Virginia Administrative Code › Title 23 - TAXATION › Agency 10 - DEPARTMENT OF TAXATION › Chapter 120 - Corporation Income Tax › Section 23VAC10-120-280 - Alternative method of allocation and apportionment

Current through Register Vol. 40, No. 24, July 15, 2024
A. All corporations are required to file
				returns allocating and apportioning income using the statutory methods set
				forth in Va. Code §§ 58.1-407 through 58.1-420, and no corporation
				has a right under this section to use an alternative method without specific
				permission from the Department. Such permission will generally be granted only
				on a year by year basis. Even if an alternative method has been allowed for a
				prior year, or is expected to be allowed for the current year, a return
				following the statutory method must be filed.
The policy of the department is that the statutory method is
				  the most equitable method of determining the portion of a multistate
				  corporation's income that is attributable to business activity in Virginia.
				  Permission to use an alternate method of allocation and apportionment will be
				  granted only in extraordinary circumstances.
B. In order to request the department to
				redetermine the portion of Virginia taxable income subject to Virginia income
				tax based on an alternate method, the taxpayer must:
1. File a return using the statutory method
				of allocating and apportioning income and pay the resulting tax.
2. File an amended return within the time
				prescribed for filing amended returns claiming refunds. The amended return must
				follow the proposed alternative method and contain the following information:
a. a statement of why the statutory method is
				inapplicable or inequitable as applied to taxpayer, and
b. an explanation of the proposed method of
				allocation and apportionment in sufficient detail for the department to make a
				meaningful review.
3. If
				the situation causing the claimed inequity or inapplicability is expected to
				continue from year to year, the corporation may apply for permission to pay the
				income tax for future years based on the alternate method. If granted, such
				permission will relieve the corporation of the obligation to file a return
				based on the statutory method and the information in subdivision 2 of this
				subsection. If the department determines that circumstances have changed and no
				longer justify use of an alternate method, the department will revoke such
				permission effective with the change in circumstances and will assess any
				additional tax due.
4. The
				department will not grant permission to use an alternate method of allocation
				and apportionment unless it determines:
a.
				That the statutory method is in fact inapplicable because it produces an
				unconstitutional result under the particular facts and circumstances of the
				taxpayer's situation; or
b. That
				the statutory method is in fact inequitable because:
(1) It results in double taxation of the
				income, or a class of income, of the taxpayer; and
(2) The inequity is attributable to Virginia,
				rather than to the fact that some other state has a unique method of allocation
				and apportionment.
c.
				Such determination shall be made each year based on a review and information
				filed.
5. Permission to
				pay the income tax based on an alternate method will not be granted for future
				years unless the department also determines that the statutory method will
				probably be inapplicable or inequitable in future years to the same extent and
				for the same reasons as in the taxable period applied for.