Tax Type
Corporation Income Tax
Description
Request to file consolidated returns; Affiliates with different apportionment factors
Topic
Allocation and Apportionment
Returns/Payments/Records
Date Issued
08-16-1994
August 16, 1994
Re: Ruling Request: Corporate income taxes
Dear*******
This will reply to your letter of January 6, 1994 in which you have requested a ruling on behalf of******* (the "Taxpayer"). I apologize for the delay in responding.
FACTS
The Taxpayer and Affiliates have been filing Virginia income tax returns on a combined basis since 1986. The Taxpayer and Affiliates are a mixed factor group, some members of which are required to use a single factor apportionment formula and the remainder of which are required to use the statutory three factor apportionment formula. The Taxpayer and Affiliates wish to file a consolidated Virginia tax return, retroactively beginning with the 1990 taxable year.
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.
Effective for taxable years beginning on or after January 1, 1990, Chapter 619 of the 1990 Acts of Assembly (HB 159) allows affiliated corporations utilizing different apportionment factors to be included in a Virginia consolidated return.
The Taxpayer and Affiliates have been filing on a combined basis and cannot file a consolidated return as one group for years prior to 1993 unless permission is granted. Although permission to change to or from consolidated filing is rarely granted, HB 159 was
intended to apply to affiliated groups previously denied Virginia consolidated filing status solely due to mixed apportionment factors between members.
Pursuant to its order of January 19, 1993 adopting VR 630-3-442, the department indicated that it would grant a timely request to change to consolidated filing by a group including corporations required to use different apportionment factors, retroactive to taxable years beginning on and after January 1, 1990. For this purpose, a request is considered timely if it is filed within one year of March 10, 1993, the effective date of the regulation.
Because of the legislative intent, and the facts and circumstances of this case, the Taxpayer and Affiliates are hereby granted permission to file a consolidated return for the 1990 taxable year and thereafter.
The consolidated apportionment factor for affiliates required to use different factors shall be determined in accordance with Public Document 91-244 (10/7/91), copy attached, for taxable years beginning on or after January 1, 1990, but before January 1, 1993. The consolidated apportionment factor for affiliates required to use different factors shall be determined in accordance with §7 of VR 630-3-442, copy attached, for taxable years beginning on or after January 1, 1993.
The consolidated return must include the net income and apportionment factors of every member of an affiliated group which would be subject to Virginia income tax if separate returns were to be filed. The return may not include any corporation which is exempt from Virginia income tax under §58.1-401 of the Code of Virginia or U.S. Public Law 86-272. All of these are factual matters which must be established for each affiliated corporation. While this letter grants permission to file a consolidated return, it does not signify consent for the inclusion of any particular affiliate in such consolidated return.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/759OM
Rulings of the Tax Commissioner