Tax Type
Corporation Income Tax
Description
Affiliates request consolidated filing
Topic
Returns/Payments/Records
Date Issued
07-29-1991
July 29, 1991
Re: Ruling Request: Corporation Income Tax
Dear********************
This will reply to your letter of June 19, 1990, in which you request permission, on behalf of*********** (the "Taxpayer"), to file a consolidated corporation income tax return for the affiliated group for the taxable year ended March 31, 1989 and for taxable years thereafter.
FACTS
The taxpayer and its parent filed separate Virginia income tax returns for several years. The taxpayer, originally on an August 31 taxable year, received permission from the Internal Revenue Service to change its taxable year to March 31, adopting the same taxable year as its parent. The taxpayer and the parent filed Virginia consolidated income tax returns for the taxable years ended March 31, 1989 and March 31, 1990, prior to requesting the permission of the Department of Taxation. You now request permission to file on a consolidated basis.
RULING
Va. Code § 58.1-442 allows corporations to elect to file returns on the basis of one of three filing statuses (separate, combined or consolidated) regardless of how the corporations filed their federal income tax return. Once an affiliated group has made an election, the group may not change its filing status unless permission is granted by the Department of Taxation.
It is well established that permission to change to or from consolidated returns will generally not be granted, as the change affects the allocation and apportionment factors and distorts business done in Virginia and income arising from activity in Virginia. Virginia Regulation (VR) 630-3-442(E).
Based on the facts as presented, I find no extraordinary circumstances to warrant the granting of permission for the two corporations to change to filing on a consolidated basis. The two corporations have been affiliated for a number of years and have filed returns on a separate basis; the fact that they first became eligible to file a consolidated Virginia return on March 31, 1989, when the taxpayer adopted the same taxable year as the parent, is not controlling. See P.D. 91-36 (3/18/91) (copy enclosed). Accordingly, permission is denied.
The Virginia consolidated returns for the taxable years ended March 31, 1989 and March 31, 1990, were improperly filed, because permission to change from separate to consolidated filing status was not obtained by the affiliated group. Therefore, the returns must be amended to conform to the filing status elected by the group, i.e., separate returns.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner