Tax Type
Corporation Income Tax
Description
Returns of Affiliated Corporations
Topic
Returns and Payments
Date Issued
08-02-1999
August 2, 1999
Re: Request for Ruling: Corporate Income Tax
Dear *****
This will reply to your letter in which you request permission for ***** (the "Taxpayer') and an affiliated corporation to change from filing a consolidated Virginia corporation income tax return to filing on a combined basis.
FACTS
The Taxpayer and an affiliated corporation have filed a consolidated Virginia return for a number of years. The Taxpayer contends that because it conducts 100% of its business in Virginia and the affiliate only conducts 23% of its business in Virginia, the consolidated apportionment factor does not equitably and accurately reflect the overall business transacted in Virginia. The Taxpayer alleges that income subject to Virginia tax is overstated creating a substantial distortion of Virginia tax due.
The Taxpayer requests that it be allowed to change from the consolidated filing status to the combined status to alleviate the distortion.
RULING
Code of Virginia Sec. 58.1-442 allows a corporation 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 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 department will generally not grant permission to change to or from a consolidated filing status absent extraordinary circumstances.
The Taxpayer and its affiliate have been members of an affiliated group of corporations within the meaning of Code of Virginia Sec. 58.1-302 and filed their initial Virginia income tax return on a consolidated basis, thereby electing the consolidated filing status for all subsequent years. In accordance with 23 VAC 10-120-320, the members of the group must follow the filing method previously elected by the group.
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, I find no extraordinary circumstances exist to warrant granting permission to change to filing on a combined basis. Accordingly, permission to file a combined return cannot be granted.
If you have any questions regarding this ruling, please contact ***** of the Office of Tax Policy at******
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21914P
Re: Request for Ruling: Corporate Income Tax
Dear *****
This will reply to your letter in which you request permission for ***** (the "Taxpayer') and an affiliated corporation to change from filing a consolidated Virginia corporation income tax return to filing on a combined basis.
FACTS
The Taxpayer and an affiliated corporation have filed a consolidated Virginia return for a number of years. The Taxpayer contends that because it conducts 100% of its business in Virginia and the affiliate only conducts 23% of its business in Virginia, the consolidated apportionment factor does not equitably and accurately reflect the overall business transacted in Virginia. The Taxpayer alleges that income subject to Virginia tax is overstated creating a substantial distortion of Virginia tax due.
The Taxpayer requests that it be allowed to change from the consolidated filing status to the combined status to alleviate the distortion.
RULING
Code of Virginia Sec. 58.1-442 allows a corporation 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 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 department will generally not grant permission to change to or from a consolidated filing status absent extraordinary circumstances.
The Taxpayer and its affiliate have been members of an affiliated group of corporations within the meaning of Code of Virginia Sec. 58.1-302 and filed their initial Virginia income tax return on a consolidated basis, thereby electing the consolidated filing status for all subsequent years. In accordance with 23 VAC 10-120-320, the members of the group must follow the filing method previously elected by the group.
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, I find no extraordinary circumstances exist to warrant granting permission to change to filing on a combined basis. Accordingly, permission to file a combined return cannot be granted.
If you have any questions regarding this ruling, please contact ***** of the Office of Tax Policy at******
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21914P
Rulings of the Tax Commissioner