Tax Type
Corporation Income Tax
Description
Consolidated Return
Topic
Corporate Distributions and Adjustments
Date Issued
12-10-1982
December 10, 1982
Re: § 58-151.079 Permission to File a Consolidated Return
Dear ****************
For 1979 and 1980******and two of its subsidiaries***** filed separate Virginia returns. In 1981 acquired two more subsidiaries *********. For calendar year 1981 ****** elected to file a consolidated Federal return. then filed a consolidated Virginia return with a letter requesting permission to so file. Although the consolidated return showed a tax due and penalties and interest due, no check was attached to the return.
As it existed in prior years, § 58-151.079 allowed corporations to elect to file either separate or consolidated returns in the first year that two or more affiliated corporations were required to file Virginia returns. *********** and two of its subsidiaries involved in this request elected to file separate returns for 1979.
The election is made by the affiliated group as a whole, not by the individual members of the affiliated group. When a new corporation becomes affiliated, within the meaning of § 58-151.081, with an affiliated group which has previously made an election under § 58-151.079, the new corporation must file its Virginia returns on the basis of that election. The new corporation does not "elect" to file on the same basis; it does not have any elections to make.
In a consolidated return inter-affiliate transactions are eliminated and the apportionment factors of multistate corporations are combined. As a result the income subject to Virginia income tax on a consolidated return may be significantly different than the total shown on separate returns, especially if any if the affiliates do business in more than one state. For this reason the Department of Taxation very rarely grants permission for corporations to change to or from consolidated returns once the election has been made.
Accordingly permission to file a consolidated return for 1981 is denied.
§ 58-151.079 has been amended to permit affiliated corporations to file a combined return for taxable years beginning on or after January 1, 1981. A change from separate returns to combined return does not affect the computation or apportionment of income except that losses of one corporation may offset the income of an affiliated corporation.
Permission is hereby granted to file a combined return for taxable years beginning on or after January 1, 1981 which includes all affiliates doing business in Virginia upon the following conditions:
1. Schedules shall be filed with the combined return which contain all information which would be contained in a separate Virginia return for each and every eligible member of the affiliated group. See §§ 58-151.079 and 58-151.081.
2. In computing the Virginia Taxable Income of each eligible member of the affiliated group there shall be added to federal taxable income the amount of any net operating loss deduction or other deduction which has been recognized for Virginia income tax purposes and offset other income in a Virginia consolidated or combined return for other taxable years. See, for example, Federal Income Tax Regulation 1.1502-79.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner