Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; Change in method of filing
Topic
Returns and Payments
Date Issued
12-12-1994
December 12, 1994
RE: Request for Ruling: Corporate Income Tax
Dear****************
This will reply to your letter of August 18, 1994, in which you request permission for ****************(the"Taxpayer") and a subsidiary to change from filing separate Virginia income tax returns to filing on a consolidated basis.
FACTS
The taxpayer is the common parent of the subsidiary and filed on a consolidated basis for federal income tax purposes. For Virginia tax purposes, the parent and the subsidiary filed separate income tax returns.
The taxpayer has been active in Virginia over several years and has paid Virginia income taxes. The subsidiary has been registered to do business in Virginia, but has not conducted any business in Virginia in prior years. Although it has filed separate Virginia returns in prior years, it has not actually been subject to tax in Virginia and was not eligible to be included in a consolidated Virginia return pursuant to Virginia Regulation (VR) 630-3-442. The subsidiary has now moved operations into Virginia and will be subject to Virginia income taxes.
You request permission to change to a consolidated filing status, citing the fact that both taxpayer and subsidiary now have income from Virginia sources.
RULING
The taxpayer and its subsidiary have been filing Virginia returns on a separate basis. However, in the fall of 1993 the subsidiary moved some of its operations into Virginia and
therefore had income from Virginia sources making them eligible for inclusion in a Virginia consolidated return.
Code of Virginia § 58.1-442 allows corporations to elect to file returns on the basis of one of three statuses (separate, combined, or consolidated) regardless of how the corporations filed their federal income tax return. Virginia Regulation § 6303-442 A. (attached) requires that the election of filing status must be made in the first year two or more affiliated corporations are required to file Virginia returns.
For this reason the return for the fiscal year ending May 31, 1994 will be the first year for the affiliated group and in which two or more affiliates are eligible to be included in a consolidated or combined return and an election of filing status will be available. Accordingly, the Taxpayer will be permitted to file a consolidated Virginia corporation income tax return with the subsidiary for the beginning with the fiscal year ending May 31, 1994 subsequent years.
If you have any further questions, please contact*************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8388P
Rulings of the Tax Commissioner