Tax Type
Corporation Income Tax
Description
Consolidated return; Affiliated members having different apportionment factors
Topic
Allocation and Apportionment
Date Issued
07-07-1987
July 7, 1987
Re: §58.1-1821 Application; Corporation Income Tax
Audit adjustments to returns for 1982
Dear *****************
This is in response to your letter of April 1, 1987, in which you applied for correction of an erroneous assessment of additional tax for the year 1982.
After reviewing the return and the audit adjustments in question, we are in agreement that two of the items, federal taxable income and the 30% ACRS addition, were correctly reported on the Virginia return and no audit adjustment is required.
The auditor reconciled the addition for interest on obligations of other states to the amount reported on Schedule M-1 as tax exempt interest. We will accept the information furnished with your letter which supports the amount shown on the Virginia return.
The major issue raised in your application is the proper method of computing the tax when a group of affiliated corporations which use different apportionment factors elects to file a consolidated return. The regulations, VR 630-3-442, state that a Virginia consolidated return may not include corporations which use different apportionment factors. The auditor divided the affiliated corporations into two groups, based on the factor used. and consolidated the income and factors for each group.
In an earlier letter you requested a ruling which would have permitted the income or loss of the two consolidated groups to be combined into a single Virginia return. In our recently issued ruling letter (copy enclosed) the proposed filing method was not allowed.
Accordingly, the audit report and assessment will be revised to remove the adjustments for federal taxable income, ACRS additions, and interest on obligations of other states. The audit adjustments based on requiring two returns, one for each consolidated group of corporations, are correct as made by the auditor.
Although you requested a conference to discuss these issues, this letter has been issued without a conference in view of the resolution of three of the issues and the fact that a conference was held in connection with the ruling letter on the consolidated return issue.
You will shortly receive a revised audit report and bill for the amount of the assessment outstanding with accrued interest. The bill should be paid within thirty days in order to avoid the accrual of additional interest.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner