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tax under section 521, 526, 527, or 528. See

beginning of the short period resulting from the

A change from a 52-53-week tax year to a

Rev. Proc. 85-58, 1985-2 C.B. 740, for

change of tax year.

tax year that ends with reference to the same

procedures to follow in changing an annual

month, and vice versa.

An organization described in section 501(c)

accounting period for a tax-exempt

or (d) is exempt from tax under section 501(a)

A subsidiary that is required to change its tax

organization not meeting the scope of this

unless the exemption is denied under section

year in order to adopt the common parent's

revenue procedure.

502 or 503.

annual tax year for the first consolidated return

11. Is a direct or indirect shareholder of a

year for which the subsidiary's income is

Rev. Proc. 85-58 does not apply to:

passive foreign investment company (PFIC)

includible in the consolidated return under

Farmers' cooperatives exempt from Federal

that is a qualified electing fund (within the

Regulations section 1.1502-76(a).

income tax under section 521,

meaning of section 1295) with respect to be the

Line 7. If the applicant is requesting a ruling

Organizations described in sections 526,

shareholder;

based on its natural business year discussed

527, and 528,

12. Is a PFIC that U.S. persons (who own

in Rev. Proc. 87-32 (for partnerships, S

Organizations described in section 401(a),

directly or indirectly, in the aggregate, 10

corporations, or PSCs) or in Rev. Proc. 74-33,

and

percent or more of the company) elected under

1974-2 C.B. 489 (for all other applicants),

Organizations requesting a change in a tax

section 1295 to be treated as a qualified

attach to Form 1128 a statement that sets forth

year on a group basis.

electing fund;

the gross receipts referred to in section 4.03(3)

A central organization should follow Rev.

of Rev. Proc. 87-32 or the gross receipts and

13. Is a corporation which has in effect an

Proc. 76-10 to apply for a group change in tax

inventory costs referred to in section 4 of Rev.

election under section 936; or

year for all its subordinate organizations.

Proc. 74-33.

14. Is a cooperative association (within the

Rev. Proc. 76-10 does not apply to:

meaning of section 1381(a)) with a loss in the

Section B—Corporations (other than S

Farmers' cooperatives exempt from Federal

short period required to effect the change of

corporations and controlled foreign

income tax under section 521,

annual accounting period, unless all the

corporations)

Certain organizations that have unrelated

patrons of the cooperative association are

business taxable income defined in section

substantially the same in the year before the

Corporations must complete Section B and any

512(a), and

change of annual accounting period, in the

other section that applies to that particular

short period required to effect the change, and

Organizations that are private foundations

entity. For example, a PFIC completes Section

in the year following the change. For purposes

defined in section 509(a).

B and attaches the statement required by

of this subsection, “substantially the same”

Section H. Complete Sections B and F for a

means that ownership of more than 90 percent

Part III–Ruling Request

tax-exempt organization that is a corporation.

of the cooperative association's stock is owned

by the same members.

Section C—S Corporations

Do not file a tax return using the

requested tax year until this application

An S corporation must have a permitted tax

Rev. Proc. 87-32

is approved.

year unless it has elected under section 444 to

CAUTION

A partnership, S corporation, or PSC may be

Complete Part III if the applicant cannot file

have a tax year other than the required tax

able to change or retain its tax year by

under the expeditious approval rules listed in

year. A “permitted tax year” is:

following Rev. Proc. 87-32. Under section

Part II on page 3 or if the application is late.

1. A tax year that ends on December 31,

4.01(1) of the procedure, the entity determines

Rev. Rul. 87-57. If a partnership, S

its natural business year. The entity must

corporation, or PSC wants to adopt, change,

2. Any other tax year if the corporation can

attach to Form 1128 a statement showing the

or retain a tax year by establishing a business

establish a business purpose to the satisfaction

amount of gross receipts for the most recent

purpose but cannot qualify for the expeditious

of the IRS.

47 months as required by section 4.03(3) of the

approval rules, refer to Rev. Rul. 87-57, 1987-2

For purposes of 2, any deferral of income to

revenue procedure. Section 4.01(2) provides

C.B. 117. The ruling discusses various facts

shareholders will not be treated as a business

expeditious approval for an S corporation to

and circumstances in which the taxpayer may

purpose. For more information, see Rev. Proc.

adopt, change to, or retain a tax year that

or may not establish a business purpose for

87-32 and Rev. Rul. 87-57.

coincides with the tax year used by the

using a tax year.

If any shareholder is applying for a

shareholders. The representations (Form 1128,

Section 444 election. If approval is requested

corresponding change in tax year, that

Part II, line 2) highlight the requests provided

to use a particular tax year based on a

shareholder must file a separate Form 1128 to

for in section 4 of the revenue procedure.

business purpose, a partnership, S corporation,

get advance approval to change its tax year.

Note: Generally, to retain its tax year, the

or PSC, if otherwise qualified, may file a

entity must have a valid section 444 election in

backup section 444 election. If the business

Section D—Partnerships

effect.

purpose request is later denied, the

A partnership must obtain advance approval

partnership, S corporation, or PSC, if otherwise

Rev. Proc. 66-50

from the IRS to adopt, change, or retain a tax

qualified, will be required to activate the backup

year unless it is not required to file Form 1128,

Use this procedure if:

section 444 election. The election is made on

or it meets one of the expeditious approval

The entity is an individual changing from a

Form 8716. See Temporary Regulations

rules discussed in Part II on page 3. See Who

fiscal year to a calendar year;

section 1.444-3T for additional information.

Does Not File on page 1.

Income is received only from wages,

Partners must also get separate advance

Section A—General Information

salaries, interest, dividends, capital gains,

approval to change their tax years.

pensions, annuities, rents, or royalties; and

All applicants must complete Section A to

Line 1. Enter the first date a business

All the rules of Rev. Proc. 66-50 are met.

request a ruling on an adoption, change to, or

transaction resulted in a tax consequence,

retention of a tax year.

such as receiving income or incurring an

Rev. Proc. 85-58 or 76-10

Line 1a. For purposes of line 1a the following

expense.

are not considered changes in tax years:

Use either procedure if the entity is a

tax-exempt organization requesting a change

Any prior change in accounting period by a

Section E—Controlled Foreign

under the simplified method of Rev. Proc.

majority-owned, newly acquired subsidiary that

Corporations

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

wants to change to the tax year of its domestic

A CFC, in general, must obtain advance

or foreign parent with which it does not file

Under Rev. Proc. 85-58, an organization

approval from the IRS to change a tax year

consolidated tax returns in order to file

exempt under section 501(a) does not have to

unless the CFC is permitted to change its tax

consolidated financial statements, provided the

file Form 1128 unless:

year in accordance with Rev. Proc. 90-26 or

change is made within 12 months of the

The organization was required to file an

Notice 95-13 (see instruction under Who Does

acquisition. For purposes of this subsection,

annual information return or Form 990-T, at any

Not File on page 1). A CFC that is revoking

“majority-owned” means ownership that

time during the last 10 calendar years, and

its 1-month deferral election that was made

satisfies the test of section 1504(a)(2),

The organization has changed its tax year

under section 898(c)(1)(C) must obtain prior

substituting “more than 50 percent” for “at least

at any time within the last 10 calendar years

approval from the IRS by completing Parts I

80 percent;”

ending with the calendar year that includes the

and III of Form 1128.

Page 4

Instructions For Form 1128 - Application To Adopt, Change, Or Retain A Tax Year - 2000 Page 4

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