SECTION 3. SIGNIFICANT CHANGES

Significant changes to Rev. Proc. 87–32 made by this revenue procedure include:

.01 Section 4.01(1) of this revenue procedure clarifies that a partnership, S corporation, electing S corporation, or PSC may change automatically to its required taxable year.

.02 Section 4.01(2) of this revenue procedure allows a partnership, S corporation, electing S corporation, or PSC to change automatically to a natural business year that satisfies the 25-percent gross receipts test, regardless of whether such year results in more deferral of income than its present taxable year.

June 4, 2001 1316 2001–23 I.R.B.

.03 Section 4 of this revenue procedure allows a PSC to automatically change its taxable year even if the taxpayer makes an S corporation election for the taxable year immediately following the short period.

.04 Sections 4.01(1), (2), and (3) of this revenue procedure allow, in appropriate circumstances, a partnership, S corporation, electing S corporation, or PSC to adopt, change to, or retain a 52–53-week taxable year ending with reference to the required taxable year, natural business year, or ownership taxable year.

.05 Section 4.01(4) of this revenue procedure allows any partnership, S corporation, electing S corporation, or PSC to automatically change from a 52–53-week taxable year to a non-52–53-week taxable year that ends on the last day of the same calendar month, and vice versa.

.06 Section 4.02 of this revenue procedure generally prevents a partnership, S corporation, electing S corporation, or PSC from using this revenue procedure to change its annual accounting period if the taxpayer is under examination and does not obtain consent from the appropriate director, or is before an area office or before a federal court and its annual accounting period is an issue under consideration.

.07 Section 4.02(2) of this revenue procedure reduces the waiting time between changes from six to four years and provides that a change to a required or ownership taxable year, and a change to or from a 52–53-week taxable year referencing the same month, will not be considered changes within four years.

.08 Section 5.05 of this revenue procedure disregards certain tax-exempt entities for purposes of determining the ownership taxable year of an S corporation or electing S corporation.

.09 Section 7.02(2) of this revenue procedure extends the filing requirements for filing a Form 1128 to the due date of the taxpayer’s federal income tax return (including extensions) for the first effective year.

.10 Section 8.01 provides audit protection for partnerships, S corporations, electing S corporations, or PSCs that change their annual accounting period under this revenue procedure.