Internal Revenue Code:Sec. 444. Election of taxable year other than required taxable year
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter E - Accounting Periods and Methods of Accounting
PART I - ACCOUNTING PERIODS
Statute
Sec. 444. Election of taxable year other than required taxable year
(a) General rule
Except as otherwise provided in this section, a partnership, S
corporation, or personal service corporation may elect to have a
taxable year other than the required taxable year.
(b) Limitations on taxable years which may be elected
(1) In general
Except as provided in paragraphs (2) and (3), an election may
be made under subsection (a) only if the deferral period of the
taxable year elected is not longer than 3 months.
(2) Changes in taxable year
Except as provided in paragraph (3), in the case of an entity
changing a taxable year, an election may be made under subsection
(a) only if the deferral period of the taxable year elected is
not longer than the shorter of -
(A) 3 months, or
(B) the deferral period of the taxable year which is being
changed.
(3) Special rule for entities retaining 1986 taxable years
In the case of an entity's 1st taxable year beginning after
December 31, 1986, an entity may elect a taxable year under
subsection (a) which is the same as the entity's last taxable
year beginning in 1986.
(4) Deferral period
For purposes of this subsection, except as provided in
regulations, the term ''deferral period'' means, with respect to
any taxable year of the entity, the months between -
(A) the beginning of such year, and
(B) the close of the 1st required taxable year ending within
such year.
(c) Effect of election
If an entity makes an election under subsection (a), then -
(1) in the case of a partnership or S corporation, such entity
shall make the payments required by section 7519, and
(2) in the case of a personal service corporation, such
corporation shall be subject to the deduction limitations of
section 280H.
(d) Elections
(1) Person making election
An election under subsection (a) shall be made by the
partnership, S corporation, or personal service corporation.
(2) Period of election
(A) In general
Any election under subsection (a) shall remain in effect
until the partnership, S corporation, or personal service
corporation changes its taxable year or otherwise terminates
such election. Any change to a required taxable year may be
made without the consent of the Secretary.
(B) No further election
If an election is terminated under subparagraph (A) or
paragraph (3)(A), the partnership, S corporation, or personal
service corporation may not make another election under
subsection (a).
(3) Tiered structures, etc.
(A) In general
Except as otherwise provided in this paragraph -
(i) no election may be under subsection (a) with respect to
any entity which is part of a tiered structure, and
(ii) an election under subsection (a) with respect to any
entity shall be terminated if such entity becomes part of a
tiered structure.
(B) Exceptions for structures consisting of certain entities
with same taxable year
Subparagraph (A) shall not apply to any tiered structure
which consists only of partnerships or S corporations (or both)
all of which have the same taxable year.
(e) Required taxable year
For purposes of this section, the term ''required taxable year''
means the taxable year determined under section 706(b), 1378, or
441(i) without taking into account any taxable year which is
allowable by reason of business purposes. Solely for purposes of
the preceding sentence, sections 706(b), 1378, and 441(i) shall be
treated as in effect for taxable years beginning before January 1,
1987.
(f) Personal service corporation
For purposes of this section, the term ''personal service
corporation'' has the meaning given to such term by section
441(i)(2).
(g) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out the provisions of this section, including
regulations to prevent the avoidance of subsection (b)(2)(B) or
(d)(2)(B) through the change in form of an entity.
Sources
(Added Pub. L. 100-203, title X, Sec. 10206(a)(1), Dec. 22, 1987,
101 Stat. 1330-397; amended Pub. L. 100-647, title II, Sec.
2004(e)(1), (2)(A), (12), (13), Nov. 10, 1988, 102 Stat. 3600,
3602.)
Miscellaneous
AMENDMENTS
1988 - Subsec. (a). Pub. L. 100-647, Sec. 2004(e)(1)(A),
substituted ''as otherwise provided in this section'' for ''as
provided in subsections (b) and (c)''.
Subsec. (b)(4). Pub. L. 100-647, Sec. 2004(e)(13), inserted
''except as provided in regulations,'' before ''the term''.
Subsec. (d)(2)(A). Pub. L. 100-647, Sec. 2004(e)(12), inserted
''or otherwise terminates such election'' after ''its taxable
year''.
Subsec. (d)(2)(B). Pub. L. 100-647, Sec. 2004(e)(1)(C), inserted
''or paragraph (3)(A)'' after ''under subparagraph (A)''.
Subsec. (d)(3). Pub. L. 100-647, Sec. 2004(e)(1)(B), amended par.
(3) generally. Prior to amendment, par. (3) read as follows: ''No
election may be made under subsection (a) with respect to an entity
which is part of a tiered structure other than a tiered structure
comprised of 1 or more partnerships or S corporations all of which
have the same taxable year.''
Subsecs. (f), (g). Pub. L. 100-647, Sec. 2004(e)(2)(A), added
subsec. (f) and redesignated former subsec. (f) as (g).
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provisions of the Revenue Act of
1987, Pub. L. 100-203, title X, to which such amendment relates,
see section 2004(u) of Pub. L. 100-647, set out as a note under
section 56 of this title.
EFFECTIVE DATE
Section 10206(d) of Pub. L. 100-203, as amended by Pub. L.
100-647, title II, Sec. 2004(e)(11), Nov. 10, 1988, 102 Stat. 3602,
provided that:
''(1) In general. - Except as provided in this subsection, the
amendments made by this section (enacting this section and sections
280H and 7519 of this title) shall apply to taxable years beginning
after December 31, 1986.
''(2) Required payments. - The amendments made by subsection (b)
(enacting section 7519 of this title) shall apply to applicable
election years beginning after December 31, 1986.
''(3) Elections. - Any election under section 444 of the Internal
Revenue Code of 1986 (as added by subsection (a)) for an entity's
1st taxable year beginning after December 31, 1986, shall not be
required to be made before the 90th day after the date of the
enactment of this Act (Dec. 22, 1987).
''(4) Special rule for existing entities electing s corporation
status. - If a C corporation (within the meaning of section
1361(a)(2) of the Internal Revenue Code of 1986) with a taxable
year other than the calendar year -
''(A) made an election after September 18, 1986, and before
January 1, 1988, under section 1362 of such Code to be treated as
an S corporation, and
''(B) elected to have the calendar year as the taxable year of
the S corporation,
then section 444(b)(2)(B) of such Code shall be applied by taking
into account the deferral period of the last taxable year of the C
corporation rather than the deferral period of the taxable year
being changed. The preceding sentence shall apply only in the case
of an election under section 444 of such Code made for a taxable
year beginning before 1989.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 280H, 7519 of this title.
