Tax Type
Corporation Income Tax
Description
Request to file consolidated return
Topic
Returns/Payments/Records
Date Issued
01-11-1993
January 11, 1993
Re: Ruling Request: Corporate Income Taxes
Dear ****
This will reply to your letter dated September 28, 1992 in which you request permission to file a Virginia consolidated income tax return for ***** and affiliate (the "Taxpayer") for the taxable year ended June 30, 1992.
FACTS
The Taxpayer is a Georgia corporation, with a 100% owned subsidiary (the "Subsidiary") which is a Tennessee Corporation. Taxpayer filed Virginia income tax returns for previous years on a separate basis. The Subsidiary has never filed a Virginia income tax return. The Subsidiary has no Virginia property, payroll or sales. The Taxpayer and the Subsidiary both file on a June 30 fiscal year end. You ask that the affiliated group be allowed to file on a consolidated basis.
RULING
Permission to change to or from the consolidated filing method is generally not granted by the department, because this change can affect the allocation and apportionment factors and possibly distort the reporting of the portion of business done in Virginia. See Virginia Regulation (VR) 630-3-442 (E) (copy attached).
In the first year two or more members of an affiliated group of corporations are required to file Virginia returns, the group may elect to file separate returns, a consolidated return, or a combined return. All returns for subsequent years must be filed on the same basis unless permission is granted by the Department of Taxation. Other members of the affiliated group of corporations which become subject to Virginia income tax in subsequent years must conform to the initial election made by the group unless permission to change is granted by the department. See VR 630-3442 (A).
Generally, a consolidated return may not include corporations which are: (1) Exempt from Virginia Income Tax under Va. Code §58.1-401 or U.S. Public Law (P.L.) 86-272 (15 U.S.C.A. §§381-384) or (2) not subject to Virginia income tax if separate returns were to be filed. See VR 630-3-442 (C).
The information provided indicates that the subsidiary conducted all its business outside of the Commonwealth of Virginia. The Subsidiary owned no property within Virginia, had no employees in Virginia, and had no sales in Virginia. The activities of the Subsidiary do not appear to exceed the limitations of P.L. 86-272.
Based upon the above, I do not find that the Subsidiary is an eligible member of an affiliated group which would be subject to Virginia income tax if separate returns were to be filed. Accordingly, permission to file a consolidated return is denied.
If you have already filed your return on a consolidated basis, an amended separate return must be filed.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/6466M
Rulings of the Tax Commissioner