Tax Type
Corporation Income Tax
Description
Request to amend separate returns on a combined basis
Topic
Returns/Payments/Records
Date Issued
10-30-1991
October 30, 1991
Re: Ruling Request: Corporate Income Tax
Dear****************
This will reply to your letter dated October 12, 1990 in which you request permission to change retroactively to the combined filing status from separate for affiliates of**********(the "Taxpayer").
FACTS
The taxpayer's affiliates filed separately in Virginia for the 1987, 1988 and 1989 taxable years. All affiliates meet the requirements under Virginia Regulation (VR) §630-3-442(D) for the filing of combined returns and wish to switch to this method for the above years.
RULING
The election as to Virginia filing method for corporate income tax returns is done in the first year a corporation or group of affiliates are required to file Virginia returns. Thereafter, affiliated groups may change their filing method only with permission from the Department of Taxation (VR §630-3-442).
Permission to change between the separate and combined return filing methods will generally be granted, because allocation and apportionment formulas are not affected by changes between these two statuses (VR §630-3-442.E).
However, the filing of combined returns retroactively causes a significant administrative burden for the department. In addition to auditing and reconciling the amended return, each separate account must be adjusted to transfer payments and credits to the combined account. Furthermore, when a separate return reports a federal net operating loss, some or all of it may have been carried back to years prior to the combined return and generated a refund of Virginia tax.
The filing of retroactive combined returns to carryback federal net operating loss results in only a timing difference for Virginia tax purposes. Because of this, and in view of the significant administrative burden caused by allowing a retroactive change in filing status I am unwilling to grant permission in the absence of extraordinary circumstances. You have shown no such circumstances.
After considering all of the factors, I decline to grant permission to file amended combined returns for 1987, and 1988. Because the request to change was filed before the extended due date for the 1989 return, permission is granted to file a combined return for 1989 and thereafter. This is consistent with Public Document 91-271 (10/23/91), a copy of which I have enclosed for your convenience.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5161G
Rulings of the Tax Commissioner