Tax Type
Corporation Income Tax
Description
Alternative method using cost performance denied
Topic
Allocation and Apportionment
Date Issued
05-11-1990
May 11, 1990
Re: Request for Ruling; Corporation Income Tax
Dear *****************
This is in response to your letter of February 20, 1990 in which you applied for permission to use an alternative method of allocation and apportionment of income.
Requested Method
The taxpayer is a foreign corporation in the business of originating and servicing mortgage loans and also acts as an agent in selling such loans to permanent mortgage lenders. In October of 1986, the taxpayer expanded its operations, opening an office in Virginia. The office was closed in July of 1987, after it was determined that it was not producing any revenue. Virginia corporation income tax returns were filed for 1986 and 1987 and Virginia taxes were paid on income apportioned to Virginia using the cost of performance method. The taxpayer now contends that this method was inequitable, since the Virginia office incurred only expenses during its operating period and never generated any revenue. The taxpayer proposes a method of apportionment based primarily on a separate accounting for its Virginia operations.
Determination
The policies which apply to requests for an alternative method under §58.1-421 are well established. See VR §630-3-421 and the Ruling Letter dated September 18, 1986, P.D. No. 86-184 (copies enclosed). After considering the facts set forth, you have not demonstrated by clear and cogent evidence that the statutory method is unconstitutional or inapplicable as applied in your situation. Accordingly, permission to use an alternative method of allocation and apportionment is denied.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner