Document Number
88-333
Tax Type
Corporation Income Tax
Description
Permission to change from consolidated to combined return is denied
Topic
Returns/Payments/Records
Date Issued
12-16-1988
December 16, 1988



Re: Virginia Code § 58.1-442
Permission to File a Combined Return


Dear********************

This is in response to your letter of November 15, 1988, in which you ask that I review my ruling of June 20, 1988, denying permission for the above-referenced taxpayers to file a combined return. P.D. No. 88-150 (copy enclosed).

The parent is presently filing a consolidated Virginia income tax return with Subsidiary 1. Subsidiary 2 is filing a separate Virginia income tax return since it elects to report income on the completed contracts basis pursuant to Va. Code §58.1-419. It is ineligible to file a consolidated return with the parent and Subsidiary 1 which are three-factor corporations.

You have requested permission to file a combined return including all three affiliates. In order to file such a combined return, the parent and Subsidiary 1 would have to change their Virginia filing status from consolidated to combined, while Subsidiary 2 would change its Virginia filing status from separate to combined.

Permission to change to or from [emphasis added] filing consolidated returns will generally not be granted. Such changes affect the allocation and apportionment factors and distort the business done in Virginia and the income arising from activity in Virginia. VR 630-3-442(E)(1). (Copy enclosed.)

If in the first year that two or more affiliates were required to file Virginia returns, you had elected either separate or combined filing status, the filing of a combined return would be permissible under the Virginia corporation income tax regulations as enclosed. However, because the parent and Subsidiary 1 elected to file a consolidated Virginia return, permission to change from consolidated to combined for the taxable year ending February 28, 1989, and subsequent years is denied.

Sincerely,




W. H. Forst
Tax Commissioner


Rulings of the Tax Commissioner

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