Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; Request to change filing status from separate to consolidated.
Topic
Returns and Payments
Date Issued
11-14-1997
November 14, 1997
Re: Request for Ruling: Corporate Income Tax
Dear**************
This will respond to your letter of September 11, 1997, in which you requested permission for *******(the "Taxpayer") and affiliates to change from filing separate Virginia income tax returns to filing a consolidated Virginia income tax return beginning with the taxable year ending December 31, 1996.
FACTS
The Taxpayer became subject to Virginia tax beginning in 1996. Several affiliates previously filed separate Virginia income tax returns for the taxable year ending December 31, 1995, and prior years. The Taxpayer requests that it be allowed to change from separate Virginia filings to the consolidated filing status.
RULING
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 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 Code of Virginia § 58.1-302 prior to the taxable year ending December 31, 1996. The affiliated corporations filed their Virginia returns on a separate basis, thereby electing the separate filing status for all subsequent years. In accordance with Title 23 VAC 10-120-320, 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.
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 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, 1996, because your consolidated request was timely filed.
If you have any questions regarding this ruling, please contact ***** at ****** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13145P
Rulings of the Tax Commissioner