Tax Type
Corporation Income Tax
Description
Permission to file a consolidated return denied
Topic
Returns/Payments/Records
Date Issued
05-12-1988
May 12, 1988
Re: Virginia Code §58.1-442
Permission to File a Consolidated Return
Dear***************
This is in reply to your letter of February 3, 1988, requesting permission for the above-referenced taxpayers to file a consolidated return.
It is my understanding that the above-referenced taxpayers are affiliated corporations which are filing separate Virginia income tax returns. It is also my understanding that they use the same taxable year and represent all of the members of the affiliated group which are subject to Virginia income tax.
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, particularly 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 Virginia return for the fiscal year ended September 30, 1987, is denied.
Section 58.1-442 of the Code of Virginia does 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 for the above-referenced taxpayers to file a combined return for the fiscal year ended September 30, 1987, and thereafter if the combined return includes all affiliated corporations subject to Virginia income tax and if they use the same taxable year. The return should be filed using the name and identification number of the designated lead affiliate. The combined return is to be filed in accordance with the requirements set forth in the Virginia Corporation Income Tax Regulations 630-3-442 (copy enclosed).
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner