Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; First year election of affiliated group
Topic
Returns and Payments
Date Issued
04-10-1997
April 10, 1997
Re: Request for Ruling: Corporate Income Tax
Dear**********
This will respond to your letter of March 11, 1997, in which you request permission for ***** (the "Taxpayer") and affiliates to file a consolidated Virginia corporation income tax return for the taxable year ending June 1, 1996.
FACTS
The Taxpayer is a Delaware corporation recently incorporated to be the parent of an affiliated group purchased from another corporation. Prior to the formation of the Taxpayer, the affiliated group filed as part of a combined return with its former parent corporation. The Taxpayer believes that the acquisition of the affiliated group by the new parent corporation creates a "first year" election, whereby the group can elect to file a consolidated return.
RULING
Code of Virginia § 58.1-442 allows corporations to elect to file returns as separate, combined, or consolidated entities regardless of how the corporations filed their federal income tax return. Once an affiliated group has made an election, the group may not change its filing status unless permission is granted by the department.
Prior to the formation of the Taxpayer, the group was affiliated within the meaning of Code of Virginia § 58.1-302. The affiliated corporations filed their Virginia corporation income tax returns as part of a combined return, thereby electing combined filing status for all subsequent returns. Therefore, the taxable year ending June 1, 1996, is not an initial election year for the Taxpayer, and the Taxpayer's affiliated group must conform to the prior election and file a combined return.
It is well established that permission to change to or from consolidated returns will generally not be granted absent extraordinary circumstances. Based on the facts presented, I find no extraordinary circumstances to warrant the granting of permission for the affiliated group to change to filing on a consolidated basis. Accordingly, permission to change filing status must be denied.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12312P
Rulings of the Tax Commissioner