Tax Type
Corporation Income Tax
Description
Consolidated Return
Topic
Returns/Payments/Records
Date Issued
07-05-1994
July 5, 1994
Re: Request for Ruling: Corporate Income Tax
Dear*****************
This will reply to your letter of April 11, 1994, in which *************(the "Taxpayer") and affiliates seek permission to change from filing separate Virginia income tax returns to filing a consolidated Virginia income tax return, beginning with the year ended December 31, 1993.
FACTS
The Taxpayer filed separate Virginia tax returns prior to 1993. Although the Taxpayer itself had no subsidiaries, the Taxpayer was affiliated, within the meaning of VR 630-3-302, with other corporations that also filed pre - 1993 Virginia returns on a separate basis. The Taxpayer and these affiliates had a common corporate parent that did not file in Virginia.
During 1993 the Taxpayer acquired an affiliated group of corporations. The acquired group of corporations (a "parent-subsidiary" group) was already doing business in Virginia, and had filed consolidated Virginia returns prior to 1993. The Taxpayer believes that the addition of new members to its Virginia affiliated group created a "first year" election situation, thereby allowing the group to elect the consolidated method of filing for 1993. Alternatively, the Taxpayer believes that as the new parent of a group already filing a Virginia consolidated return it can (or must) conform to the filing method of that group.
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 the corporations filed their federal income tax return. VR 630-3-442 A provides that in the first year two or more members of an affiliated group of corporations are required to file Virginia returns, the group may elect to file separate returns, a consolidated return, or a combined return. All returns for subsequent years must be filed on the same basis unless permission to change is granted by the department. Permission to change to or from the consolidated filing method is generally not granted by the department, because this change can affect the allocation and apportionment factors and possibly distort the reporting of the portion of business done in Virginia .
Prior to the acquisition of the parent-subsidiary group of corporations in 1993, the Taxpayer was a member of an affiliated group within the meaning of VR 630-3-302. These corporations filed their Virginia returns on a separate basis, thereby electing the separate filing status for all subsequent returns. Therefore, 1993 was not an initial election year for the Taxpayer, and the Taxpayer's affiliated group remained subject to an election to file separate returns. In accordance with VR 630-3-442 E, the new members of the group must follow the filing method previously elected by the group.
Based on the facts as presented, no extraordinary circumstances exist to warrant granting permission to change to filing on a consolidated basis. Accordingly, permission to file a consolidated return cannot be granted.
Va. Code §58.1-442 permits affiliated corporations to file a combined return. Permission to change between the separate and combined return filing methods generally will be granted, because allocation and apportionment formulas are not affected by changes between these two statuses. You have requested permission to file a combined return in the event that consolidated filing is denied.
Because the request to change was filed before the extended date for the 1993 tax return, permission is hereby granted for taxpayer and affiliates to file a combined return for 1993 thereafter.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/787lM
Rulings of the Tax Commissioner