Tax News

CCH (cch.taxgroup.com) reports:

The IRS has modified the exclusive procedures that certain corporations must use to obtain automatic approval to change their annual accounting period under Code Sec. 442 and Reg. §1.442-1(b). The modifications apply to (1) a corporation leaving a consolidated group that wants to change its annual accounting period in the year the corporation ceases to be a member of the group; and (2) a controlled foreign corporation (CFC) that has a majority U.S. shareholder year and is properly applying to change to a one-month deferral year or to a 52-53-week tax year that references a one-month deferral year.
As modified, the procedures clarify that any corporation leaving a consolidated group is excluded from the automatic change procedures during the group's tax year in which the corporation ceases to be a group member, without regard to a change in the group's accounting period. The corporation must continue to use the group's annual accounting period unless the corporation receives approval under Rev. Proc. 2002-39, 2002-1 CB 1046, to change its accounting period, or is required to change its accounting period upon joining another consolidated group.
The modified procedures also provide that if a CFC changes to a one-month deferral year or to a 52-53-week tax year that references the one-month deferral year, it is not required to issue financial statements and reports to creditors on the basis of the requested year. However, the CFC must close its books and records as of the last day of the first effective year. In every year thereafter, the CFC must close its books and records as of the last day of the requested tax year, either a one-month deferral year or a 52-53-week tax year that references the deferral year. The CFC must also compute its income and its earnings and profits on the basis of the requested year.
Rev. Proc. 2006-45, I.R.B. 2006-45, 851, is modified and clarified.
Rev. Proc. 2007-64, 2007FED ¶46,647
Other References:
Code Sec. 442
CCH Reference - 2007FED ¶20,406.13
CCH Reference - 2007FED ¶20,406.17
Code Sec. 898
CCH Reference - 2007FED ¶27,725.20
Statement of Procedural Rules Sec. 602.204
CCH Reference - 2007FED ¶43,384.10
Tax Research Consultant
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