Academic journal article Journal of Accountancy

Bills to Reform Section 444 Fiscal Year Rules Introduced

Academic journal article Journal of Accountancy

Bills to Reform Section 444 Fiscal Year Rules Introduced

Article excerpt

Companion bills were introduced in the House (HR 3943) and in the Senate (S 2109) to modify the requirement that partnerships, S corporations and personal service corporations adopt a calendar year for tax purposes.

In presenting the legislation, Congressman Beryl Anthony, Jr. (D-Ark.) and Senator Max Baucus (D-Mont.) both described how the Tax Reform Act of 1986 (TRA) had imposed the calendar year requirement. As a result of public outcry concerning the difficulties created by the requirement, the Revenue Act of 1987 modified the TRA with the creation of section 444---which allowed retention or adoption of a fiscal year by partnerships, S corporations and personal service corporations if certain annual requirements were met.

However, Anthony argued that the rules are still overly restrictive and that "on average, only about 20% of small businesses on a fiscal year before TRA 1986 remain on a section 444 fiscal year."

Baucus said, "This work load compression problem is not limited to tax work. It has become an even greater problem with accounting and auditing work. …

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