IRS issues new procedure for automatic accounting period changes.

• Author: Devlin, Frank

The Service just released Rev. Proc. 2000-11, which provides updated and revised procedures by which certain corporations may obtain automatic approval to change their annual accounting periods. Rev. Proc. 2000-11 modifies, amplifies and supersedes Rev. Procs. 92-13, 92-13A and 94-12, and is generally effective for annual accounting period changes for which the short period required to effect the change ends after Jan. 17, 2000.

Rev. Proc. 2000-11 generally applies to corporations that have not changed their accounting periods in the last six years and meet certain other requirements. The new procedure is generally broader in scope than its predecessors, eliminating several restrictions that limited the use of prior automatic change rules.

The following are some of the major changes to the automatic period change rules:

1. A corporation may automatically change from a 52-53-week tax year to a tax year that ends with reference to the same month, and vice versa.

2. A Sec. 957 controlled foreign corporation may revoke its one-month deferral election under Sec. 898(c)(1)(B) and automatically change to the tax year of its majority U. S. shareholder.

3. In addition to a change by a subsidiary to its common parent's tax year under the requirement of Regs. Sec. 1.1502-76(a)(1), the following two new categories of changes are not subject to the six-year waiting period between changes in tax years. The first is when a more-than-50%-owned, newly acquired subsidiary changes within 12 months of acquisition to the tax year of its domestic or foreign parent (nonconsolidated tax filing) to file consolidated financial statements. The second is when a corporation changes from a 52-53-week tax year to a tax year that ends with the same month, and vice versa.

4. An automatic change is now available to a corporation that is a partner of a partnership or a beneficiary of a trust or estate if the corporation has a majority interest in the partnership and the partnership is required to change its tax year under Sec. 706(b) to the corporation's new tax, if the corporation's new tax year will result in no change in deferral or in less deferral from the passthrough entity than the corporation's present tax year or if the amount of income from such passthrough entity for each of the prior three tax years is de minimis (defined as both no greater than 5% of the corporation's gross receipts, and $500,000, both individually and in the aggregate).

5. An automatic change is...