Tax Type
Corporation Income Tax
Description
Permission to file consolidated return denied
Topic
Returns/Payments/Records
Date Issued
11-01-1984
November 9, 1984
Re: Virginia Code § 58-151.079
Permission to File Consolidated Returns
Dear ****
The parent corporation has applied for permission to file a consolidated Virginia return with its wholly owned subsidiary for the taxable year ending June 30, 1984. Both corporations presently do business only in Virginia and have filed separate federal and Virginia returns in prior years. A consolidated federal return will be filed for the taxable year ending June 30, 1984.
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 an election has been made.
Accordingly, permission to file a consolidated return 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 the taxable year ending June 30, 1984 and subsequent years. The combined return shall include the affiliated corporation noted above which is subject to taxation in Virginia and 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