Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; First-year election of affiliated group.
Topic
Returns and Payments
Date Issued
03-25-1998
March 25, 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 subsidiary, ("S'), for the taxable year ending May 31, 1997.
FACTS
On October 2, 1996, the Taxpayer incorporated a new subsidiary ("S'). Both the Taxpayer and S use a taxable year ending May 31. The Taxpayer has previously filed its Virginia corporate income tax returns on a separate basis. Prior to the formation of S, the Taxpayer had no Virginia affiliates. The Taxpayer requests permission to file a consolidated Virginia corporation income tax return with S for the taxable year ending May 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 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 Sec. 58.1-302 with respect to the taxable year ending May 31, 1997. However, the return for this period would include a short period for S and its filing would not constitute an election. Virginia regulations provide that the filing of the first return for a 12 month taxable year beginning on or after the date of organization or acquisition of a new corporation which creates the affiliated group will be deemed the filing which elects a return filing status. See Title 23 VAC 10-120-324(D).
Therefore, the election would be made when the group files its May 31, 1998, return and prior permission from the department is not required. The taxable year ending May 31, 1998, year 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 Title 23 VAC 10-120-324 of the Virginia Administrative Code (copy enclosed)
.
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 subsidiary, ("S'), for the taxable year ending May 31, 1997.
FACTS
On October 2, 1996, the Taxpayer incorporated a new subsidiary ("S'). Both the Taxpayer and S use a taxable year ending May 31. The Taxpayer has previously filed its Virginia corporate income tax returns on a separate basis. Prior to the formation of S, the Taxpayer had no Virginia affiliates. The Taxpayer requests permission to file a consolidated Virginia corporation income tax return with S for the taxable year ending May 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 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 Sec. 58.1-302 with respect to the taxable year ending May 31, 1997. However, the return for this period would include a short period for S and its filing would not constitute an election. Virginia regulations provide that the filing of the first return for a 12 month taxable year beginning on or after the date of organization or acquisition of a new corporation which creates the affiliated group will be deemed the filing which elects a return filing status. See Title 23 VAC 10-120-324(D).
Therefore, the election would be made when the group files its May 31, 1998, return and prior permission from the department is not required. The taxable year ending May 31, 1998, year 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 Title 23 VAC 10-120-324 of the Virginia Administrative Code (copy enclosed)
.
If you have any questions regarding this ruling, please contact ***** of the Office of Tax Policy at *****.
Rulings of the Tax Commissioner