Tax Type
Corporation Income Tax
Description
Affiliated corporations; Consolidated return
Topic
Returns/Payments/Records
Date Issued
03-17-1993
March 17, 1993
Re: Ruling request: Corporate Income Taxes
Dear**********
This will reply to your letter dated June 8, 1992 in which you request permission to file a Virginia consolidated return for************** and subsidiaries (the "Taxpayer") for the taxable year ended July 31, 1991, and in which you seek information concerning the inclusion of***********("Subsidiary A"), ****************** ("Subsidiary B" in a Virginia consolidated return.
FACTS
Virginia income tax returns were filed on a consolidated basis for all affiliated companies having Virginia nexus and which used a three factor apportionment formula, and on a separate basis for the group's parent corporation, which is a Financial Corporation. (The Financial Corporation was previously removed from the consolidated return by a field audit of the department) During the years ended July 31, 1989 and July 31, 1990, a 100% owned subsidiary of the Taxpayer acquired Subsidiary A and Subsidiary B, respectively. Taxpayer wishes to file as a consolidated group pursuant to newly enacted law.
RULING
Permission to change to or from the consolidated filing method is generally not granted by the department, because this change can affect the apportionment factors and possibly distort the reporting of the portion of business done in Virginia. See Virginia Regulation (VR) 630-3-442.
However, effective for taxable years beginning on or after January 1. 1990, affiliated corporations using different apportionment factors are permitted to file as a Virginia consolidated group. This assumes that all of the other requirements are met for consolidated group filings. Further, it is my that this newly enacted law intended to apply to affiliated groups previously denied the consolidated filing method because of differing apportionment factors.
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 630-3-442.
It would appear from the facts presented that the affiliated group (of three apportionment formula corporations) properly elected consolidated filing in its initial year of taxability.
Based upon the above, I hereby grant permission for Subsidiary A to join in filing a consolidated return with other affiliated companies using a three factor apportionment formula for the year ended July 31, 1989 and thereafter, and for Subsidiary B to join in filing a consolidated return with all other affiliated companies using a three factor apportionment formula for the year ended July 31, 1990 and, assuming that Subsidiaries A and B are otherwise subject to Virginia income tax if separate returns were to be filed.
Based upon the above, I hereby grant permission for the Taxpayer to file as a Virginia consolidated group for the year ended July 31, 1991 and thereafter. All affiliated corporations subject to Virginia income tax must join in filing on a consolidated basis. Final regulations (VR 630-3-442, copy attached) have been issued which set forth the method of computing a consolidated factor for affiliates required to use different factors.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6219N
Rulings of the Tax Commissioner