Tax Type
Corporation Income Tax
Description
Request to include affiliates without Virginia nexus on consolidated return
Topic
Returns/Payments/Records
Date Issued
12-28-1992
December 28, 1992
Re: Ruling Request -- Corporate Income Taxes
Dear ***********************
This will reply to your letter dated May 22, 1992 in which you request permission for*****************and affiliates (the "taxpayer") to change from filing a consolidated return (with Virginia nexus corporations only) to filing a consolidated return which includes all corporations filing in the federal consolidated return.
FACTS
The taxpayer has previously filed Virginia consolidated returns including only Virginia nexus corporations. However, the taxpayer wishes to include additional corporations in the Virginia income tax return that do not have Virginia nexus. The taxpayer wants to insure that the "correct amount of income and expense" is apportioned by including corporations in the Virginia return which have no Virginia nexus, and which own and manage its national headquarters building, located outside of Virginia.
DETERMINATION
A Virginia consolidated return is a single return for all eligible members of an affiliated corporate group, and may not contain members which are not subject to Virginia income tax if separate returns were to be filed. See Virginia Regulation (VR) 630-3-442.
You cite Virginia Code (VC) § 58.1-442.B.1 in support of your request. The section states, in pertinent part: "A consolidated return shall mean a single return for a group of corporations affiliated within the meaning of § 58.1-302, prepared in accordance with the principles of § 1502 of the Internal Revenue Code and regulations promulgated thereunder." Two or more corporations are affiliated under VC § 58.1-302 if they are subject to Virginia income taxes and either have a common 80% owner in either a parent subsidiary or brother-sister relationship.
Any corporation subject to federal income tax, with "income from Virginia sources," is generally subject to Virginia income tax. A corporation has income from Virginia sources if there is sufficient business activity within Virginia to make positive either the payroll, property, or sales apportionment factor.
Since it is clear that the corporations at issue which are not currently included in the Virginia consolidated return do not have a positive Virginia apportionment factor numerator, they cannot have income from Virginia sources. Accordingly, your request to file a consolidated return including corporations with no Virginia nexus is denied. Further, all returns that are still within the statute of limitations should be refiled excluding all corporations without Virginia nexus.
Sincerely,
W.H. Forst
Tax Commissioner
OTP/6210G
Rulings of the Tax Commissioner