Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; First year election
Topic
Returns and Payments
Date Issued
03-20-1995
March 20, 1995
Re: Ruling Request: Corporation Income Tax
Dear************:
This will reply to your letter dated August 19, 1994, in which you request permission for **********(the"Taxpayer") and*************("S") to file a 1994 consolidated Virginia return.
FACTS
The Taxpayer has been doing business in Virginia for several years and files corporate income tax returns on a separate company basis. During 1994, the Taxpayer formed a wholly-owned subsidiary, S. Both the Taxpayer and S are calendar year taxpayers.
All the outstanding stock of the Taxpayer is held by a partnership. This partnership consists of two unrelated partners, neither of which has an 80% or more interest in the partnership assets.
For taxable year 1994, the Taxpayer and S will file a consolidated return for federal income tax purposes. You request permission for the Taxpayer and S to file on a consolidated basis in Virginia for 1994.
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. Once an affiliated group has made an election, all returns for subsequent years must be filed on the same basis and the group may not change its status unless permission is granted by the department. A taxpayer need not make a request with the department in order to make the initial election. Rather, Virginia law requires written permission when a taxpayer desires to change the initial election.
In order to file on a consolidated basis for Virginia purposes, the corporation must be affiliated, as defined by Code of Virginia §58.1-302. "Affiliated" means;
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- two or more corporations subject to Virginia income taxes whose relationship to each other is such that (i) one corporation owns at least eighty percent of the voting stock of the other or others, or (ii) at least eighty percent of the voting stock of two or more corporations is owned by the same interests.
- two or more corporations subject to Virginia income taxes whose relationship to each other is such that (i) one corporation owns at least eighty percent of the voting stock of the other or others, or (ii) at least eighty percent of the voting stock of two or more corporations is owned by the same interests.
Please be aware that the department will not grant permission to change to or from a consolidated filing absent extraordinary circumstances. Such a change can affect allocation and apportionment factors and distort business done in Virginia and income arising from activity in Virginia. See Virginia Regulation 630-3-442 §5 (A)(1), copy attached.
Should you have additional questions regarding this matter, please contact****************.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP/8387L
Rulings of the Tax Commissioner