January 6, 2023
Re: Corporate Income Tax: Request for Filing Status Change
Dear *****:
This will respond to your letter in which you request permission for ***** (the “Taxpayer”) to file a separate corporate income tax return for the taxable year ended December 31, 2021, and for all subsequent taxable years. The Taxpayer and its subsidiaries previously filed on a consolidated basis in Virginia. On January 1, 2021, all subsidiaries of the Taxpayer became disregarded entities. For the 2021 taxable year, the Taxpayer will file a standalone federal income tax return that includes all financial data from the disregarded entities.
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 full taxable year two or more members of a group of corporations affiliated pursuant to Virginia Code § 58.1-302 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.
In this case, as a result of the change in corporate structure, the Taxpayer is no longer a member of an affiliated group for the 2021 taxable year. As such, the Taxpayer has no option other than to file a separate Virginia return. In this situation, no permission to change filing status is required.
Further, because the Taxpayer was not required to get permission to change its filing status, the $100 fee submitted with its request will be refunded.
The Code of Virginia sections cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/4368.X