
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC444]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
       Subchapter E--Accounting Periods and Methods of Accounting
 
                       PART I--ACCOUNTING PERIODS
 
Sec. 444. Election of taxable year other than required taxable 
        year
        

(a) General rule

    Except 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 general

        Except 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 year

        Except 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 years

        In 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 period

        For 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 election

    If 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 election

        An election under subsection (a) shall be made by the 
    partnership, S corporation, or personal service corporation.

                       (2) Period of election

        (A) In general

            Any 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 election

            If 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 general

            Except 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.

        (B) Exceptions for structures consisting of certain entities 
                with same taxable year

            Subparagraph (A) shall not apply to any tiered structure 
        which consists only of partnerships or S corporations (or both) 
        all of which have the same taxable year.

(e) Required taxable year

    For purposes of this section, the term ``required taxable year'' 
means the taxable year determined under section 706(b), 1378, or 441(i) 
without taking into account any taxable year which is allowable by 
reason of business purposes. Solely for purposes of the preceding 
sentence, sections 706(b), 1378, and 441(i) shall be treated as in 
effect for taxable years beginning before January 1, 1987.

(f) Personal service corporation

    For purposes of this section, the term ``personal service 
corporation'' has the meaning given to such term by section 441(i)(2).

(g) Regulations

    The Secretary shall prescribe such regulations as may be necessary 
to carry out the provisions of this section, including regulations to 
prevent the avoidance of subsection (b)(2)(B) or (d)(2)(B) through the 
change in form of an entity.

(Added Pub. L. 100-203, title X, Sec. 10206(a)(1), Dec. 22, 1987, 101 
Stat. 1330-397; amended Pub. L. 100-647, title II, Sec. 2004(e)(1), 
(2)(A), (12), (13), Nov. 10, 1988, 102 Stat. 3600, 3602.)


                               Amendments

    1988--Subsec. (a). Pub. L. 100-647, Sec. 2004(e)(1)(A), substituted 
``as otherwise provided in this section'' for ``as provided in 
subsections (b) and (c)''.
    Subsec. (b)(4). Pub. L. 100-647, Sec. 2004(e)(13), inserted ``except 
as provided in regulations,'' before ``the term''.
    Subsec. (d)(2)(A). Pub. L. 100-647, Sec. 2004(e)(12), inserted ``or 
otherwise terminates such election'' after ``its taxable year''.
    Subsec. (d)(2)(B). Pub. L. 100-647, Sec. 2004(e)(1)(C), inserted 
``or paragraph (3)(A)'' after ``under subparagraph (A)''.
    Subsec. (d)(3). Pub. L. 100-647, Sec. 2004(e)(1)(B), amended par. 
(3) generally. Prior to amendment, par. (3) read as follows: ``No 
election may be made under subsection (a) with respect to an entity 
which is part of a tiered structure other than a tiered structure 
comprised of 1 or more partnerships or S corporations all of which have 
the same taxable year.''
    Subsecs. (f), (g). Pub. L. 100-647, Sec. 2004(e)(2)(A), added 
subsec. (f) and redesignated former subsec. (f) as (g).


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provisions of the Revenue Act of 1987, 
Pub. L. 100-203, title X, to which such amendment relates, see section 
2004(u) of Pub. L. 100-647, set out as a note under section 56 of this 
title.


                             Effective Date

    Section 10206(d) of Pub. L. 100-203, as amended by Pub. L. 100-647, 
title II, Sec. 2004(e)(11), Nov. 10, 1988, 102 Stat. 3602, provided 
that:
    ``(1) In general.--Except as provided in this subsection, the 
amendments made by this section [enacting this section and sections 280H 
and 7519 of this title] shall apply to taxable years beginning after 
December 31, 1986.
    ``(2) Required payments.--The amendments made by subsection (b) 
[enacting section 7519 of this title] shall apply to applicable election 
years beginning after December 31, 1986.
    ``(3) Elections.--Any election under section 444 of the Internal 
Revenue Code of 1986 (as added by subsection (a)) for an entity's 1st 
taxable year beginning after December 31, 1986, shall not be required to 
be made before the 90th day after the date of the enactment of this Act 
[Dec. 22, 1987].
    ``(4) Special rule for existing entities electing s corporation 
status.--If a C corporation (within the meaning of section 1361(a)(2) of 
the Internal Revenue Code of 1986) with a taxable year other than the 
calendar year--
        ``(A) made an election after September 18, 1986, and before 
    January 1, 1988, under section 1362 of such Code to be treated as an 
    S corporation, and
        ``(B) elected to have the calendar year as the taxable year of 
    the S corporation,
then section 444(b)(2)(B) of such Code shall be applied by taking into 
account the deferral period of the last taxable year of the C 
corporation rather than the deferral period of the taxable year being 
changed. The preceding sentence shall apply only in the case of an 
election under section 444 of such Code made for a taxable year 
beginning before 1989.''

                  Section Referred to in Other Sections

    This section is referred to in sections 280H, 7519 of this title.
