Tax Type
Corporation Income Tax
Description
Request to file consolidated return
Topic
Returns/Payments/Records
Date Issued
03-31-1994
March 31, 1994
Re: Ruling Request: Consolidated Return
Dear***************
This will reply to your letter dated May 21, 1993, and letter dated April 13, 1993, requesting permission for subsidiaries of*********** (the "Taxpayer") to file a consolidated return in Virginia.
FACTS
Four of the subsidiaries requesting permission to file a consolidated Virginia return were acquired by the Taxpayer on December 31, 1991. The remaining five subsidiaries were already owned by the Taxpayer, doing business in Virginia, and filing separate Virginia returns and a consolidated federal return. All of the subsidiaries use the same apportionment formula.
RULING
In the first year two or more affiliated corporations are subject to Virginia tax, the group may elect to file either separate, consolidated, or combined returns. Virginia Regulation 630-3-442 provides that the election is made upon the filing of the first return for a 12 month taxable year beginning on or after the date the corporations become an affiliated group. Any corporation joining the affiliated group after the initial election has been made must file its Virginia return on the same basis as the other members of the affiliated group.
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 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 activities in Virginia.
Five of the Taxpayer's subsidiaries were an affiliated group prior to the acquisition of the other four subsidiaries in December, 1991. All five members had been filing their Virginia returns on a separate basis. Thus, the affiliated group had previously elected to file separate Virginia returns. The newly acquired subsidiaries are required by Virginia law to file their Virginia returns on the same basis as the members of the existing affiliated group.
Since the existing affiliated group has already made an initial election, your request constitutes a request on behalf of the subsidiaries for permission to change their filing status from separate to consolidated. As mentioned above, permission to change from separate to consolidated filing is generally denied unless extraordinary circumstances dictate that such permission be granted. Based on the facts as presented, I find no extraordinary circumstances that justify granting permission for the affiliated group to change its filing status. Accordingly, permission to change from separate Virginia returns to a consolidated Virginia return is denied.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
Rulings of the Tax Commissioner