Tax Type
Corporation Income Tax
Description
Permission to file a combined return
Topic
Returns/Payments/Records
Date Issued
02-28-1985
February 28, 1985
RE: Section 58.1-442 - Permission to File Combined Returns
Dear ****
This is in reply to your letter of December 12, 1984 in which you provide additional information in regard to your request for the above referenced taxpayers to file a combined return. Initially, the Department of Taxation denied your request to file a combined return on the basis that you were requesting permission for less than the entire affiliated group to file a combined return. The additional information that you have provided demonstrates that this is not the case.
The designated lead affiliate, S-1 and S-2 clearly have income and deductions from Virginia sources as defined by Virginia Code Section 58.1-302 and are subject to Virginia income tax. The operations in Virginia of the parent, S-3, S-5, S-6 and S-7 either fall within the protection from income taxation granted by Public Law 86-272, or fail to result in income and deductions from Virginia sources; therefore, they are currently not subject to Virginia income tax.
It appears, from the information that you have provided, that S-4 is a land holding company which is holding land in Virginia for speculation. Since it is a land holding company that is holding land in Virginia, it is deemed that this property is "used" in Virginia for purposes of computing the property factor under Virginia Code Section 58.1-409. Therefore, it is subject to Virginia income tax.
Under Virginia Code Section 58.1-302 it is required that two or more corporations be subject to Virginia income tax, as well as meet the 8O% ownership test, to be "affiliated". Therefore, S-3, S-5, S-6 and S-7 are not "affiliated" under the definition in the Code of Virginia, even though they may be 100% owned by a common parent and "affiliated" for federal income tax purposes. Virginia Code Section 58.1-442 requires that a corporation be "...affiliated within the meaning of Section 58.1-3O2..." in order to file a combined return. Since the parent, S-3, S-5, S-6 and S-7 do not meet this requirement because they are not subject to Virginia income tax, they may not be included in a combined return.
The designated lead affiliate, S-1, S-2 and S-4 all utilize the same taxable year and are subject to Virginia income tax. Permission is granted for the designated lead affiliate, S-1, S-2 and S-4 to file a combined return for the taxable year ending September 30, 1984 and years thereafter. The return must be filed under the name and identification number of the designated lead affiliate and include all affiliates subject to Virginia income tax. In the event that the parent, S-3, S-5, S-6, S-7 or any other corporation that is part of this federal affiliated group becomes subject to Virginia income tax, they must be included in the combined return. The combined return is to be filed in accordance with the requirements set forth in the Virginia Corporation Income Tax Regulations.
Sincerely,
W. H. Forst
Tax Commissioner
RE: Section 58.1-442 - Permission to File Combined Returns
Dear ****
This is in reply to your letter of December 12, 1984 in which you provide additional information in regard to your request for the above referenced taxpayers to file a combined return. Initially, the Department of Taxation denied your request to file a combined return on the basis that you were requesting permission for less than the entire affiliated group to file a combined return. The additional information that you have provided demonstrates that this is not the case.
The designated lead affiliate, S-1 and S-2 clearly have income and deductions from Virginia sources as defined by Virginia Code Section 58.1-302 and are subject to Virginia income tax. The operations in Virginia of the parent, S-3, S-5, S-6 and S-7 either fall within the protection from income taxation granted by Public Law 86-272, or fail to result in income and deductions from Virginia sources; therefore, they are currently not subject to Virginia income tax.
It appears, from the information that you have provided, that S-4 is a land holding company which is holding land in Virginia for speculation. Since it is a land holding company that is holding land in Virginia, it is deemed that this property is "used" in Virginia for purposes of computing the property factor under Virginia Code Section 58.1-409. Therefore, it is subject to Virginia income tax.
Under Virginia Code Section 58.1-302 it is required that two or more corporations be subject to Virginia income tax, as well as meet the 8O% ownership test, to be "affiliated". Therefore, S-3, S-5, S-6 and S-7 are not "affiliated" under the definition in the Code of Virginia, even though they may be 100% owned by a common parent and "affiliated" for federal income tax purposes. Virginia Code Section 58.1-442 requires that a corporation be "...affiliated within the meaning of Section 58.1-3O2..." in order to file a combined return. Since the parent, S-3, S-5, S-6 and S-7 do not meet this requirement because they are not subject to Virginia income tax, they may not be included in a combined return.
The designated lead affiliate, S-1, S-2 and S-4 all utilize the same taxable year and are subject to Virginia income tax. Permission is granted for the designated lead affiliate, S-1, S-2 and S-4 to file a combined return for the taxable year ending September 30, 1984 and years thereafter. The return must be filed under the name and identification number of the designated lead affiliate and include all affiliates subject to Virginia income tax. In the event that the parent, S-3, S-5, S-6, S-7 or any other corporation that is part of this federal affiliated group becomes subject to Virginia income tax, they must be included in the combined return. The combined return is to be filed in accordance with the requirements set forth in the Virginia Corporation Income Tax Regulations.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner