Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; Change in method of filing
Topic
Returns and Payments
Date Issued
02-17-1995
February 17, 1995
Re: Request for Ruling: Corporate Income Tax
Dear**********
This will reply to your letter of January 9, 1995, in which you request permission for your client, *************(the "Taxpayer") and affiliates to change from filing separate Virginia income tax returns to filing a consolidated Virginia income tax return, or in the alternative, a combined return beginning with the year ended September 30, 1994.
FACTS
The Taxpayer and one of its affiliated companies filed separate Virginia income tax returns prior to the year ended September 30, 1994. The Taxpayer incorporated a new affiliate on November 2, 1993, which would join in the filing. The affiliated group intends to file a consolidated federal return, and you now request that the Taxpayer be allowed to change from separate Virginia filings to a consolidated return.
RULING
Code of Virginia §58.1 -442 allows corporations to elect to file returns on the basis of one of three filing statuses (separate, combined, or consolidated) regardless of how the corporations filed their federal income tax return. Virginia Regulation (VR) 630-3-442 A 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 6310-3-302 prior to the taxable year ending September 30, 1994. These corporations filed their Virginia returns on a separate basis, thereby electing the separate filing status for all subsequent returns. In accordance with VR 630-3-442 E, 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 the request to change was filed before the extended due date for the return for the taxable year ending September 30,1994, permission is hereby granted for the Taxpayer and affiliates to file a combined return for that year and subsequent years.
If you have any additional questions regarding this ruling, you may contact************.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP9150P
Rulings of the Tax Commissioner