Tax Type
Corporation Income Tax
Description
Request to file consolidated return
Topic
Returns/Payments/Records
Date Issued
07-29-1994
July 29, 1994
RE: Ruling Request: Corporate Income Taxes
Dear***************
This will reply to your letter dated March 28, 1994 in which you request permission for*********** (the "Taxpayer") and subsidiaries to file a Virginia consolidated return for the taxable year ended December 31, 1993 and thereafter.
FACTS
The Taxpayer and its three wholly owned subsidiaries have historically filed on a separate basis for Virginia corporate income tax purposes, while filing on a consolidated basis for federal income tax purposes. The Taxpayer and two of the subsidiaries have filed separate Virginia returns since 1986 and the remaining subsidiary has done likewise since 1982. 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. See Virginia Regulation (VR) 630-3-442 (5) (A), copy enclosed.
VR 630-3-442 (1) (B), copy enclosed, 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.
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 filing status, based upon the initial Virginia returns filed.
Based on the facts as presented, there are no extraordinary circumstances to warrant the granting of permission for the Taxpayer and its subsidiaries to change to filing on a consolidated basis. Accordingly, permission to change must be denied.
However, the department will generally grant permission to change to a combined filing on a prospective basis. Therefore, the Taxpayer and its subsidiaries are granted permission to file on a combined basis for their taxable year ended December 31, 1993 and thereafter. Enclosed you will find VR 630-3-442 (4) describing the requirements for a combined filing.
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner