I missed electing Virginia's manufacturer's single-sales-factor apportionment method on my original corporate return -- can I still make the election on an amended return and get a refund?

Plain-English summary

A corporation timely filed a 2015 amended Virginia corporate income tax return electing to apportion its income using the modified apportionment method available to manufacturing companies under Virginia Code § 58.1-422 — an elective method that (for qualifying manufacturers) shifts toward a single sales factor rather than Virginia's standard formula. On audit, the Department denied the election solely because it hadn't been made on the corporation's original 2015 return. The corporation filed a protective claim for refund under Virginia Code § 58.1-1824, which lets the Department either hold a claim pending the outcome of a related court case or decide it on the merits under § 58.1-1821.

A court decision resolved the case in the taxpayer's favor. While the claim was pending, the Virginia Court of Appeals decided Commonwealth v. 1887 Holdings, 77 Va. App. 653 (2023) — holding that otherwise-eligible taxpayers can elect the manufacturer's modified apportionment method on an amended return, not only on the original one. Following that precedent, the Department found the corporation was eligible to make the election on its 2015 amended return.

The refund was granted in full. Beyond the timing question, the corporation also had to show it otherwise qualified for the manufacturer's election in 2015, and that — had it elected on time — it would have satisfied the method's follow-on requirement to meet certain employment and wage levels over the subsequent three years. The corporation submitted data establishing both, so the Department granted the refund claim and indicated a refund would be issued shortly.

What this means for you

Manufacturers that missed electing the single-sales-factor apportionment method on an original return

You may still be able to make that election on an amended return, following the 1887 Holdings precedent — but you'll need to independently show you otherwise met the eligibility requirements for the election in the year at issue, including the multi-year employment and wage commitments the method requires.

Anyone with a protective refund claim tied to pending litigation

This ruling illustrates how Virginia's protective-claim mechanism (§ 58.1-1824) works in practice: a taxpayer can file now, while a relevant court case is still pending, and have the claim decided once that precedent is resolved — here, entirely in the taxpayer's favor.

Accountants and tax professionals advising manufacturing clients

Track appellate decisions affecting apportionment elections; a taxpayer who missed a filing-mechanics deadline in a closed year may still have a live refund opportunity if a court later clarifies the rule, as happened here.

Common questions

Q: Can a manufacturer elect Virginia's modified (single-sales-factor) apportionment method on an amended return instead of the original return?
A: Yes, following the Virginia Court of Appeals' 2023 decision in Commonwealth v. 1887 Holdings — provided the taxpayer otherwise qualifies for the election.

Q: Does making the election late on an amended return excuse the underlying eligibility requirements?
A: No. The taxpayer here still had to show it met the requirements to qualify for the manufacturer's method in the year at issue, including the follow-on employment and wage tests for the succeeding three years.

Q: What is a "protective claim for refund" under Virginia Code § 58.1-1824?
A: A refund claim that the Department can hold pending the outcome of a related case working through the courts, rather than deciding it immediately on the merits — useful when a legal question affecting your claim is still unsettled.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-422 — manufacturing companies' modified/single-sales-factor apportionment election
• Va. Code § 58.1-1824 — protective claim for refund pending the outcome of another case in the courts, or decided on the merits under § 58.1-1821
• Va. Code § 58.1-1821 — application to the Tax Commissioner for correction of an assessment

Case law:

• Commonwealth v. 1887 Holdings, 77 Va. App. 653 (2023) — otherwise-eligible taxpayers may elect the manufacturer's modified apportionment method on an amended return

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 24-128

Original ruling text

December 11, 2024

Re: § 58.1-1824 Application: Corporate Income Tax

Dear *:

This will reply to your letter in which you seek a refund of corporate income tax paid by your client, * (the “Taxpayer”), for the taxable year ended December 31, 2015.

FACTS

The Taxpayer timely filed a 2015 amended corporate income tax return electing to apportion its income using the modified apportionment method available to manufacturing companies pursuant to Virginia Code § 58.1-422. Under audit, the Department denied the election because it was not made on the Taxpayer’s original return. The Taxpayer timely filed a protective claim for refund, asserting that it was permitted to make the election on the amended return.

DETERMINATION

Pursuant to the authority granted the Department under Virginia Code § 58.1-1824, a protective claim for refund can be held pending the outcome of another case before the courts or the claim may be decided based upon its merits pursuant to Virginia Code § 58.1-1821.

In Commonwealth v. 1887 Holdings , 77 Va. App. 653 (2023), the Virginia Court of Appeals determined that otherwise eligible taxpayers could elect to use the manufacturer’s modified apportionment method on amended returns. In accordance with the court’s determination, therefore, the Taxpayer was eligible to elect the manufacturer’s method on its 2015 amended return. In addition, the Taxpayer has submitted data indicating it otherwise met the requirements to make the election in 2015 and that, if it had done so, it would have met the applicable employment and wage requirements in the succeeding three years. Accordingly, the Taxpayer’s refund claim is granted and a refund will be issued shortly.

The Code of Virginia sections cited are available online at law.lis.virginia.gov. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at or **@tax.virginia.gov.

Sincerely,

Kristin L. Collins

Assistant Commissioner of Tax Policy

Commonwealth of Virginia