Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; Permission to change filing status
Topic
Returns and Payments
Date Issued
06-20-1996
PD 96-145
Re: Request for Ruling: Corporate Income Tax
Dear**************
This will reply to your letter of November 27, 1995, in which you requested permission for*******(the "Taxpayer") to change from filing a separate Virginia corporation income tax return to filing a consolidated Virginia corporation income tax return with its wholly owned subsidiary,*************("S") retroactive to the taxable year ended August 31, 1994.
The Taxpayer filed a separate Virginia corporation income tax return for the taxable year ended August 31, 1994. S became subject to Virginia tax in August, 1994, but did not file a Virginia return. The Taxpayer states that its tax department was unaware that the affiliate had become subject to Virginia tax and consequently the Taxpayer filed a separate return. The Taxpayer requests that it be allowed to amend the August 31, 1994, return and retroactively file a consolidated return for that period.
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.
Absent extraordinary circumstances, permission to change to or from the consolidated filing method is generally not granted by the department, because this change can affect the allocation and apportionment factors and possibly distort the reporting of the portion of business done in Virginia. Further, permission to change will generally be effective only for returns filed on or after the date the request for permission to change was filed.
The Taxpayer filed a separate return for the taxable year ended August 31, 1994. S has not filed a Virginia return for this period. The due date for S to file a timely return for this period has expired. Consequently, the department finds that the Taxpayer and S have made an election to file on a separate basis.
Based on the facts presented, no extraordinary circumstances exist to warrant granting permission to change to filing on a consolidated basis. Accordingly, Permission to file a retroactive Virginia consolidated return cannot be granted.
You have requested permission to file a combined return in the event that consolidated filing is denied. Permission is hereby granted to file on a combined basis prospectively, beginning with the return for the fiscal year ending August 31, 1995. Any new affiliates beginning business in Virginia must file as members of the combined return. S should file a separate return for the fiscal year ending August 31, 1994.
If you have any questions regarding this ruling, please contact **** at *****.
Danny M. Payne
Tax Commissioner
OTP/10650P
COMMONWEALTH of VIRGINIA
Department of Taxation
Department of Taxation
June 20, 1996
Re: Request for Ruling: Corporate Income Tax
Dear**************
This will reply to your letter of November 27, 1995, in which you requested permission for*******(the "Taxpayer") to change from filing a separate Virginia corporation income tax return to filing a consolidated Virginia corporation income tax return with its wholly owned subsidiary,*************("S") retroactive to the taxable year ended August 31, 1994.
FACTS
The Taxpayer filed a separate Virginia corporation income tax return for the taxable year ended August 31, 1994. S became subject to Virginia tax in August, 1994, but did not file a Virginia return. The Taxpayer states that its tax department was unaware that the affiliate had become subject to Virginia tax and consequently the Taxpayer filed a separate return. The Taxpayer requests that it be allowed to amend the August 31, 1994, return and retroactively file a consolidated return for that period.
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.
Absent extraordinary circumstances, permission to change to or from the consolidated filing method is generally not granted by the department, because this change can affect the allocation and apportionment factors and possibly distort the reporting of the portion of business done in Virginia. Further, permission to change will generally be effective only for returns filed on or after the date the request for permission to change was filed.
The Taxpayer filed a separate return for the taxable year ended August 31, 1994. S has not filed a Virginia return for this period. The due date for S to file a timely return for this period has expired. Consequently, the department finds that the Taxpayer and S have made an election to file on a separate basis.
Based on the facts presented, no extraordinary circumstances exist to warrant granting permission to change to filing on a consolidated basis. Accordingly, Permission to file a retroactive Virginia consolidated return cannot be granted.
You have requested permission to file a combined return in the event that consolidated filing is denied. Permission is hereby granted to file on a combined basis prospectively, beginning with the return for the fiscal year ending August 31, 1995. Any new affiliates beginning business in Virginia must file as members of the combined return. S should file a separate return for the fiscal year ending August 31, 1994.
If you have any questions regarding this ruling, please contact **** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10650P
Rulings of the Tax Commissioner