Eligibility
Partnerships, S-Corps, and PSCs not part of a tiered structure; requires making 'required payments' under Section 7519 for partnerships/S-Corps or meeting deduction limits under 280H for PSCs.
Frequently Asked Questions
Who is eligible for the Election of Taxable Year Other Than Required Year?
Partnerships, S-Corps, and PSCs not part of a tiered structure; requires making 'required payments' under Section 7519 for partnerships/S-Corps or meeting deduction limits under 280H for PSCs.
How does the Election of Taxable Year Other Than Required Year work?
Partnerships, S corporations, and personal service corporations can elect a taxable year other than the required calendar year, allowing for a deferral period of up to 3 months.
What law authorizes the Election of Taxable Year Other Than Required Year?
The Election of Taxable Year Other Than Required Year is authorized under IRC §444 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §444
Source: Internal Revenue Code, Title 26, United States Code
§ 444. Election of taxable year other than required taxable year(a) General ruleExcept 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 generalExcept 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 yearExcept 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 yearsIn 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 periodFor 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 electionIf 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 electionAn election under subsection (a) shall be made by the partnership, S corporation, or personal service corporation.
(2) Period of election(A) In generalAny 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 electionIf 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 generalExcept 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.
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