Tax Type
Corporation Income Tax
Description
Request permission to file consolidated return; Affiliated corporations
Topic
Returns/Payments/Records
Date Issued
03-18-1993
March 18, 1993
Re: Ruling request: Corporate Income Taxes
Dear**********
This will reply to your letter dated October 23, 1992 in which you request permission for *************(the "Taxpayer") ***********(the "Affiliate") to change from filing separate Virginia income tax returns, to filing a consolidated return.
FACTS
The Taxpayer and Affiliate are both wholly owned subsidiaries of a common parent corporation, and join the parent in filing a federal consolidated income tax return. Both corporations previously filed Virginia income tax returns on a separate basis. The 1990 and 1991 Virginia income tax returns were filed on a consolidated basis, without first having received permission to change the method of filing. You ask that the affiliated group be allowed 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.
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. Virginia Regulation (VR) 630-3-442 (E) (copy enclosed).
VR 630-3-442 (A) provides that 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.
It is clear from the facts presented that the affiliated group (as defined by Va. Code §58.1-302) elected to file using a separate return status, based upon the initial Virginia returns filed.
Based the facts as presented, I find no extraordinary circumstances to warrant the of permission for the Taxpayer and Affiliate to change to filing on a consolidated basis. Accordingly, permission is denied.
The consolidated returns for the tax years 1990 and 1991 were improperly filed, because permission to change from separate to consolidated filing status was not obtained by the affiliated group. Therefore, consolidated returns filed for 1990, 1991 and thereafter must be amended to conform to the filing status previously elected by the group, which was separate returns.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6515M
Rulings of the Tax Commissioner