Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; Change in method of filing
Topic
Returns and Payments
Date Issued
12-13-1996
December 13, 1996
Re: Request for Ruling: Corporate Income Tax
Dear****************
This will respond to your letter of August 30,1996, requesting permission for************* (the "Taxpayer") and an affiliate to change from filing separate returns to a Virginia consolidated income tax return for the Taxable year ending December 31, 1995.
FACTS
The Taxpayer and its affiliate filed separate Virginia income tax returns prior to their taxable year ending December 31, 1995. Beginning with the taxable year ending December 31,1995, the Taxpayer and the affiliate changed their filing status to a Virginia consolidated return without first receiving permission to change from the department. The Taxpayer requests that they 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 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 conducted 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 ending December 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 5, the members of the group must follow the filing method previously elected by the group.
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 consolidated return cannot be granted.
The Taxpayer will therefore be required to amend its 1995 Virginia consolidated return by filing separate Virginia returns for this year. The department will agree to waive any late filing penalties that might be associated with these filings provided that the Taxpayer and its affiliate file the proper separate returns within the next 60 days. Please forward these returns to ---------- Office of Tax Policy, Department of Taxation, Post Office Box 1880, Richmond, Virginia 23218-1880.
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 the allocation and apportionment formulas are not affected by changes between these two statuses. Although you have not requested to do so, the department will allow a change to the combined filing method beginning with the taxable year ending December 31, 1995, in lieu of the separate filing if you so desire.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11787P
Rulings of the Tax Commissioner