Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; Change in filing status requested
Topic
Returns and Payments
Date Issued
07-27-1995
July 27, 1995
Re: Ruling Request: Corporate Income Taxes
Dear****************
This will reply to your letter dated August 5, 1994, in which you request permission for *********(the "Taxpayer") and *************("S") to file a Virginia consolidated return for the taxable year ended December 31, 1993, and thereafter. I apologize for the delay in responding.
FACTS
The Taxpayer and S conduct business entirely within Virginia. S is the wholly owned subsidiary of the Taxpayer. The Taxpayer and S 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 has filed a separate Virginia return since 1973 and S has done likewise since 1990.
The Taxpayer and S filed a consolidated Virginia return for the taxable year ended December 31, 1993. You ask that the affiliated group be allowed to file on a consolidated basis.
RULING
Virginia Regulation (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.
In a consolidated return, inter-affiliate transactions are eliminated and the apportionment factors of multi-state corporations are combined. As a result, the income subject to Virginia income tax on a consolidated return may be significantly different than the total shown on separate returns, particularly if any of the affiliates do business in more than one state. For this reason, the department will grant permission to change to or from a consolidated filing only if extraordinary circumstances exist.
It is clear from the facts presented that the affiliated group (as defined by Code of Virginia §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 S 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 S are granted permission to file on a combined basis for their taxable year ended December 31, 1995 and thereafter.
Attached is a schedule showing the balance due as a result of recomputing the tax liability of the Taxpayer and S on a separate basis for 1993 and 1994. The assessment of interest for 1993 has been limited to the period ending with the date of your letter. The balance must be paid in full within 30 days to avoid accrual of additional interest. Please forward your payment to the Office of Tax Policy, the Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia 23282. Should you have any questions concerning this matter, please contact**************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8372L
Rulings of the Tax Commissioner