Tax Type
Corporation Income Tax
Description
Returns of Affiliated Corporations
Topic
Returns and Payments
Date Issued
10-15-1998
October 15, 1998
Re: Request for Ruling: Corporate Income Tax
Dear *****
This will respond to your letter in which you request permission for ***** (the ``Taxpayer'), and its affiliated corporations to change from filing separate Virginia corporation income tax returns to a combined return effective for the taxable year ending December 31, 1997.
FACTS
The Taxpayer acquired two affiliated corporations on January 1, 1997, that had filed separate returns in Virginia for a number of years. Prior to the acquisition of these affiliates, the Taxpayer was not subject to the Virginia corporate income tax. According to the information you provided, the Taxpayer will be subject to Virginia tax for the taxable year ending December 31, 1997. You have represented that the group is affiliated within the meaning of Code of Virginia Sec. 58.1-302 and files using the same taxable year. The Taxpayer and its newly acquired affiliates request permission to change to the combined filing status prospectively with the taxable year ending December 31, 1997.
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 two affiliates were members of an affiliated group of corporations within the meaning of Code of Virginia Sec. 58.1-302 prior to the taxable year ending December 31, 1997. These corporations filed their Virginia returns on a separate basis, thereby electing the separate filing status for all subsequent years. In accordance with 23 VAC 10-120-320 B, other members of the group that become subject to Virginia income tax in subsequent years must follow the filing method previously elected by the group unless permission to change is granted by the department.
Permission to change between separate and combined filing methods will generally be granted, because allocation and apportionment formulas are not affected by changes between these two statuses. See 23 VAC 10-120-324, copy enclosed. Because your request to change was filed prior to the due date or the extended due date of the separate returns, permission to change from separate to a combined filing is hereby granted. Any new affiliates that become subject to the Virginia corporation income tax are required to join in the Taxpayer's combined return.
If you have any questions regarding this ruling, please contact ***** of the Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/17285P
Re: Request for Ruling: Corporate Income Tax
Dear *****
This will respond to your letter in which you request permission for ***** (the ``Taxpayer'), and its affiliated corporations to change from filing separate Virginia corporation income tax returns to a combined return effective for the taxable year ending December 31, 1997.
FACTS
The Taxpayer acquired two affiliated corporations on January 1, 1997, that had filed separate returns in Virginia for a number of years. Prior to the acquisition of these affiliates, the Taxpayer was not subject to the Virginia corporate income tax. According to the information you provided, the Taxpayer will be subject to Virginia tax for the taxable year ending December 31, 1997. You have represented that the group is affiliated within the meaning of Code of Virginia Sec. 58.1-302 and files using the same taxable year. The Taxpayer and its newly acquired affiliates request permission to change to the combined filing status prospectively with the taxable year ending December 31, 1997.
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 two affiliates were members of an affiliated group of corporations within the meaning of Code of Virginia Sec. 58.1-302 prior to the taxable year ending December 31, 1997. These corporations filed their Virginia returns on a separate basis, thereby electing the separate filing status for all subsequent years. In accordance with 23 VAC 10-120-320 B, other members of the group that become subject to Virginia income tax in subsequent years must follow the filing method previously elected by the group unless permission to change is granted by the department.
Permission to change between separate and combined filing methods will generally be granted, because allocation and apportionment formulas are not affected by changes between these two statuses. See 23 VAC 10-120-324, copy enclosed. Because your request to change was filed prior to the due date or the extended due date of the separate returns, permission to change from separate to a combined filing is hereby granted. Any new affiliates that become subject to the Virginia corporation income tax are required to join in the Taxpayer's combined return.
If you have any questions regarding this ruling, please contact ***** of the Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/17285P
Rulings of the Tax Commissioner