Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; Request to change filing status from separate to consolidated denied, but combined filing permitted.
Topic
Returns and Payments
Date Issued
06-30-1998
June 30, 1998
Dear***********
This will respond to your letter in which you request permission for ***** (the ``Taxpayer') to file a Virginia consolidated income tax return with its affiliates beginning with the taxable year ending December 31, 1997.
FACTS
Several of the Taxpayer's affiliates which were subject to Virginia income tax have filed their Virginia corporation income tax returns on the separate basis for a number of years. During 1997, the Taxpayer acquired two new groups of affiliated corporations which had filed their returns on the consolidated basis in Virginia in previous years. The Taxpayer requests that its affiliates and the two newly acquired affiliated groups be allowed to file a Virginia consolidated return effective for the taxable year ending December 31, 1997, and thereafter.
RULING
Code of Virginia Sec. 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 returns. Title 23 of the Virginia Administrative Code (VAC) 10-120-320(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. All returns for subsequent years must be filed on the same basis unless permission to change is granted by the department.
The Taxpayer's subsidiaries that filed in Virginia prior to the acquisition of the two new groups constituted an affiliated group of corporations within the meaning of 23 VAC 10-120-20 at the close of the taxable year ending December 31,1996. These corporations filed their Virginia income tax returns on a separate basis, thereby electing the separate filing status for all subsequent years. In accordance with 23 VAC 10-120-320, the new members of the group must follow the filing method previously elected by the group. In the instant case, the new members who had been filing using the consolidated filing basis must adopt the filing status of the purchasing corporation. See Public Document (P.D.) 93-187 (8-26-93), copy enclosed.
It is well established that permission to change to or from a consolidated return will generally not be granted absent extraordinary circumstances. Based on the facts presented, l find 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 Sec. 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 the allocation and apportionment formulas are not affected by changes between these two statues. 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, 1997, in lieu of the separate filing if you so desire.
If you have any questions regarding this ruling, please contact ***** of the Office of Tax Policy at *****.
Dear***********
This will respond to your letter in which you request permission for ***** (the ``Taxpayer') to file a Virginia consolidated income tax return with its affiliates beginning with the taxable year ending December 31, 1997.
FACTS
Several of the Taxpayer's affiliates which were subject to Virginia income tax have filed their Virginia corporation income tax returns on the separate basis for a number of years. During 1997, the Taxpayer acquired two new groups of affiliated corporations which had filed their returns on the consolidated basis in Virginia in previous years. The Taxpayer requests that its affiliates and the two newly acquired affiliated groups be allowed to file a Virginia consolidated return effective for the taxable year ending December 31, 1997, and thereafter.
RULING
Code of Virginia Sec. 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 returns. Title 23 of the Virginia Administrative Code (VAC) 10-120-320(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. All returns for subsequent years must be filed on the same basis unless permission to change is granted by the department.
The Taxpayer's subsidiaries that filed in Virginia prior to the acquisition of the two new groups constituted an affiliated group of corporations within the meaning of 23 VAC 10-120-20 at the close of the taxable year ending December 31,1996. These corporations filed their Virginia income tax returns on a separate basis, thereby electing the separate filing status for all subsequent years. In accordance with 23 VAC 10-120-320, the new members of the group must follow the filing method previously elected by the group. In the instant case, the new members who had been filing using the consolidated filing basis must adopt the filing status of the purchasing corporation. See Public Document (P.D.) 93-187 (8-26-93), copy enclosed.
It is well established that permission to change to or from a consolidated return will generally not be granted absent extraordinary circumstances. Based on the facts presented, l find 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 Sec. 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 the allocation and apportionment formulas are not affected by changes between these two statues. 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, 1997, in lieu of the separate filing if you so desire.
If you have any questions regarding this ruling, please contact ***** of the Office of Tax Policy at *****.
Rulings of the Tax Commissioner