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Virginia Administrative Code
Title 23. Taxation
Agency 10. Department of Taxation
Chapter 120. Corporation Income Tax
1/27/2023

23VAC10-120-322. Consolidated returns; description; eligible members; filing; consent.

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.

Historical Notes

Derived from VR630-3-442 § 3, eff. January 1, 1985; amended, eff. March 10, 1993.

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