Current through Register Vol. XLI, No. 38, September 20, 2024
13e.1. General. -- Every taxpayer subject to
the West Virginia corporation net income tax is required to file its own tax
return, including taxpayers that are members of a combined reporting group.
Taxpayers subject to the West Virginia corporation net income tax that are
members of a combined reporting group are required to attach a combined report
to their annual tax returns. Members of a combined reporting group may annually
elect to designate one taxpayer member of the combined group to file a single
return in the form and manner prescribed by the Tax Department, in lieu of
filing their own respective returns, without changing the respective liability
of the group members. The group member taxpayer designated to file the single
return shall consent to act as surety with respect to the tax liability of all
other taxpayers properly included in the combined report and shall agree to act
as agent on behalf of those taxpayers for the year of the election for tax
matters relating to the combined report for that year. All combined group
members required to file in West Virginia shall be included in the group tax
return filed pursuant to this section and W. Va. Code §
11-24-13e.
13e.1.a. Combined report. -- "Combined
report" refers to the schedules that are required to be filed by W. Va. Code
§
11-24-13a,
which are attached to the West Virginia Form 120 of a taxpayer member of the
combined reporting group, which reports the taxpayer member's income from
sources within this State under the combined reporting method and other
information required by law.
13e.1.b. Combined reporting group. --
"Combined reporting group" refers to those corporations and entities with
business income that are permitted or required to be included in a particular
combined report under W. Va. Code §
11-24-13a.
A combined reporting group includes those partnerships and limited liability
companies treated as partnerships for federal income tax purposes whose incomes
are required to be included in a combined report.
13e.1.c. Group return. -- "Group return"
means a single composite tax return filed under W. Va. Code §
11-24-13e
on behalf of members of a combined reporting group, and includes, but is not
limited to annual returns and quarterly and other periodic returns,
declarations of estimated tax and the forms for making installment payments of
estimated tax. The group return reflects the aggregate total tax of the tax
liabilities of all of the Taxpayer members, computed on the basis of the
separate tax liability of each Taxpayer member.
13e.1.d. Key corporation or key member. --
"Key corporation" or "key member" means the taxpayer member which files a group
return described under this section on behalf of the taxpayer members of the
combined reporting group as agent and surety for the taxpayer members of the
combined reporting group pursuant to W. Va. Code §
11-24-13e.
13e.1.e. Taxpayer member. -- "Taxpayer
member" means a corporation or entity which is required to file a tax return
under W. Va. Code §§
11-24-1,
et seq. in this State, and which is a member of a combined
reporting group.
13e.1.f. The term
"corporation" as used in this section means and includes any entity required to
file a tax return under W. Va. Code §§
11-24-1,
et seq., and any entity whose income, expenses, capital, or
activities are required to be included on or as a part of a combined report
under W. Va. Code §§
11-23-1,
et seq. or W. Va. Code §§
11-24-1,
et seq.
13e.2. Requirements.
13e.2.a. In order to be eligible to make the
election provided under this section, the electing key corporation shall meet
the definition of a "key corporation" as defined in this section in addition to
meeting the following requirements, by either being:
13e.2.a.1. The parent corporation of the
combined reporting group as defined in subparagraph 8.7.a.1.A. of this rule;
or
13e.2.a.2. If the parent
corporation of the combined reporting group is not a taxpayer member, the
taxpayer member with the largest West Virginia property factor numerator;
and
13e.2.a.3. The key
corporation's powers, rights and privileges must not be forfeited or suspended
by the West Virginia Secretary of State and it must not have a petition with
the United States Bankruptcy Court pending on the last day of the taxable
year.
13e.2.b. If the
entity that would have otherwise been designated as the key corporation under
this section is disqualified due to the parent corporation not being a taxpayer
member, or due to rights and privileges having been forfeited or suspended by
the West Virginia Secretary of State, or due to a pending bankruptcy petition,
then the members of the combined reporting group may not elect to designate one
taxpayer member of the combined group to file a single return under W. Va. Code
§
11-24-13e.
13e.3. Manner for making the election. -- An
election to file a group return is made by the key corporation by the filing of
an Election to File Unitary Taxpayers' Group Return, filed in conjunction with
its West Virginia Form 120, which sets forth the information prescribed by the
Tax Commissioner. This election shall be made with an original, timely filed
return, determined by including any authorized extensions for filing the
return.
13e.4. Consequences of
making an election.
13e.4.a. The election is
binding on all the taxpayer members of the combined group and the key
corporation for all matters for the taxable year of the election.
13e.4.b. The key corporation shall file the
group return. -- The group return satisfies the requirement for filing a West
Virginia form 120 by each taxpayer member listed on the key corporation's
Election to File Unitary Taxpayers' Group Return, filed in conjunction with its
West Virginia Form 120, listing of members included in the group return.
13e.4.b.1. A combined group member having
income or gain not required to be reported on the combined return and having no
income that is required to be reported on the combined return, need not be
included in the group return, but may either file a separate return or may be
included on the group return, and, if included shall report income or gain not
required to be reported on the combined return in the group return. A combined
group member having income that is required to be reported on the combined
return, shall be included in the group return, and the group return shall
report both income that is required to be reported on the combined return for
that combined group member and any income or gain not required to be reported
on the combined return for that combined group member shall also be reported on
the group return.
13e.4.b.2. By
signing the West Virginia Form 120, an officer of the key corporation is
attesting that he or she has the legal authority to bind the key corporation to
all of its duties.
13e.4.b.3.
Failure of a taxpayer member, properly included in a group return, to file its
own return shall be considered to be an acknowledgement that the officer of the
key corporation possesses the authority to fulfill the taxpayer member's return
filing obligation.
13e.4.b.4. A
taxpayer member asserting that it is not properly included in a group return
shall independently satisfy its obligation to file a
return.
13e.4.c. The key
corporation is a surety for each taxpayer member properly included in a group
return for payments owed under the West Virginia corporation net income tax law
for the tax year for which the election applies.
13e.4.d. The key corporation is an agent for
each taxpayer member.
13e.4.e.
Extensions for filing tax returns or waivers to extend the statute of
limitations for issuing notices of assessments shall be executed by the key
corporation and shall be effective for all taxpayer members properly included
in a group return for the tax year for which the election applies.
13e.4.f. All Tax Department notices,
assessments, legal documents and administrative documents relating to or
regarding the business franchise tax or corporation net income tax liability of
a taxpayer member properly included in a group return, may be sent to the key
corporation and additional amounts due with respect to any taxpayer member
properly included in a group return, may be assessed and billed to the key
corporation, which shall be liable for payment of those amounts. The key member
may file a petition for reassessment on behalf of a taxpayer member properly
included in a group return, in response to a notice of assessment. The key
member may also file claims for refund or credit and petitions for refund or
credit on behalf of a taxpayer member properly included in a group return. Any
refund or credit due to a taxpayer member properly included in a group return
may be paid or credited to the key corporation. Any levy, any notice of a lien,
or any other proceeding to collect the amount of any assessment, after an
assessment has become final, shall name the corporation or entity from which
the collection is to be made. A taxpayer member properly included in a group
return from which collection is to be made and the key corporation, as surety
and agent of the taxpayer, are jointly and severally liable for any amount
due.
13e.4.g. If some or all of the
corporations included in the election to file a group return are subsequently
determined not to be members of the combined reporting group of the key
corporation, then the key corporation and the electing taxpayer members shall
be considered to agree that any subsequent adjustment for any and all members
included in the original group return may still be billed to or paid by the key
corporation in the case of assessments and refunded to the key corporation in
the case of overpayments.
13e.5. Duration of election to file group
return. -- The election to file a group return for all matters for the taxable
year of the election will remain in effect until 30 days following the receipt
by the Tax Commissioner of a written notice of termination of the election by
any of the taxpayer members. The taxpayer member that is terminating the
election shall also notify the previously designated key corporation that the
election is being terminated. The termination shall only be applied
prospectively. If the key corporation is terminating the election, it shall
notify all of the taxpayer members that were included in the group return
election. If an employee, agent, or representative of the Tax Commissioner is
conducting an examination of a combined group return at the time when any of
the taxpayer members or a key corporation sends a written notice of termination
to the Tax Commissioner, the terminating taxpayer member or terminating key
corporation shall provide the employee, agent or representative of the Tax
Commissioner that is conducting the examination with a copy of the written
notification of termination of the election.
13e.6. Failure or inability of key
corporation to perform its duties. -- If the key corporation does not fulfill
its obligation to pay any tax liability or to act on behalf of the taxpayer
members, or if its powers, rights, and privileges are forfeited or suspended at
any time with respect to a tax year, each taxpayer member may be independently
assessed or billed for its own tax liability for that tax year. In that event,
each taxpayer member will be credited with taxes previously paid in accordance
with the taxpayer member's tax liability as indicated in the return data as
filed. In the event that the liabilities of the taxpayer members cannot be
derived from the return data as filed, the individual liabilities of the each
of the respective members may be determined by the Tax Commissioner from data
obtained during audit or supplied by the taxpayer members, using the best
available information. If insufficient information is available to determine
individual liabilities, the Tax Commissioner may credit taxes paid in a manner
that is reasonable under the circumstances.
13e.7. Curing an invalid election.
13e.7.1. In the event that a taxpayer fails
to satisfy one or more of the conditions of this section, the Tax Commissioner
may, at the request of the taxpayer and at the Commissioner's discretion, treat
the W. Va. Code §
11-24-13e
election to designate one taxpayer member of the combined group to file a
single return, as being valid.
13e.7.2. In lieu of disallowing a W. Va. Code
§
11-24-13e
election to designate one taxpayer member of the combined group to file a
single return, the Tax Commissioner may allow the taxpayer members to designate
another taxpayer member in substitution for the key corporation originally
designated in the election.
13e.8. Appointment of designated agent for
purposes of resolving disputes over membership in a combined group. -- If the
Tax Commissioner determines that one or more corporations which did not join in
the filing of a group return are members of a combined group, or that one or
more corporations which did join in the filing of a group return are not
members of the combined group which filed the return, then, for purposes of
resolving disputes over the membership of the combined group and any separate
company item of any corporation, the Tax Commissioner may take other actions as
outlined in subdivisions 13e.8.1, 13e.8.2. and 13e.8.3.:
13e.8.1. Notification of deficiency or
assessment to corporation which has ceased to be a member of the combined
group. -- If a corporation that made the election to file or was required to
join in the filing of a group return has ceased to be a member of the combined
group, and if the corporation files written notice of the cessation with the
Tax Commissioner, then the Commissioner upon request of the corporation shall
furnish the corporation with a copy of any notice of deficiency or notice of
assessment in respect of the tax for a group return year for which it was a
member of the combined group and information regarding any notice and demand
for payment of the deficiency. The written notice of cessation should be mailed
to the address stated in the instructions to the West Virginia corporation net
income tax return. The filing of the written notification and request by a
corporation shall not have the effect of limiting the scope of the agency of
the key member provided for in this section with respect to those tax years
during which the corporation was a member of the combined group for which a
group return was filed, and a failure by the Tax Commissioner to comply with
the written request shall not have the effect of limiting the liability of the
corporation.
13e.8.2. If no group
return was filed, the corporations may appoint a member of the combined group
as the designated agent solely for purposes of contesting the Tax
Commissioner's determination. The Commissioner may accept a written
representation made by any member of the combined group that it has been
appointed the designated agent. The appointment of a designated agent under
this provision shall not be construed as a concession by either the
corporations or the Tax Commissioner regarding the proper composition of the
combined group. The designated agent appointed under this provision shall have
all rights and responsibilities of a key corporation under this section,
including the responsibility to file a group return for all tax periods
beginning on or after the appointment of the key member. The designated agent
appointed under this subsection, shall meet the qualifications of a key member
as provided in this rule, and shall continue to act as designated agent for the
combined group under the provisions this section for all tax periods beginning
on or after the appointment of the key member, until the appointment of the key
member is lawfully revoked.
13e.8.3. If a group return was filed, the key
member which filed the return shall represent all corporations which joined in
the filing of the group return and all corporations which the Tax Commissioner
asserts are members of the combined group, except that the Commissioner may
allow any corporation which the Commissioner asserts should be added to or
eliminated from the combined group included in the return to represent itself
after receipt of a written request from the corporation. And in that case, any
corporation shall be bound by any action taken by the designated agent
(including, for example, extensions of the statute of limitations, settlements,
stipulations, or concessions of fact) before the request of the corporation to
represent itself has been accepted by the Tax Commissioner.
13e.9. Liability for combined tax, additions
to tax, penalty, and interest.
13e.9.1. Joint
and several liability of members of a combined group. -- The taxpayer members
who elected to file a group return are jointly and severally liable for the
combined tax, addition to tax, penalty and interest computed in accordance with
the West Virginia Tax Procedure and Administration Act codified in W. Va. Code
§§
11-10-1,
et seq..
13e.9.2.
Effect of intercompany agreements. -- No agreement entered into by one or more
members of a combined group with any other member of the group or with any
other person shall in any case have the effect of reducing the liability
prescribed under this Section, or this rule or W. Va. Code §§
11-24-1,
et seq.
13e.9.3.
Additions to tax, penalties, and interest. -- If additions to tax, penalties or
interest are imposed under W. Va. Code §§
11-10-1,
et seq., with respect to a group return year, the amount shall
be based on the combined tax liability or deficiency for the common taxable
year.
13e.9.3.a. For purposes of applying the
addition to tax for failure to file a return:
13e.9.3.a.1. A corporation which erroneously
fails to join in the filing of a group return, but which timely files a
separate West Virginia corporation net income tax return or joins in the timely
filing of a group return for another combined group, shall not be subject to
any addition to tax for failure to timely file the return. In determining
whether the separate or group return is timely filed, the separate taxable year
of the corporation or the common taxable year of the taxpayer members included
in the group return the corporation erroneously joined shall be used, rather
than the common taxable year of the group with which the corporation should
have filed. Provided that the Tax Commissioner may disallow the group return
under which the Taxpayer should have filed, but failed to file, and require all
group members to each file separately. The Tax Commissioner may disallow the
group return under which the Taxpayer filed, in circumstances where the
Taxpayer erroneously filed under the group return of a different combined group
and require all group members of the group under which the Taxpayer erroneously
filed to each file separately. Also the Tax Commissioner may disallow both
group returns and require separate filings for each member of both
groups.
13e.9.3.a.2. A corporation
which erroneously fails to join in the filing of a group return, and which
fails, without reasonable cause, to timely file a separate West Virginia
corporation net income tax return or to join in the timely filing of a group
return for another combined group, shall be subject to additions to tax for
failure to timely file a return computed on the amount of tax shown (or
required to be shown) due on the group return for its proper combined group.
Because it is the duty of the key member, acting on behalf of the combined
group, to include the corporation in the group return, the members of the
combined groups are jointly and severally liable for the amount of the addition
to tax.
13e.9.3.a.3. A corporation
which erroneously joins in the timely filing of a group return shall not be
subject to additions to tax for failure to file a return but depending on the
facts and circumstances of the case, may be subject to applicable sanctions for
failure to pay tax, late filing, tax evasion, fraud or other applicable
administrative or criminal sanctions.
13e.9.3.b. For purposes of applying the
addition to tax for failure to timely pay tax:
13e.9.3.b.1. In a case where a corporation or
entity erroneously fails to join in the filing of a group return for a common
taxable year, neither that corporation or entity nor the combined group shall
be subject to any failure-to-pay addition to tax under the West Virginia Tax
Procedure and Administration Act, if timely payment is made of the tax shown on
a separate return filed by the corporation or on a group return in which it
erroneously joins in filing for each taxable year ending with or within the
common taxable year. Unless there is reasonable cause for the failure of the
corporation or entity to join in the filing of the group return, the
corporation or entity and the combined group may be jointly and severally
liable for the addition to tax for failure to pay any additional amount which
would have been shown on the group return had the corporation or entity been
included. Depending on the facts and circumstances of the case the Taxpayer may
be subject other applicable administrative or criminal sanctions.
13e.9.3.b.2. A corporation or entity which
erroneously fails to join in the filing of a group return for a common taxable
year or which joins in the filing of a group return, for the taxable year
ending with or within the common taxable year, and which also fails to timely
pay the tax shown on the return, shall be subject to additions to tax under the
West Virginia Tax Procedure and Administration Act only for failure to pay the
tax shown on the return it actually files or joins in filing. Unless there is
reasonable cause for the failure of the corporation or entity to join in the
filing of the group return, the corporation and the combined group may be
jointly and severally liable for an addition to tax under the West Virginia Tax
Procedure and Administration Act for failure to pay any additional amount which
would have been shown on the group return had the corporation been included.
Depending on the facts and circumstances of the case, the Taxpayer may be
subject other applicable administrative or criminal sanctions.
13e.9.3.b.3. If a corporation erroneously
joins in the filing of a group return, neither the corporation nor the combined
group shall be subject to the addition to tax under the West Virginia Tax
Procedure and Administration Act for failure to pay any tax required to be
shown on a separate company return and the combined group shall not be subject
to addition to tax under the Act for failure to pay any increase in tax
resulting from the exclusion of the corporation from the combined group if the
tax timely paid with the original group return exceeds the total tax required
to be shown on the correct returns. Depending on the facts and circumstances of
the case, the Taxpayer may be subject to other applicable administrative or
criminal sanctions.
13e.9.3.c. For purposes of applying the
addition to tax for negligence imposed by the West Virginia Tax Procedure and
Administration Act or the addition to tax for fraud imposed by that Act, in any
case in which a corporation erroneously joins or fails to join in the filing of
a group return, the addition may be imposed on any deficiency resulting from
the error, without taking into account any overpayment which may have resulted
from the error.
Example. Corporations A, and B meet all the requirements of a
unitary business combined group. Corporations A and B cannot be included in the
same unitary business group as their non-unitary affiliate Corporation C. On a
separate-return basis, Corporation A has a West Virginia net loss of $500,
Corporation B has West Virginia net income of $300 and Corporation C has West
Virginia net income of $700. Corporations A and C file a group return reporting
combined West Virginia net income of $200, while Corporation B files a separate
return reporting West Virginia net income of $300. On audit, the Tax
Commissioner corrects the liabilities by combining Corporations A and B, which
eliminates Corporation B's separate return income and entitles them to a refund
of the taxes paid by Corporation B, and by determining a separate return
deficiency for Corporation C. If the combination of Corporations B and C on the
original return was due to negligence or an intent to defraud, Corporation C
will be subject to the applicable addition to tax on its entire deficiency
without regard to the overpayment made by Corporation B.
13e.9.4. Interest. -- If
interest is imposed under the West Virginia Tax Procedure and Administration
Act, with respect to a group return year, the amount shall be based on the
separate tax liability, deficiency underpayment or overpayment of the group
return members for the common taxable year.
13e.9.5. Combined amended returns.
13e.9.5.a. If an election to file a group
return is in effect for a taxable year and that election is subsequently
revoked for that year because the group is not a unitary business, the key
member may not file a group amended return. If a group files what it believes
to be a correct group return and it is later determined that the group is not
engaged in a unitary business, the key member shall not file a group amended
return. Instead, in either instance, the key member and each corporation which
joined in the filing of the group return shall file a separate amended return.
In computing the tax due on any amended return, the filer shall take into
account all payments, credits, and other amounts (including refunds) actually
paid by, or to, the filer, or applied by, or for, the filer under the
erroneously filed group return.
13e.9.6. Ineligible member. -- If a change in
liability relates to the removal from the group return of a member that was not
eligible to be included in the group return, or of a taxpayer which could not
be required to be a part of the group (e.g., a corporation which was not
engaged in a unitary business with the combined group members), the key member
shall file a group amended return and the ineligible taxpayer member shall file
a separate amended return.
13e.9.7.
If a corporation erroneously fails to join in the filing of a group return, the
key member shall file an amended group return adding the corporation and, if a
separate return was filed by the corporation, the corporation shall file an
amended separate return showing no net income, overpayment, or underpayment,
and stating that the corporation has joined in the filing of a group
return.
13e.10.
Application. -- This section applies to taxable years beginning after December
31, 2008.
