Tax Type
Corporation Income Tax
Description
Permission to file a consolidated return is denied
Topic
Returns/Payments/Records
Date Issued
10-26-1988
October 26, 1988
Re: Virginia Code §58.1-442
Permission to File a Consolidated Return
Dear***************
This is in response to your letter of August 22, 1988, requesting permission for the three above-referenced taxpayers to file a consolidated return for the taxable year ended December 31, 1987.
It is my understanding that the three taxpayers are the only members of a large group of affiliated corporations which do business in Virginia and that each of the three corporations uses the same taxable year. Affiliate 1 has been filing in Virginia since 1985. Affiliates 2 and 3 became eligible to file a Virginia return in 1987.
You have indicated that the three corporations include one corporation which apportions income using the single factor for financial corporations (Affiliate 2) and two corporations which use the standard three-factor formula (Affiliates 1 and 3). VR 630-3-442 states that corporations using different apportionment factors may not be included in the same consolidated return. Accordingly, permission for the three above-referenced taxpayers to file a consolidated Virginia return for the taxable year ended December 31, 1987, is denied.
However, as the examples in subsection G of the regulation indicate, a separate consolidated return may be filed for each group with similar apportionment factors. Since this is the first year in which two affiliates of the group are required to file a Virginia corporate income tax return, permission is granted for the two corporations which use the standard three-factor apportionment formula (Affiliates 1 and 3) to file a consolidated return for the taxable year ended December 31, 1987, and subsequent years. If the taxpayers make this election, Affiliate 2 must file a separate Virginia return since it is a one-factor corporation.
As an alternative, it should be noted that Section 58.1-442 of the Code of Virginia permits corporations to file a combined return for taxable years beginning on or after January 1, 1981. If the taxpayers do not elect to file the consolidated/separate returns just discussed, permission is hereby granted for the three taxpayers to file a combined return for the taxable year ended December 31, 1987, and subsequent years 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