Tax Type
Corporation Income Tax
Description
Consolidated return
Topic
Returns and Payments
Date Issued
09-07-1990
September 7, 1990
Re: Ruling Request: Corporation Income Tax
§58.1-442 Consolidated Return
Dear ****
This is in response to your letter of March 13, 1990, in which you requested permission to file a consolidated Virginia corporation income tax return for the year ended December 31, 1989, the initial year of both corporations.
You state that the corporations are affiliated within the meaning of Va. Code §58.1-302. one corporation builds modular homes and has some out-of-state sales. This corporation is required to use the three factor apportionment formula (property, payroll and sales). The other corporation holds mortgages, and all of its income consists of interest. Under Va. Code §58.1-418 (copy enclosed), this corporation is classified as a financial corporation and is required to use a one factor formula based on cost of performance.
It is well established that a consolidated Virginia return may not include corporations which are required to use different apportionment factors if separate returns were to be filed (V. §630-3-442(C)(2), copy enclosed). Because one corporation is required to use the three factor apportionment formula and the other corporation is required to use a single factor formula, the two corporations in this case may not be included in the same consolidated Virginia return. Accordingly, permission to file a consolidated return for the year ended December 31, 1989, is denied.
While consolidated filing is not available for the year ended December 31, 1989, it may be available for tax years beginning on or after January 1, 1990. Groups which file a consolidated federal return and include affiliates with different apportionment factors may request permission to file on a consolidated basis in 1990 (HB 159, 1990 Acts of Assembly, chapter 619). The department is in the process of drafting a regulation which will explain how a mixed factor group computes a consolidated apportionment factor. The regulation is also expected to set forth the circumstances when existing mixed factor groups may be allowed to switch to consolidated returns. We have added your name to the list of interested parties who will be mailed a copy of the draft regulation.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner