Current through Register Vol. 41, No. 3, September 23, 2024
A. Description. A
consolidated return is a single return for all eligible members of an
affiliated group of corporations. The return shall show consolidated net income
prepared in accordance with IRC § 1502 and the regulations thereunder and
consolidated apportionment factors (See §§ 58.1-407 through 58.1-420
of the Code of Virginia).
B.
Eligible members.
1. A consolidated return
must include the net income and apportionment factors of all members of an
affiliated group which would be subject to Virginia income tax if separate
returns were to be filed. However, in the first year two or more members of an
affiliated group are required to file a Virginia income tax return, all members
subject to Virginia income tax and otherwise eligible to participate in a
Virginia consolidated return in that first year must have the same taxable year
end in order for the group to elect consolidated filing. In order for the
affiliate's income to be includible in a Virginia consolidated return, each new
affiliate created or purchased after the initial Virginia consolidated return
filing must adopt the taxable year end of the original group for the new
affiliate's first full 12-month taxable year and thereafter.
2. A consolidated return may not include
corporations which are:
(i) exempt from
Virginia income tax under § 58.1-401 of the Code of Virginia or U.S.
Public Law 86-272 ( 15 USC §§ 381 - 384), or
(ii) not affiliated as defined by §
58.1-302 of the Code of Virginia, or
(iii) not subject to Virginia income tax if
separate returns were to be filed, or
(iv) using different taxable years. For
purposes of clause (iv) a corporation shall not be deemed to be using a
different taxable year if it files a return for a period of less than 12 months
and all of the months are within the taxable year of the consolidated
group.
3. No affiliated
corporations, otherwise eligible, will be denied the privilege of consolidation
merely because other members of the affiliated group are not eligible to be
included.
C. Filing. A
complete copy of the federal consolidated return, or the separate federal
return of each corporation included in the consolidated Virginia return, must
be filed with the Virginia return. If the federal return is so voluminous that
it is impractical to file a complete copy with the Virginia return, the
complete federal return shall be made available to the department upon request.
All supplementary and supporting schedules filed with a consolidated Virginia
return should be prepared in columnar form, one column being provided for each
corporation included in the consolidation, one column for a total of like items
before adjustments are made, one column for intercompany eliminations and
adjustment, and one column for a total of the like items after giving effect to
the eliminations and adjustments. The items included in the columns for
eliminations and adjustments should be symbolized so as readily to identify
contra items affected, and suitable explanations appended, if
necessary.
D. Consent.
1. The filing of a consolidated return
requires the consent of all corporations eligible to be included. The filing of
a consolidated return will be deemed to be consented to by all eligible
corporations included therein. See
23VAC10-120-380 for requirements
as to the execution of the consolidated return and consent to be
included.
2. Once a consolidated
return has been filed all subsequent returns by such corporations, their
successors, and other members of the affiliated group who are subsequently
required to file a Virginia income tax return, must also be filed on a
consolidated basis unless the department grants permission to change from a
consolidated return.
Statutory Authority
§§ 58.1-203 and 58.1-442 of the Code of Virginia.
