Tax Type
Corporation Income Tax
Description
Returns of affiliated corporations; First year election of affiliated group
Topic
Returns and Payments
Date Issued
08-21-1996
August 21, 1996
Re: Request for Ruling: Corporate Income Tax
Dear**************
This will reply to your letter of February 27, 1996, in which you request permission for *******(the "Taxpayer") and**********("S") to continue filing a Virginia consolidated corporation income tax return.
FACTS
The Taxpayer and S began filing Virginia corporation income tax returns in 1992. The Taxpayer's 1992 return was filed for the entire taxable year and on a separate basis. The return for S for 1992 was a short period return and filed on a separate return basis. In 1993, the Taxpayer and S filed a Virginia consolidated return. The 1993 Virginia consolidated return was questioned by the department since separate returns had been filed for 1992. You request that the 1993 consolidated return be accepted as filed and the Taxpayer be allowed to continue to file using the consolidated return method.
RULING
Code of Virginia § 58.1-442 allows corporations to elect to file returns as separate, combined, or consolidated entities regardless of how the corporations filed their federal income tax return. Once an affiliated group has made an election, the group may not change its filing status unless permission is granted by the department.
The filing of the first return for a 12 month taxable year beginning on or after the creation of a new affiliate will be deemed the filing which determines filing status. See Virginia Regulation (VR) 630-3-442, § 5 D, copy attached.
Since the first return for S was for a short period, an election had not been made. Consequently, the Taxpayer and S were free to elect any filing method with the filing of their initial 12 month return. The first 12 month return for the Taxpayer and S was for the taxable year ended December 31, 1993. Accordingly, the Taxpayer and S made a valid election to file a consolidated return.
Elections as to filing methods are deemed to be made by the affiliated group as a whole. Changes in membership of an affiliated group do not affect the original election by the group, and new members must assume the filing status previously elected by the group.
The penalties and associated interest assessed against S will be abated in full.
If you have any questions regarding this ruling, please contact*********of the Office of Tax Policy at********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11014P
Rulings of the Tax Commissioner