Tax Type
Corporation Income Tax
Description
Combined or consolidated return
Topic
Returns/Payments/Records
Date Issued
02-26-1986
February 1986
Re: Virginia Code Section 58.1-442
Permission to File a Combined or Consolidated Return
Dear ******************
This will reply to your letters of November 11, 1985 and January 13, 1986 requesting permission for the above-referenced taxpayers to file a combined or consolidated Virginia income tax return for the taxable year ended November 24, 1985 and thereafter.
FACTS
Parent acquired more than 80% of the voting stock of Subsidiary in a leveraged buyout in August 1985. Subsidiary is presently filing a separate Virginia return. You indicate that Parent would not be subject to Virginia income tax if a separate return were to be filed. You present facts showing the unitary nature of Parent and Subsidiary and assert that a combined return is necessary to avoid distortion of Subsidiary's income.
DETERMINATION
Section 58.1-442 of the Code of Virginia and the regulations promulgated thereunder provide that returns filed on a combined or consolidated basis are unavailable to corporations who would not be subject to Virginia income tax if separate returns were to be filed. You have indicated that Parent is presently not subject to Virginia income tax and, accordingly, a request for combined or consolidated filing status for Parent and Subsidiary must be denied. At such time as you advise us that Parent has become subject to Virginia income tax, we would be willing to re-examine your request.
You have also alluded to Virginia Code §58.1-446 which permits the Department of Taxation to equitably adjust tax where it appears that an arrangement exists as to improperly reflect business done or Virginia taxable income earned from business done in Virginia. This section has a discretionary application and, under the facts and circumstances you present, I decline to exercise that discretion.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner