SECTION 2. BACKGROUND

.01 Definitions . The following definitions apply solely for purposes of this revenue procedure.

(1) Annual accounting period . The term “annual accounting period” means the annual period (calendar year or fiscal year) on the basis of which an in-scope applicable entity regularly keeps its books and records for purposes of making an elective payment election under § 6417.

(2) First Effective Year . The “first effective year” for an in-scope applicable entity that adopted a taxable year by filing its first Form 990-T solely to make an elective payment election under § 6417 is the first taxable year for which a change in annual accounting period is effective and for which an in-scope applicable entity must comply with all the terms and conditions under this revenue procedure. The first effective year

generally is the short period required to effect the change.

(3) Short Period . In the case of a change in annual accounting period, an in-scope applicable entity’s “short period” is the period beginning with the day following the close of the old taxable year and ending with the day preceding the first day of the new taxable year.

(4) Taxable year . The term “taxable year” generally means the in-scope applicable entity’s annual accounting period, regardless of whether it is a calendar or fiscal year.

.02 Adoption of Taxable Year . (1) In general . A taxpayer may adopt any taxable year that satisfies § 441 and the regulations thereunder without the approval of the Commissioner. See § 1.441-1(c).

(2) Adopting a taxable year for pur- poses of § 6417 . The regulations under § 6417 provide that an applicable entity that is not required to file a federal income tax return under § 6011 or an annual information return under § 6033(a), but is filing an annual return solely to make an elective payment election under § 6417, adopts a taxable year upon filing an initial Form 990-T to make the elective payment election. The applicable entity may choose to adopt a taxable year for purposes of § 6417 based upon either a calendar or fiscal year. The applicable entity must maintain adequate books and records, including a reconciliation of any differences between its regular books of account and those using its chosen taxable year, to support making an elective payment election on the basis of its chosen taxable year.

.03 Change in Taxable Year . (1) In general . A taxpayer that wants to change its annual accounting period and use a new taxable year generally must obtain the approval of the Commissioner. To secure such approval, a taxpayer must file an application, generally on Form 1128, Application to Adopt, Change, or Retain a Tax Year, with the Commissioner within such time and in such manner as is provided in administrative procedures

published by the Commissioner. In general, a change in annual accounting period will be approved if the taxpayer establishes a business purpose for the requested annual accounting period, agrees to the Commissioner’s prescribed terms, conditions, and adjustments for effecting the change, and files the requested change in annual accounting period under the Commissioner’s prescribed administrative procedures.

(2) No retroactive change in annual accounting period . Unless specifically authorized by the Commissioner, a taxpayer may not request, or otherwise make, a retroactive change in annual accounting period, regardless of whether the change is to a required taxable year.