Tax Type
Corporation Income Tax
Description
Retroactive permission to file consolidated return is denied
Topic
Returns/Payments/Records
Date Issued
06-01-1992
June 1, 1992
Re: Corporation Income Tax: Ruling Request
Dear ****
This will reply to your letter dated October 31, 1991 in which you request permission for * * * affiliate (the "taxpayer") to change from filing separate Virginia income tax returns, to filing a consolidated return.
FACTS
The taxpayer and its wholly owned subsidiary are Virginia corporations which operate solely in Virginia. Both corporations have filed on a separate Virginia income tax return basis since their inception, except for the 1991 tax return, which was filed on a consolidated basis. You ask that the affiliated group be allowed to continue to file on a consolidated basis.
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.
Permission to change to or from consolidated returns will generally not be granted, as the change affects the allocation and apportionment factors and distorts business done in Virginia and income arising from activity in Virginia. Virginia Regulation (VR) 630-3-442(E) (copy enclosed).
VR 630-3-442(A) provides that the election of return filing status is made the first year two or more affiliated corporations are required to file Virginia tax returns. In this case, the taxpayer clearly elected to file using a separate return filing status, based upon the initial Virginia return filed.
Therefore, based upon the facts as presented, I find no extraordinary circumstances to warrant the granting of permission for the two corporations to change to filing on a consolidated basis. Accordingly, permission is denied. In addition, the Virginia consolidated return for 1991 was improperly filed, because permission to change from separate to consolidated filing status was not obtained by the affiliated group. Therefore, the 1991 return must be amended to conform to the filing status previously elected by the group, which was separate returns.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner