Tax Type
Corporation Income Tax
Description
Combined Return
Topic
Returns/Payments/Records
Date Issued
10-30-1991
October 30, 1991
Re: Ruling Request: Corporation Income Taxes
Dear********************
This is in reply to your letter of September 19, 1990 in which you request permission to file a combined Virginia income tax return for the taxable year ending December 31, 1988 for *********(the "Taxpayer").
FACTS
You previously applied for and received permission to change the filing status for the taxpayer to combined filing for the Virginia corporate income tax from separate filing status for the 1989 tax year. You state that all members of the proposed Virginia combined filing group for the 1988 tax year were subject to the Virginia income tax on a separate basis, and were included in the federal consolidated income tax return of the taxpayer.
DISCUSSION
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 (Virginia Regulation (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 losses results only in a timing difference for Virginia tax purposes. In consideration 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 returns for the 1988 tax year. 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/4683G
Rulings of the Tax Commissioner