Tax Type
Corporation Income Tax
Description
Filing change to consolidated return denied
Topic
Returns/Payments/Records
Date Issued
03-05-1990
March 5, 1990
Re: Request for Ruling; Corporation Income Tax
§58.1-442 Consolidated Return
Dear ****
This is in response to your letter of January 16, 1990, in which you applied for permission for the Taxpayer and its subsidiary to file the Virginia Corporation Income Tax Return on a consolidated basis.
Facts
The Taxpayer and its subsidiary filed their Virginia corporation income tax returns on a separate basis for the tax year ended December 31, 1987. The reason for filing separate returns for 1987 was that tax preparation for the Taxpayer and the subsidiary was performed by two different CPA firms. The Taxpayer requests permission to file a consolidated return for the tax year ended December 31, 1988, as the returns for the two corporations are to be prepared by one CPA firm, and the two corporations have filed a consolidated federal corporation income tax return.
Discussion
Under Va. Code §58.1-442, once an affiliated group has made an election to file on a separate, consolidated, or combined basis, the group may not change its filing status unless permission is granted by the Department of Taxation. It is well established that permission to change to or from consolidated returns will generally not be granted, as the change affects the allocation and apportionment factors and distorts business done in Virginia and the income arising from activity in Virginia. See VR §630-3-442.E. (copy enclosed).
Based on the facts as presented, I find no reason to grant permission for the Taxpayer and its subsidiary to change from filing on a separate basis to filing on a consolidated basis. Accordingly, permission to change is denied, and the Taxpayer and its subsidiary shall continue to file separate Virginia corporation income tax returns.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner