Tax Type
Corporation Income Tax
Description
Permission to file consolidated return denied
Topic
Returns/Payments/Records
Date Issued
05-10-1988
May 10, 1988
Re: Virginia §58.1-442
Permission to File a Consolidated Return
Dear**************
This is in reply to your letter of August 21, 1987, requesting permission for the above referenced taxpayers to file a consolidated return. I apologize for the delay in responding.
You have indicated that the consolidated entity consists of the parent and three subsidiaries and that two of the subsidiaries (Subsidiary 2 and Subsidiary 3) were formed during 1986. Prior to formation of the two additional subsidiaries in 1986, the parent and Subsidiary 1 filed separate returns.
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 year beginning January 1, 1986, is denied.
Section 58.1-442 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 taxable year beginning January 1, 1986, 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 parent. 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).
The 1986 return has already been filed, and it appears that it was filed as a consolidated return. Therefore, the return must be amended to comply with the combined filing requirements of the regulations.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner