Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; Elections
Topic
Returns and Payments
Date Issued
04-25-1997
April 25, 1997
Re: Request for Ruling: Corporate Income Tax
Dear*****************
This will respond to your letter in which you request permission for ******** (the "Taxpayer") and *********** (“S") to file a 1995 Virginia consolidated corporation income tax return.
FACTS
The Taxpayer was incorporated in December 1994, at which time it received 100% of the stock of S. The first full taxable year for the group was the calendar year 1995 at which time the group filed a Virginia consolidated corporation income tax return. You request that the Taxpayer and S be allowed to continue filing a Virginia consolidated return.
RULING
Code of Virginia § 58.1-442 allows corporations to elect to file 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, all returns for subsequent years must be filed on the same basis and the group may not change its filing 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 only when a taxpayer desires to change the initial election.
In order to file on a consolidated basis for Virginia purposes, the corporations must be affiliated within the meaning of Code of Virginia § 58.1-302. "Affiliated means 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."
The Taxpayer and S are affiliated within the meaning of Code of Virginia § 58.1--302 with respect to the 1995 tax year. Therefore, 1995 would be the initial election year for the Taxpayer and S. Accordingly, the Taxpayer's election to file a Virginia consolidated return for 1995 was valid and the Taxpayer and S must continue to file using this status.
Please be aware that the department will not grant permission to change to or from the consolidated status absent extraordinary circumstances. Such a change can affect allocation and apportionment factors and distort business done in Virginia and income from Virginia sources. See 23 Virginia Administrative Code 10-120-324, copy enclosed.
If you have any questions regarding this ruling, please contact ************* at *********** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12394P
Rulings of the Tax Commissioner