                                 CODE OF VIRGINIA

SEPARATE, COMBINED, OR CONSOLIDATED RETURNS OF AFFILIATED CORPORATIONS (§
58.1-442)

A. Corporations that are affiliated within the meaning of &#xA7; 58.1-302 may,
for any taxable year, file separate returns, file a combined return, or file a
consolidated return of net income for the purpose of this chapter, and the taxes
thereunder shall be computed and determined upon the basis of the type of return
filed. Following an election to file on a separate, consolidated, or combined
basis all returns thereafter filed shall be upon the same basis unless
permission to change is granted by the Department.

B. For the purpose of subsection A:

   1. A consolidated return shall mean a single return for a group of
   corporations affiliated within the meaning of &#xA7; 58.1-302, prepared in
   accordance with the principles of &#xA7; 1502 of the Internal Revenue Code and
   regulations promulgated thereunder. Permission to file a consolidated return
   shall not be denied to a group of affiliated corporations filing a
   consolidated federal return solely because two or more members of such
   affiliated group would be required to use different apportionment factors if
   separate returns were filed. The Tax Commissioner shall promulgate regulations
   setting forth the manner in which such an affiliated group shall compute its
   Virginia taxable income.

   2. A combined return shall mean a single return for a group of corporations
   affiliated within the meaning of &#xA7; 58.1-302, in which income or loss is
   separately determined in accordance with subdivisions a through d:
   				a. Virginia taxable income or loss is computed separately for each
   corporation;
   				b. Allocable income is allocated to the state of commercial domicile
   separately for each corporation;
   				c. Apportionable income or loss is computed, utilizing separate
   apportionment factors for each corporation;
   				d. Income or loss computed in accordance with subdivisions a, b, and c is
   combined and reported on a single return for the affiliated group.

C. Notwithstanding subsection A, a group of corporations may apply to the Tax
Commissioner for permission to change the basis of the type of return filed (i)
from consolidated to separate or (ii) from separate or combined to consolidated,
if such corporations are affiliated within the meaning of &#xA7; 58.1-302 and
the affiliated group of which they are members, as it has existed from time to
time, has filed on the same basis for at least the preceding 12 years.
Permission shall be granted if the affiliated group agrees to file returns
computing its Virginia income tax liability under both the new filing method and
the former method and will pay the greater of the two amounts for the taxable
year in which the new election is effective and for the immediately succeeding
taxable year.

D. Notwithstanding subsections A and C, for taxable years beginning on and after
January 1, 2023, but before January 1, 2025, a group of corporations may elect
to change the basis of the type of return filed from combined to consolidated,
if (i) such corporations are affiliated within the meaning of &#xA7; 58.1-302;
(ii) the affiliated group of which they are members, as it has existed from time
to time, has filed on the same basis for at least the preceding 20 years; and
(iii) on or before January 1, 2022, at least one member of the affiliated group
of which they are members is a related entity within the meaning of &#xA7;
58.1-302 to a state or national bank that is exempt from filing a Virginia
corporate income tax return under subdivision 3 of &#xA7; 58.1-401.
			Any eligible affiliated group that elects to change the basis of the type of
return pursuant to this subsection shall be required to agree to file returns
computing its Virginia income tax liability under both the new filing method and
the former method and shall pay the greater of the two amounts for the taxable
year in which the new election is effective and for the immediately succeeding
taxable year. A taxpayer shall provide notification to the Department of
Taxation that an election pursuant to this subsection is being made. Such
notification shall be submitted on forms as prescribed by the Department of
Taxation.

E. If any provision of subsection D is for any reason held to be invalid or
unconstitutional by the decision of a court of competent jurisdiction, then that
provision shall not be deemed severable, and all provisions of subsection D
shall expire and be unavailable for any affiliated group that has not made the
election as of the date of such decision.

HISTORY: Code 1950, § 58-151.079; 1971, Ex. Sess., c. 171; 1981, c. 402; 1984,
c. 675; 1990, c. 619; 2003, c. 166; 2022, cc. 274, 416, 417; 2023, cc. 520, 521.