Tax Type
Corporation Income Tax
Description
Permission to file a consolidated return
Topic
Returns/Payments/Records
Date Issued
10-14-1988
October 14, 1988
Re: Virginia Code Section 58.1-442
Permission to File a Consolidated Return
Dear****************
This is in response to your letter of August 12, 1988, requesting permission for the above-referenced taxpayers to file a consolidated return for the calendar Year 1987.
It is my understanding that the taxpayers comprise a five-member affiliated group of corporations, that all do business in Virginia, and that all use the same taxable year. The "parent" and Affiliate 1 filed separate returns in 1986. Affiliates 2, 3, and 4 became eligible to file a Virginia return in 1987.
In a consolidated return, inter-affiliate transactions are eliminated and the apportionment factors of multi-state 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, particularly if any of 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 Virginia return for the calendar year 1987 is denied.
Section 58.1-442 does permit affiliated corporations to file a combined return for taxable years beginning on or after January 1, 1981. A change from separate returns to a 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 for the above-referenced taxpayers to file a combined return for the calendar year 1987 and thereafter if the combined return includes all affiliated corporations subject to Virginia income tax and if they use the same taxable year. The return should be filed using the name and identification number of the designated lead affiliate. The combined return is to be filed in accordance with the requirements set forth in the Virginia Corporation Income Tax Regulations §630-3-442 (copy enclosed).
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner