Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; First year election of affiliated group
Topic
Returns and Payments
Date Issued
05-23-1997
May 23, 1997
Re: Request for Ruling: Corporate Income Tax
Dear**********************
This will respond to your letter of March 18, 1997, in which you request permission for ***********(the "Taxpayer") to file a Virginia consolidated income tax return with its affiliate, *********("S").
FACTS
The Taxpayer owned 66.67% of stock in S for a number of years. On March 24, 1996, the Taxpayer acquired the remaining 33.33% of stock in S. The Taxpayer files on a calendar year basis and S files using a September 30 year end. S filed a short period return for the period October 1 through December 31, 1996, to establish the same taxable year as that of the Taxpayer. You request permission to file a Virginia consolidated return since the Taxpayer and S are now affiliated and will use the same taxable year.
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. See 23 VAC 10-120-320 of the Virginia Administrative Code (copy enclosed) that 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.
Taxpayer and S became affiliated within the meaning of Code of Virginia § 58.1--302 with respect to the 1997 tax year. Therefore, 1997 would be the initial election year for the Taxpayer and S and they may elect to file a Virginia consolidated return.
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 VAC 10-120-324 of the Virginia Administrative Code (copy enclosed).
If you have any questions regarding this ruling, please contact******at *****
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12410P
Rulings of the Tax Commissioner