Tax Type
Corporation Income Tax
Description
Consolidated Returns; Mixed Apportionment Factors
Topic
Allocation and Apportionment
Returns and Payments
Date Issued
10-07-1991
October 7, 1991
Re: Request for Ruling: Corporate Income Tax
Dear*****************
This will reply to your letter of September 9, 1991 in which you request permission to file a consolidated Virginia corporation income tax return for************** (the "Taxpayer") and its subsidiaries for the taxable year ended December 31, 1990.
FACTS
The taxpayer is an affiliated group of corporations which files a consolidated federal return on a calendar year basis. One of the affiliates is required by law to apportion income using a single factor while the remaining affiliates use the statutory three factor formula. In prior years the corporations have filed a combined return pursuant to the ruling in P.D. 88-303 (10/31/88).
RULING
Effective for taxable years beginning on and after January 1, 1991, Chapter 619 of the 1990 Acts of Assembly (HB 159) overrides the department's regulation that prohibits the inclusion of corporations required to use different apportionment factors in a single consolidated Virginia return (VR 630-3-442 C.2.b.ii). Therefore, an affiliated group that had previously elected to file a consolidated Virginia return for any of its affiliates must include all of its affiliates subject to income tax in Virginia for 1990 and after regardless of the apportionment factors used. (See VR 630-3-442 C.2.a.) Also, if 1990 (or a subsequent year) is the first year in which two or more affiliates are subject to Virginia income tax, the affiliated group may elect to file a consolidated return regardless of the apportionment factors used.
However, the taxpayer has been filing a combined return and cannot file a consolidated return for the group unless permission is granted. Although permission to change to or from consolidated filing is rarely granted, it is my understanding that the General Assembly intended HB 159 to apply to affiliated groups that had been denied the privilege of consolidation solely because of the department's policy with respect to mixed apportionment factors. Because of this legislative intent and the fact that the taxpayer has promptly requested permission to file a consolidated return for the first taxable year eligible for such filing, permission is granted to file a consolidated return for 1990 and subsequent years.
Regulations will be promulgated in due course that set forth the method of computing a consolidated apportionment factor for affiliates required to use different factors. Until a final regulation is available you should use the method set forth in the enclosed "Mixed apportionment factors."
Please feel free to request additional rulings if you feel that additional guidance is needed for mixed apportionment factor affiliated groups filing Virginia income tax returns.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner