxable years. See, for example, Federal Income Tax Regulation 1.1502-79.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner