Tax Type
Corporation Income Tax
Description
Permission to file a combined return vs. a consolidated return
Topic
Returns/Payments/Records
Date Issued
10-31-1984
October 31, 1984
Re: § 58-151.079 Permission to File a Consolidated Return
Dear *********
The parent corporation has requested permission to file a consolidated Virginia income tax return with its subsidiaries for the taxable year ending December 31, 1983. All of the corporations filed separate federal returns in prior years utilizing different taxable years. For 1983, the subsidiaries are filing a short period consolidated federal return in order to change their taxable years to coincide with the taxable year of the parent corporation. Not all of the above corporations are subject to Virginia income tax. Only the parent corporation and S-1 and S-7 have filed Virginia returns in prior years.
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.
Accordingly, permission to file a consolidated return for the calendar year 1983 is denied.
§ 58-151.079 has been amended to permit affiliated corporations to file a combined return for the 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 1983 and subsequent years. The combined return shall include only the affiliated corporations which are subject to taxation in Virginia for the year of the return. If a new corporation subject to taxation in Virginia becomes a member of the affiliated group or if a current member of the affiliated group becomes subject to taxation in Virginia, the new corporation must follow the filing method previously elected by the group. The return shall be prepared in accordance with 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