Tax Type
Corporation Income Tax
Description
New affiliate in Virginia; Consolidated return
Topic
Returns/Payments/Records
Date Issued
03-18-1993
March 18, 1993
Re: Request for Ruling; Corporation Income Tax
Dear*********
This will reply to your letter of November 12, 1992 in which you request permission for ***********(the "Taxpayer") to file a consolidated Virginia corporation income tax return.
FACTS
Before 1989, the Taxpayer and its affiliates doing business in Virginia filed separate Virginia corporation income tax returns. Subsequently, the subsidiaries doing business in Virginia were sold. As a result, the Taxpayer was the only member of the affiliated group doing business in Virginia in 1989. The Taxpayer filed its Virginia corporation income tax return on a separate basis.
The Taxpayer has almost completed construction of a new facility in Virginia and plans to incorporate it separately. You ask if the Taxpayer and its new subsidiary would be permitted to file a consolidated Virginia corporation income tax return for 1993 and subsequent years.
RULING
Va. Code §58.1-442 allows corporations to elect to file returns on the basis of one of three filing statuses (separate, combined or consolidated) regardless of how corporations filed their federal income tax return. The election of filing status is made in the first year two or more affiliated corporations are required to file Virginia returns. See Virginia Regulation (VR) 630-3-442A.
The Taxpayer and its affiliated group initially elected to file Virginia returns on a separate basis. However, in 1989 the affiliated group ceased to exist for Virginia purposes when the subsidiaries doing business in Virginia were sold. The Taxpayer was the only member of the federal affiliated group doing business in Virginia and was required to file on a separate basis.
Since 1988, there has been no affiliated group to file on a consolidated basis. None of the Taxpayer's subsidiaries had income from Virginia sources, making them eligible for inclusion in a Virginia consolidated return.
If the Taxpayer incorporates its new facility as a wholly owned subsidiary, 1993 will be the first year since 1989 that there will be two or more affiliated corporations required to file Virginia returns. Therefore, the 1993 return will be the initial return for the affiliated group, and a new election of filing status will be available. Accordingly, the Taxpayer will be permitted to file a consolidated Virginia corporation income tax return with the subsidiary for 1993 and subsequent years.
If you have any further questions, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6541F
Rulings of the Tax Commissioner