The Virginia Tax Commissioner determined that the Department of Taxation was permitted to make net operating loss deduction (NOLD) adjustments for taxable years outside the statute of limitations because the adjustments were necessary to determine the correct federal taxable income for the taxable years at issue. The taxpayer, an affiliated group, originally filed its Virginia corporate income tax returns on a consolidated basis. In later years, including the years at issue, the group filed returns on a combined basis—instead of on a consolidated basis—without obtaining permission from the Department. The auditor adjusted the taxpayer’s returns to a consolidated basis and correspondingly recomputed the taxpayer’s NOLDs for net operating losses incurred prior to the years at issue. The taxpayer objected and argued that the auditor’s adjustments to the NOLDs were made beyond the state’s three-year statute of limitations for assessments. Virginia uses federal taxable income as the starting point for computing Virginia taxable income, and the Tax Commissioner explained that the adjustments were necessary to accurately reflect the taxpayer’s federal taxable income for the taxable years at issue. As such, the Tax Commissioner determined that the adjustments did not constitute assessments prohibited by the statute of limitations and permitted the auditor’s recomputations. Va. Pub. Doc. Rul. No. 13-213 (Nov. 18, 2013).