Tax Type
Corporation Income Tax
Description
Permission to file a combined return; Consolidated filing denied
Topic
Returns/Payments/Records
Date Issued
10-23-1987
October 23, 1987
Re: Va. Code §58.1-442/Permission to File a Consolidated Return
Dear ********************
This will reply to your letter of July 30, 1987 requesting permission for the Taxpayers to file a consolidated return effective for the fiscal year ended May 31, 1984.
Facts
The Taxpayers filed separate returns for the fiscal year ended May 31, 1983. The Taxpayers have presented delinquent returns for the fiscal years ended May 31, 1984, 1985 and 1986 to be filed on a consolidated basis. In the alternative, the Taxpayers have also prepared separate returns for those years and request permission to file on a consolidated basis commencing with the fiscal year ended May 31, 1987. The Taxpayers have been assessed corporate income tax, penalty and interest for the fiscal years ended May 31, 1984, 1985 and 1986.
Determination
Virginia Corporation Income Tax Regulations VR 630-3-442 E.1. and 2. (copy enclosed) provide that permission to change to or from filing consolidated returns will generally not be granted, because such changes affect the allocation and apportionment factors and distort the business done in Virginia and the income arising from activity in Virginia. However, because separate and combined returns do not affect the allocation and apportionment formulas for each corporation, permission to change from separate to combined returns is generally granted.
Accordingly, I grant the Taxpayers permission to file a combined return commencing with the fiscal year ended May 31, 1987, provided that the members of the affiliated group are eligible as set forth in VR 630-3-442 D.2. and the filing group includes all members of the affiliated group which are subject to Virginia income tax. Returns for the fiscal years ended May 31, 1984, 1985 and 1986 will be filed on a separate basis.
With respect to the assessments issued against the Taxpayers, I will be willing to entertain an offer in compromise for the tax and interest if doubtful liability or doubtful collectibility can be substantiated or, with respect to the penalty, if good cause can be established.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner