Tax Type
Corporation Income Tax
Description
Audit adjustments of consolidated return
Topic
Collection of Tax
Date Issued
10-07-1992
October 7, 1992
Re: §58.1-1821 Application; Corporation Income Tax
Dear**************
This will reply to your letters of January 24, 1992 and September 13, 1991, in which you seek correction of corporation income tax assessments and refunds on behalf of ****************(the "Taxpayer").
FACTS
The Taxpayer was audited and numerous adjustments were made resulting in the assessment of additional taxes for two taxable years and refunds for two other taxable years. One adjustment changed the Taxpayer's filing status for the years under review from combined to consolidated, based on previous years' filings. The Taxpayer agrees that it is required to file a consolidated rather than a combined return for Virginia purposes and proposes that additional corporations be included in the Virginia consolidated return. The Taxpayer also seeks the revision of certain consolidation calculations in the audit report.
DETERMINATION
To be included in a Virginia consolidated income tax return, a corporation must be subject to Virginia income tax, if separate returns were to be filed. See Virginia Regulation (VR) 630-3-441. Generally, corporations organized under Virginia law and foreign corporations having income from Virginia sources are subject to Virginia tax.
Because the nexus requirements are basically the same for combined and consolidated filing, and the corporations in question were not included in the Taxpayer's combined Virginia income tax returns as filed, the auditor properly assumed that these corporations were not Virginia corporations for purposes of the consolidated return.
You now assert that the corporations are Virginia corporations eligible to be included in the Virginia consolidated return. However, you have not provided any documentation to substantiate your position. The auditor did not review this issue because of the Taxpayer's filing position on the original combined returns.
I will refer this case back to the auditor to review the business activities of the corporations in question during the years under review. If sufficient documentation is provided to substantiate that the corporations are eligible to be included in the Taxpayer's consolidated Virginia income tax return, then the audit report will be adjusted accordingly.
You also seek revision of certain consolidation calculations in the audit report. Because this case is being referred back to the auditor, I will instruct him to review your protest on these issues as well. Therefore, there is no need to address them at this time.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/5599F
Rulings of the Tax Commissioner