Tax Type
Corporation Income Tax
Description
Combined filing request
Topic
Returns/Payments/Records
Date Issued
04-27-1992
April 27, 1992
Re: Ruling Request: Corporation Income Taxes
Dear ****
This will reply to your letter dated October 2, 1991 in which you request permission for * * * * * (the "Taxpayer") to switch to the combined filing method for the taxable year December 7, 1989 to December 31, 1989 and for all subsequent years.
All companies of the taxpayer currently file separate Virginia returns, and are affiliated as defined under Va. Code § 58.1-302.
RULING
Virginia Regulation (VR) 630-3-442(E) provides that changes between separate and combined filing are generally allowed because allocation and apportionment among the members of the affiliated group are unaffected by either of these two filing methods.
When a combined return is filed for a year in which the members have already filed separate returns, the filing causes a significant administrative burden for the department. In addition to auditing and reconciling the amended returns, 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. If the separate loss is subsequently included in an amended combined Virginia return, then there would be a change in the amount of the Virginia modification that follows the separate loss. We might then have to assess and collect an erroneous form 500-NOLD refund for years preceding the amended return.
A review of your amended returns indicates that both of these issues are present, as there are many separate accounts involved. 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. This is in keeping with department policy as outlined in Public Document 91-271 (10/23/91), a copy of which I have enclosed for your convenience.
Although I am unwilling to grant permission for a retroactive filing status change, I hereby grant permission for a change to the combined group filing method for the 1990 taxable year and prospectively.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner