Tax Type
Corporation Income Tax
Description
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 October 14, 1993 in which you request permission for********(the "Taxpayers") and subsidiaries to file a Virginia consolidated return for the taxable year ended December 31, 1992 and thereafter.
FACTS
The Taxpayer and its three subsidiaries file on a consolidated basis for federal income tax purposes. However, the Taxpayer and subsidiaries have historically filed on a separate basis for Virginia corporate income tax purposes. The Taxpayer has filed separate Virginia returns since 1979. The subsidiaries have likewise filed separately; two subsidiaries since 1988 and the remaining subsidiary since 1969. You ask that the affiliated group be allowed to amend their 1992 return on a consolidated basis and then be permitted to file consolidated for all taxable years thereafter.
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 no circumstance will the department grant permission to file on a consolidated basis for a taxable period ending on or before the date of the request.
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. 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 (A) (copy attached.)
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.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/7794L
Rulings of the Tax Commissioner