Accounting period changes affecting CFCs and corporations exiting a consolidated group.

• Author: Rohrs, Jane
• Position: Controlled foreign corporations

In Rev. Proc. 2007-64, the Service has modified the scope provision set forth in Rev. Proc. 2006-45 for corporations that exit a consolidated group and request consent to change their annual accounting periods. Rev. Proc. 2007-64 also modifies the terms and conditions relating to recordkeeping and book conformity for controlled foreign corporations (CFCs) that have a majority U.S. shareholder year (as defined in Sec. 898(c)(3)) and change to a one-month deferral year under Sec. 898(c)(2) or a 52- or 53-week tax year that references a one-month deferral year.

Corporation Exiting a Consolidated Group

Rev. Proc. 2007-64 modifies the scope of Rev. Proc. 2006-45 to clarify that any corporation leaving a consolidated group is excluded from the automatic change procedures under Rev. Proc. 2006-45 during the consolidated group's tax year (without regard to a change in the consolidated group's accounting period) in which the corporation ceases to be a member of the consolidated group. The consolidated group's tax year is determined regardless of a change in the group's annual accounting period. A corporation that ceases to be a consolidated group member must continue to use the consolidated group's annual accounting period, unless it receives approval under Rev. Proc. 2002-39 to change its annual accounting period (or is required to change it on joining another consolidated group). If a corporation ceases to be a consolidated group member during the group's first effective year, it is not a member of the consolidated group for purposes of the group's change in accounting period.

Example: On March 31,2006, ABC Corp. ceases to be a member of a consolidated group that has a tax year ending November 30. ABC is not eligible to change its annual accounting period under the automatic consent procedures of Rev. Proc. 2006-45 to a tax year beginning before December...