July 9, 2024
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 combined corporate income tax return with a wholly owned subsidiary, ***** (the “Subsidiary”), for the taxable year ended January 28, 2023, and for all subsequent years.
FACTS
The Subsidiary has been filing separate corporate income tax returns. The Taxpayer first became subject to Virginia corporate income tax during the 2022 taxable year.
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 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.
Because the 2022 taxable year was the first full taxable year for which the Taxpayer was required to file a Virginia corporate income tax return, it is an election year in which the affiliated group of companies may choose to file separate returns, a combined return, or a consolidated return. Accordingly, permission to change filing status is not required.
If combined or consolidated is elected, the return should be filed with the Taxpayer as the lead corporation. Once an election is made, all returns for subsequent years must be filed on the same basis unless permission to change is granted by the Department. Any new affiliates that become subject to Virginia income tax in succeeding years must conform to the election made by the Taxpayer and the Subsidiary.
Because the Taxpayer is eligible to make an election, it was not required to pay the fee for a filing change request. The $100 fee paid for requesting a change in filing status will be refunded to the Taxpayer.
The Code of Virginia sections and regulation 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 response, you may contact *****, in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/4922.X