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If the answer to question 1 is “No,”

a Federal court with respect to a

accounting period is not an issue

go to Part III after completing Section

partner’s or shareholder’s federal

under consideration by the Federal

income tax return.

court. The applicant must attach to

5. The entity is requesting a

the application a separate statement

Line 3. If a corporation’s interest in a

change to, or retention of, a natural

signed by the applicant certifying that,

pass-through entity, CFC, FSC, or

business year as described in section

to the best of the applicant’s

IC-DISC (related entity) is

4.01(2) of Rev. Proc. 2006-46 if the

knowledge, the applicant’s annual

disregarded under section 4.02(2) or

entity has changed its annual

accounting period is not an issue

4.02(3) of Rev. Proc. 2006-45

accounting period at any time within

under consideration by the Federal

because the related entity is required

the most recent 48-month period

court. The applicant must also

to change its tax year to the

ending with the last month of the

provide a copy of the application to

corporation’s new tax year (or, in the

requested tax year. For this purpose,

the government counsel at the same

case of a CFC, to a tax year

the following changes are not

time it files the application with the

beginning one month earlier than the

considered prior changes in annual

Service Center. The application must

corporation’s new tax year), the

accounting period: (a) a change to a

contain the name and telephone

related entity must change its tax

required tax year or ownership tax

number of the government counsel.

year concurrently with the

year; (b) a change from a 52-53 week

If the answer to question 4 is “No”

corporation’s change in tax year,

tax year to a non-52-53 week tax year

because the applicant (or a partner or

either under Rev. Proc. 2006-45,

that ends with reference to the same

shareholder) is under examination

2006-46, or 2002-39. This related

calendar month, and vice versa; or (c)

and has not obtained the appropriate

party change is required

a change in accounting period by an

director’s consent to the change or

notwithstanding the testing date

S corporation or PSC, in order to

retention of the applicant’s annual

provisions in section 706(b)(4)(A)(ii),

comply with the common tax year

accounting period or the applicant is

section 898(c)(3)(B), Temporary

requirements of Regulations sections

before an appeals office or Federal

Regulations section 1.921-1T(b)(6),

1.1502-75(d)(3)(v) and

court and the applicant’s annual

and the special provision in section

1.1502-76T(a).

accounting period is an issue under

706(b)(4)(B).

consideration by the appeals office or

If the answer to question 4 is

Federal court, do not complete Part

Section B—Partnerships, S

“Yes,” and any of the following

III.

Corporations, and Personal

situations apply, the applicable

If the answer to question 4 is “No”

Service Corporations

additional procedures described

solely because of a prior change as

below must be followed.

Rev. Proc. 2006-46 provides

•

described in item (5) above, go to

The applicant is under examination

exclusive procedures for a

Part III after completing Section B.

and has obtained the consent of the

partnership, S corporation, or PSC

appropriate director to the change or

If the answer to question 4 is “Yes”

within its scope to adopt, change, or

(and the answer to question 5, 6, or 7

retention of the applicant’s annual

retain its annual accounting period

accounting period. The applicant

is also “Yes”), sign Form 1128 and

under section 442 and Regulations

must attach to the application a

see Part II— Automatic Approval

section 1.442-1(b).

statement from the director

Request under Where To File, above.

Line 4. A partnership, S corporation,

Do not complete Part III. If the answer

consenting to the change or retention.

or PSC is precluded from using the

The applicant must also provide a

to question 4 is “Yes” (and the

automatic approval rules under

copy of the application to the director

answer to question 5, 6, or 7 is “No”),

section 4 of Rev. Proc. 2006-46 if any

go to Part III after completing Section

at the same time it files the

of the following apply:

application with the Service Center.

1. The entity is under examination,

The application must contain the

Line 6. A partnership, S corporation,

unless it obtains consent of the

name(s) and telephone number(s) of

electing S corporation, or PSC

appropriate director as provided in

the examination agent(s).

establishes a ‘‘natural business year’’

•

section 7.03(1) of Rev. Proc.

The applicant is before an appeals

under Rev. Proc. 2006-46 by

2006-46.

(area) office and the applicant’s

satisfying the following ‘‘25-percent

2. The entity is before an appeals

annual accounting period is not an

gross receipts test.’’

office with respect to any income tax

issue under consideration by the

1. Prior 3 years gross receipts:

issue and its annual accounting

appeals (area) office. The applicant

a. Gross receipts from sales and

period is an issue under

must attach to the application a

services for the most recent 12-month

consideration by the appeals office.

separate statement signed by the

period that ends with the last month

3. The entity is before a Federal

applicant certifying that, to the best of

of the requested annual accounting

court with respect to any income tax

the applicant’s knowledge, the

period are totaled and then divided

issue and its annual accounting

applicant’s annual accounting period

into the amount of gross receipts from

period is an issue under

is not an issue under consideration by

sales and services for the last 2

consideration by the Federal court.

the appeals (area) office. The

months of this 12-month period.

4. On the date the partnership or

applicant must also provide a copy of

b. The same computation as in a,

S corporation would otherwise file its

the application to the appeals officer

above is made for the two preceding

application, the partnership’s or S

at the same time it files the

12-month periods ending with the last

corporation’s annual accounting

application with the Service Center.

month of the requested annual

period is an issue under

The application must contain the

accounting period.

consideration in the examination of a

name and telephone number of the

2. Natural business year:

partner’s or shareholders’s federal

appeals officer.

•

income tax return or an issue under

The applicant is before a Federal

a. Except as provided in b, below,

consideration by an area office or by

court and the applicant’s annual

if each of the three results described

-5-

Instructions For Form 1128 - Application To Adopt, Change, Or Retain A Tax Year - 2007 Page 5

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