Tax Type
Corporation Income Tax
Description
Taxpayer and A1 were eligible to elect to file combined returns .
Topic
Corporate Distributions and Adjustments
Filing Status
Date Issued
08-16-2010
August 16, 2010
Re: Ruling Request: Corporate Income Tax
Dear *****:
This will respond to your letter in which you request a ruling confirming that the taxable year January 1 through December 31, 2009 will be the election year for selecting a corporate income tax filing status for the ***** (the "Taxpayer") and its affiliates.
FACTS
The Taxpayer acquired ***** (A1), a Virginia-based corporation, in 2005. The Taxpayer did not operate in Virginia and A1 continued to file a separate return. In May 2008, the Taxpayer purchased all of the member interests of ***** (D1), a limited liability company operating in Virginia. For the short taxable year ended December 31, 2008, the Taxpayer and A1 each filed a separate Virginia corporate income tax return.
In October 2009, ***** (D2) began doing business in Virginia. D2 was a single member limited liability company owned by ***** (A2), a subsidiary of the Taxpayer.
The Taxpayer, A1, and A2 are affiliated within the meaning of Va. Code § 58.1-302 and file returns using the same taxable year. The Taxpayer requests a ruling that it was eligible to elect to file combined corporate returns effective with the taxable year ended December 31, 2009.
RULING
Virginia Code § 58.1-442 allows corporations to elect to file returns as separate, combined or consolidated entities regardless of how the corporations file 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.
Title 23 VAC 10-120-324 provides that changes between separate and combined filings will generally be allowed because allocation and apportionment among members of the affiliated group are unaffected by either filing method.
Based on the facts presented, the Taxpayer and A1 became an affiliated group in May 2008. The first full taxable year that the affiliated group was subject to Virginia income tax was the taxable year ended December 31, 2009. Therefore, the election year of the affiliated group is the 2009 taxable year. As such, the Taxpayer and A1 were eligible to elect to file combined returns beginning with the 2009 taxable year.
In addition, because it became subject to Virginia corporate income tax during the 2009 taxable year, A2 would be included the Taxpayer's affiliated group and must be included in the 2009 combined return.
All subsequent returns of the Taxpayer's affiliated group must be filed on the combined basis unless permission to change is granted by the Tax Commissioner. Further, any new affiliates becoming subject to Virginia corporate income tax in subsequent taxable years must conform to the elected filing status.
The Code of Virginia and regulation sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this response, you may contact ***** in the Department's Office of Tax Policy„ Appeals and Rulings, at *****.
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- Sincerely,
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- Linda Foster
Deputy Tax Commissioner
- Linda Foster
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AR/1-4415582158.E
Rulings of the Tax Commissioner