Tax Type
Corporation Income Tax
Description
Consolidated filing method denied
Topic
Returns/Payments/Records
Date Issued
05-29-1992
May 29, 1992
Re: Ruling Request: Consolidated Income Tax Return
Dear ***********
This will reply to your letter dated February 10, 1992 in which you request permission for * * * (the "Taxpayer") and affiliates to file a Virginia consolidated income tax return for the 1990 taxable year and thereafter.
FACTS
The taxpayer and affiliates have filed separate Virginia returns for several years, and participate in a federal consolidated tax return. All companies use the three factor formula for apportionment of income.
RULING
Va. Code § 58.1-442 allows corporations to elect to file returns on the basis of one of three filing statuses (separate, combined, or consolidated) regardless of how the corporations filed their federal income tax return. Once an affiliated group has made an election, the group may not change its filing status unless permission is granted by the Department of Taxation.
It is well established that after the initial filing election, permission to change to or from consolidated returns will generally not be granted, since the change affects the allocation and apportionment factors and distorts business done in Virginia and income arising from activity in Virginia. See Virginia Regulation (VR) 630-3-442.E.
Based upon the facts as presented, I find no extraordinary circumstances to warrant the granting of permission for the taxpayer and affiliates corporations to change to filing on a consolidated basis. This reflects the previously enumerated Department policy in this area contained in Public Document 91-36 (3/18/91), a copy of which I have enclosed. Accordingly, permission is denied.
The Virginia consolidated return filed for the 1990 taxable year was improperly filed, because permission to change from separate to consolidated filing status was not obtained by the affiliated group. Therefore, the return must be amended to conform to the filing status elected by the group, i.e., separate returns.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner