Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; Change in filing method
Topic
Returns and Payments
Date Issued
08-22-1995
August 22, 1995
Re: Request for Ruling: Corporate Income Tax
Dear***************:
This will reply to your letter of July 5, 1995, and subsequent conversation with one of my staff in which you requested permission for************* (the "Taxpayer) and affiliates to change from filing separate Virginia corporation income tax returns to filing a consolidated Virginia income tax return, or in the alternative, combined return beginning with the taxable year ended May 31, 1995.
FACTS
The Taxpayer and three affiliates filed separate Virginia income tax returns prior to the taxable year ended May 31, 1995, while filing on a consolidated basis for federal income tax purposes. The Taxpayer now requests that it be allowed to change from separate Virginia filings to a consolidated Virginia return.
DETERMINATION
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 (VR) 630-3-442, § 1 B 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 combined return, or a consolidated return. All returns for subsequent years must be filed on the same basis unless permission to change is granted by the department. Permission to change to or from the consolidated filing method is generally not granted by the department, because this change can effect the allocation and apportionment factors and possibly distort the reporting of the portion of business done in Virginia.
The Taxpayer was a member of an affiliated group of corporations within the meaning of VR 630-3-302 prior to the taxable year ended May 31, 1995. These corporations filed their Virginia returns on a separate basis, thereby electing the separate filing status for all subsequent years. In accordance with VR 630-3-442 § 1 B, the members of the group must follow the filing method previously elected by the group.
Based on the facts as presented, no extraordinary circumstances exist to warrant granting permission to change to filing on a consolidated basis. Accordingly, permission to file a consolidated return cannot be granted.
Code of Virginia § 58.1-442 permits affiliated corporations to file a combined return. Permission to change between the separate and combined return filing methods generally will be granted, because allocation and apportionment formulas are not affected by changes between these two statuses. You have requested permission to file a combined return in the event that consolidated filing is denied.
Because your request to change was filed before the extended due date of the tax return, permission is hereby granted for the Taxpayer and affiliates to file a combined return for the taxable year ended May 31, 1995, and subsequent years.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10095P
Rulings of the Tax Commissioner