Tax Type
Corporation Income Tax
Description
Combined return
Topic
Corporate Distributions and Adjustments
Returns/Payments/Records
Date Issued
03-30-1982
March 30, 1982
Re: § 58-151.079-Permission to file a Consolidated Return
Dear *********************
The parent corporation referenced above has applied for permission to file a consolidated Virginia return for itself and its two 100% owned subsidiaries. The subsidiaries qualify as affiliates under §58-151.081 since both are subject to income taxes in Virginia and are at least 80% owned by the same corporation. The parent has not filed Virginia returns in the past and may not qualify as an affiliate. For the purpose of this ruling I will assume that the parent has recently begun doing business in Virginia and is subject to Virginia income tax.
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 corporation were required to file Virginia returns. The two subsidiary corporations involved in this request elected to file separate returns for their fiscal years ending September 30, 1980.
The election is made by the affiliated group as a whole, not by the individual members of the affiliated group. When a new corporation becomes affiliated within the meaning of §58-151.081, with affiliated group which has previously made an election under §58-151.079, the new corporation must file its Virginia returns on the basis of that election. The new corporation does not "elect" to file on the same basis; it does not have any election to make.
In a consolidated return inter-affiliate transactions are eliminated and the apportionment factors of multi-state 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.
Accordingly, permission to file a consolidated return for the fiscal year ended September 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 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 taxable years beginning on or after January 1, 1981 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 58-151.081.
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