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in 1 equals or exceeds 25 percent,

outstanding shares of stock. For this

Rev. Proc. 85-58 does not apply

then the requested annual accounting

purpose, a shareholder that is

to:

•

period is deemed to be the taxpayer’s

tax-exempt under section 501(a) is

Farmers’ cooperatives exempt from

natural business year.

disregarded if such shareholder is not

federal income tax under section 521,

•

b. The taxpayer must determine

subject to tax on any income

Organizations described in

whether any annual accounting

attributable to the S corporation.

sections 526, 527, and 528,

•

period other than the requested

Tax-exempt shareholders are not

Organizations described in section

annual accounting period also meets

disregarded, however, if the S

401(a), and

•

corporation is wholly-owned by such

Organizations requesting a change

the 25-percent test described in a,

above. If one or more other annual

tax-exempt entities. A shareholder in

in a tax year on a group basis.

accounting periods produce higher

an S corporation that wants to

A central organization should

averages of the three percentages

concurrently change its tax year must

follow Rev. Proc. 76-10 to apply for a

(rounded to 1/100 of a percent)

follow the instructions generally

group change in tax year for all its

described in 1 than the requested

applicable to taxpayers changing their

subordinate organizations.

annual accounting period, then the

tax years contained in Regulations

section 1.442-1(b), Rev. Proc.

Rev. Proc. 76-10 does not apply

requested annual accounting period

to:

will not qualify as the taxpayer’s

2002-39, or any other applicable

•

Farmers’ cooperatives exempt from

natural business year.

administrative procedure published

federal income tax under section 521,

3. Special rules:

by the IRS.

•

Certain organizations that have

a. To apply the 25-percent gross

Line 8. Answer “Yes” if the

unrelated business taxable income

receipts test for any particular year,

partnership is a related entity that

defined in section 512(a), and

the taxpayer must compute its gross

must concurrently change its tax year

•

Organizations that are private

receipts under the method of

as a term and condition of the

foundations defined in section 509(a).

accounting used to prepare its federal

approval of the taxpayer’s request to

change its tax year.

income tax returns for such tax year.

Line 10. If the answer to question 10

b. If the taxpayer has a

is “Yes,” and the organization is a

Section C—Individuals

predecessor organization and is

section 501(a) organization to which

continuing the same business as its

section 3.03 of Rev. Proc. 85-58

Line 9. If the answer to question 9 is

predecessor, the taxpayer must use

applies or a central organization to

“Yes,” and the restrictions of section

the gross receipts of its predecessor

which Rev. Proc. 76-10 applies, sign

4.02 of Rev. Proc. 2003-62 (or its

for purposes of computing the

Form 1128 and see Part II—

successor) do not apply, sign Form

25-percent gross receipts test.

Automatic Approval Request above

1128 and see Part II— Automatic

c. If the taxpayer (including any

under Where To File. Do not

Approval Request above under

predecessor organization) does not

complete Part III. If the answer to

Where To File. Do not complete Part

have a 47-month period of gross

question 10 is “Yes,” and Rev. Procs.

III. If the answer to question 9 is

receipts (36-month period for the

85-58 and 76-10 do not apply, go to

“No,” go to Section A of Part III.

requested tax year plus an additional

Part III.

Section D—Tax-Exempt

11-month period for comparing the

requested tax year with other

Organizations

Part III—Ruling Request

potential tax years), then it cannot

A tax-exempt organization can

Part III is completed only by

establish a natural business year

request a change to its tax year under

applicants requesting to adopt,

under this revenue procedure.

the simplified method of either Rev.

change, or retain a tax year that

d. If the requested tax year is a

Proc. 85-58 or Rev. Proc. 76-10.

cannot use the automatic procedures

52-53-week tax year, the calendar

listed in Part II.

Under Rev. Proc. 85-58, an

month ending nearest to the last day

organization exempt under section

of the 52-53-week tax year is treated

Also, the applicant must complete

501(a) does not have to file Form

as the last month of the requested tax

the specific section(s) in Part III that

1128 unless the following conditions

year for purposes of computing the

applies to that particular applicant.

described in section 3.03 of Rev.

25-percent gross receipts test.

Proc. 85-58 apply:

If the applicant is:

Complete only

1. The organization was required

If the applicant is requesting to

A corporation (other

Sections A and

to file an annual information return or

change to a natural business year

than an S corporation

B, plus any

Form 990-T, Exempt Organization

that satisfies the 25-percent gross

or CFC)

other applicable

Business Income Tax Return, at any

receipts test described in section 5.07

section in Part

time during the last 10 calendar

of Rev. Proc. 2006-46, the applicant

III

years, and

must supply its gross receipts for the

2. The organization has changed

An S corporation

Sections A and

most recent 47 months (or for any

its tax year at any time within the last

predecessor).

10 calendar years ending with the

A partnership

Sections A and

Line 7. For an S corporation, an

calendar year that includes the

‘‘ownership tax year’’ is the tax year

beginning of the short period resulting

(if any) that, as of the first day of the

A controlled foreign

Sections A and

from the change of tax year.

first effective year, constitutes the tax

corporation

year of one or more shareholders

An organization described in

(including any shareholder that

section 501(c) or (d) is exempt from

Do not file a tax return using

concurrently changes to such tax

tax under section 501(a) unless the

the requested tax year until

year) holding more than 50 percent of

exemption is denied under section

this application is approved.

CAUTION

the corporation’s issued and

502 or 503.

-6-

Instructions For Form 1128 - Application To Adopt, Change, Or Retain A Tax Year - 2007 Page 6

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