26 U.S.C. § 444: Election of taxable year other than required taxable year

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. 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. 3 months, or the deferral period of the taxable year which is being changed. 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. the beginning of such year, and the close of the 1st required taxable year ending within such year. in the case of a partnership or S corporation, such entity shall make the payments required by section 7519, and in the case of a personal service corporation, such corporation shall be subject to the deduction limitations of section 280H. An election under subsection (a) shall be made by the partnership, S corporation, or personal service corporation. 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. 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). no election may be under subsection (a) with respect to any entity which is part of a tiered structure, and an election under subsection (a) with respect to any entity shall be terminated if such entity becomes part of a tiered structure. 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. 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 . For purposes of this section, the term “personal service corporation” has the meaning given to such term by section 441(i)(2). 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. 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 . The amendments made by subsection (b) [enacting section 7519 of this title ] shall apply to applicable election years beginning after December 31, 1986 . 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 ]. 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 elected to have the calendar year as the taxable year of the S corporation,