Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; Consolidated returns; First-year election
Topic
Returns and Payments
Date Issued
06-13-1997
June 13, 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 acquired 80% of the outstanding stock in S on July 1, 1995. The Taxpayer files on a calendar year basis and S files using a June 30 year end. The Taxpayer filed a separate return for the taxable year ending December 31, 1995. S filed a short period return for the period July 1 through December 31, 1995, to establish the same taxable year as that of the Taxpayer. You request permission to file a Virginia consolidated return for the taxable year ended December 31,1996, because 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. Title 23 VAC 10-120-320 of the Virginia Administrative Code (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 combined return, or a consolidated return.
The Taxpayer and S became affiliated within the meaning of Code of Virginia § 58.1 -302 with respect to the 1996 tax year. Therefore,1996 would be the initial year for the Taxpayer and S to elect to file using any of the three methods allowable in Code of Virginia § 58.1-442. The election is made when the group files the 1996 return and prior permission from the department is not required.
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 Title 23 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/12575P
Rulings of the Tax Commissioner