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‘‘(II) subclause (III) of subpara-
graph (A)(i) shall be applied by sub-
stituting ‘7 months’ for ‘6 months’,
and
‘‘(III) subclause (IV) of subpara-
graph (A)(i) shall be applied by sub-
stituting ‘10 months’ for ‘9 months’.
‘‘(ii) If the taxpayer makes an election
under this clause—
‘‘(I) subclause (II) of subpara-
graph (A)(i) shall be applied by sub-
stituting ‘5 months’ for ‘3 months’,
‘‘(II) subclause (III) of subpara-
graph (A)(i) shall be applied by sub-
stituting ‘8 months’ for ‘6 months’,
and
‘‘(III) subclause (IV) of subpara-
graph (A)(i) shall be applied by sub-
stituting ‘11 months’ for ‘9 months’.
‘‘(iii) An election under clause (i) or
(ii) shall apply to the taxable year for
which made and such an election shall be
effective only if made on or before the date
required for the payment of the second re-
quired installment for such taxable year.’’
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(3) The last sentence of section 6655(f)(3)(A)
is amended by striking ‘‘and subsection (e)(2)(A)’’
and inserting ‘‘and, except in the case of an election
under subsection (e)(2)(C), subsection (e)(2)(A)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
Subtitle G—Alternative Taxable
Years
SEC. 861. ELECTION OF TAXABLE YEAR OTHER THAN RE-
QUIRED TAXABLE YEAR.
(a) LIMITATIONS ON TAXABLE YEARS WHICH MAY
BE ELECTED.—Subsection (b) of section 444 (relating to
limitations on taxable years which may be elected) is
amended to read as follows:
‘‘(b) TAXABLE YEAR MUST BE SAME AS REPORTING
PERIOD.—If an entity has annual reports or statements—
‘‘(1) which ascertain income, profit, or loss of
the entity, and
‘‘(2) which are—
‘‘(A) provided to shareholders, partners, or
other proprietors, or
‘‘(B) used for credit purposes,
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the entity may make an election under subsection (a) only
if the taxable year elected covers the same period as such
reports or statements.’’
(b) PERIOD OF ELECTION.—Section 444(d)(2) (re-
lating to period of election) is amended to read as follows:
‘‘(2) PERIOD OF ELECTION.—
‘‘(A) IN
GENERAL.—An election under
subsection (a) shall remain in effect until the
partnership, S corporation, or personal service
corporation terminates the election and adopts
the required taxable year.
‘‘(B) CHANGE
NOT
TREATED
AS
TERMI-
NATION.—For purposes of subparagraph (A), a
change from a taxable year which is not a re-
quired taxable year to another such taxable
year shall not be treated as a termination.’’
(c) EXCEPTION
FOR TRUSTS.—Section 444(d)(3)
(relating to tiered structures) is amended by adding at the
end thereof the following new subparagraph:
‘‘(C) EXCEPTION
FOR
CERTAIN
STRUC-
TURES
THAT
INCLUDE
TRUSTS.—An entity
shall not be considered to be part of a tiered
structure to which subparagraph (A) applies
solely because a trust owning an interest in
such entity is a trust all of the beneficiaries of
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which use a calendar year for their taxable
year.’’
(d) REGULATIONS.—Subsection (g) of section 444
(relating to regulations) is amended to read as follows:
‘‘(g) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary to carry out the pro-
visions of this section, including regulations—
‘‘(1) to prevent the avoidance of the provisions
of this section through a change in entity or form
of an entity,
‘‘(2) to prevent the carryback to any preceding
taxable year of a net operating loss (or similar item)
arising in any short taxable year created pursuant to
an election or termination of an election under this
section, and
‘‘(3) to provide for the termination of an elec-
tion under subsection (a) if an entity does not con-
tinue to meet the requirements of subsection (b).’’
SEC. 862. REQUIRED PAYMENTS FOR ENTITIES ELECTING
NOT TO HAVE REQUIRED TAXABLE YEAR.
(a) ADDITIONAL REQUIRED PAYMENT.—
(1) IN
GENERAL.—Section 7519(b) (defining
required payment) is amended to read as follows:
‘‘(b) REQUIRED PAYMENT.—For purposes of this
section—
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‘‘(1) IN
GENERAL.—The term ‘required pay-
ment’ means, with respect to any applicable election
year of a partnership or S corporation, an amount
equal to the excess (if any) of—
‘‘(A) the adjusted highest section 1 rate,
multiplied by the net base year income of the
entity, over
‘‘(B) the net required payment balance.
For purposes of paragraph (1)(A), the term ‘ad-
justed highest section 1 rate’ means the highest rate
of tax in effect under section 1 as of the close of the
first required taxable year ending within such year,
plus 2 percentage points.
‘‘(2) ADDITIONAL PAYMENT FOR NEW APPLICA-
BLE ELECTION YEARS.—
‘‘(A) IN GENERAL.—In the case of a new
applicable election year, the required payment
shall include, in addition to any amount deter-
mined under paragraph (1), the amount deter-
mined under subparagraph (C).
‘‘(B) NEW APPLICABLE ELECTION YEAR.—
For purposes of this section, the term ‘new ap-
plicable election year’ means any applicable
election year—