Is a company subject to Virginia income taxation just because it incorporates under Virginia law?
Code of Virginia 58.1-400 imposes income tax “on the Virginia taxable income for each taxable year of every corporation organized under the laws of the Commonwealth and every foreign corporation having income from Virginia sources.” Thus, every corporation, whether incorporated in Virginia or elsewhere, that has Virginia taxable income is subject to the tax. Because the tax is imposed on the income of the corporation and not the corporation itself, a corporation, whether incorporated in Virginia or elsewhere, having no Virginia taxable income cannot be subject to the tax. Because the Taxpayer files a consolidated return, the proposed restructuring plan would affect the eligibility of several members of the affiliated group to continue to be included in the consolidated return. Pursuant to Code of Virginia 58.1-442, an affiliated group of corporations may elect to file a consolidated Virginia income tax return. Title 23 of the Virginia Administrative Code (VAC) 10-120-322 provides that
