SERVICE PROVIDES GUIDANCE FOR 52/53-WEEK TAX YEAR AFFILIATED GROUPS TO OBTAIN CONSENT TO FILE CONSOLIDATED RETURNS.

Rev. Proc. 89-56

SECTION 1. PURPOSE AND SCOPE

This revenue procedure provides a means for an affiliated group of corporations to obtain the Commissioner's advance consent under section 1.1502-76(a)(1) of the Income Tax Regulations, without filing a ruling request, to file a consolidated federal income tax return in which one or more members of the group use a 52-53-week tax year and the tax years of all members of the group end within the same 7-day period. This revenue procedure does not provide a means for members of an affiliated group to change to or from a 52-53-week tax year. See sections 441 and 442 of the Internal Revenue Code and the regulations thereunder.

SEC. 2. BACKGROUND

01 Section 1.1502-76(a)(1) of the regulations provides that the consolidated return of an affiliated group must be filed on the basis of the common parent's tax year, and each subsidiary must adopt the common parent's annual accounting period for the first consolidated return year for which the subsidiary's income is includible in the consolidated return. With the advance consent of the Commissioner, if any member is on a 52-53-week tax year, the rule of the preceding sentence shall be deemed satisfied if the tax years of all members of the group end within the same 7-day period. Currently, such consent must be obtained by means of a ruling request filed not later than the 30th day before the due date (not including extensions of time) for the filing of the consolidated return.

02 Rev. Rul. 72-184, 1972-1 C.B. 289, sets forth the circumstances under which consent will be granted for an affiliated group to file a consolidated return in which one or more members use a 52-53-week tax year while the remainder of the group uses a tax year ending on the last day of a calendar month.

03 Rev. Rul. 78-322, 1978-2 C.B. 228, provides that if the conditions set forth in Rev. Rul. 72-184 are met and the Commissioner's advance consent is obtained, subsidiary corporations may change their tax years to a 52-53-week tax year and file a consolidated federal income tax return with their common parent, which will remain on a fiscal year accounting period.

SEC. 3. MANNER OF OBTAINING CONSENT

01 In order to obtain the consent of the Commissioner under this revenue procedure, the common parent of the group must attach a statement to its consolidated federal income tax return (filed on a timely basis, taking into account any extensions). The statement must include the name, employer identification number, and tax year of each member of the group, and must also provide as follows:

THE AFFILIATED GROUP OF WHICH [INSERT NAME OF COMMON PARENT] IS THE COMMON PARENT IS FILING THIS STATEMENT UNDER REV. PROC. 89-56 AND REPRESENTS THAT IT HAS COMPLIED WITH EACH OF THE FOLLOWING CONDITIONS:

(1) THE TAX YEARS OF ALL MEMBERS OF THE GROUP WILL END WITHIN THE SAME 7-DAY PERIOD AND EACH MEMBER IS AUTHORIZED TO USE ITS TAX YEAR.

(2) THE USE OF A 52-53-WEEK TAX YEAR WILL CLEARLY REFLECT THE CONSOLIDATED TAXABLE INCOME OF THE GROUP. THE MEMBERS OF THE GROUP USING A 52-53-WEEK TAX YEAR WILL DETERMINE DEPRECIATION, AMORTIZATION, STATE AND LOCAL FRANCHISE AND PROPERTY TAXES, VACATION PAY ACCRUALS, AND ITEMS OF A SIMILAR NATURE AS THOUGH THEIR TAX YEAR CONSISTED OF 12 CALENDAR MONTHS, IN ACCORDANCE WITH THE PRINCIPLES OF SECTION 1.441-2T(d) OF THE INCOME TAX REGULATIONS.

(3) ANY DEFERRED INTERCOMPANY TRANSACTION BETWEEN MEMBERS OF THE GROUP WILL BE ACCOUNTED FOR IN THE SAME CONSOLIDATED RETURN YEAR EVEN THOUGH THE USE OF A 52-53-WEEK TAX YEAR BY CERTAIN MEMBERS MAY CAUSE A TRANSACTION TO OCCUR ON A DAY FALLING IN DIFFERENT CONSOLIDATED RETURN YEARS OF THE MEMBERS INVOLVED IN SUCH CASE, THE TAX YEAR OF THE SELLING MEMBER WILL BE USED TO DETERMINE THE CONSOLIDATED RETURN YEAR IN WHICH A TRANSACTION HAS OCCURRED. SEE REV. RUL. 72-184, 1972- 1 C.B. 289.

(4) IF DEFERRED GAIN OR LOSS MUST BE RESTORED UNDER SECTION 1.1502-13(d), (e), OR (f) OF THE REGULATIONS, THE CONSOLIDATED RETURN YEAR OF THE MEMBER CAUSING SUCH RESTORATION WILL CONTROL. IF, BECAUSE OF THE SELLING MEMBER'S PERIOD OF ACCOUNTING, THE DEFERRED GAIN OR LOSS WOULD NOT OTHERWISE BE RECOGNIZED UNTIL A LATER TAX YEAR, THE SELLING MEMBER NEVERTHELESS WILL TAKE INTO ACCOUNT SUCH GAIN OR LOSS IN THE CONSOLIDATED RETURN YEAR OF THE MEMBER CAUSING SUCH RESTORATION. SEE REV. RUL. 72-184.

02 The statement must be signed under penalties of perjury by a duly authorized officer of the common parent of the group. See section 1.1502-77 of the regulations.

SEC. 4. CONSENT

An affiliated group that attaches the statement set forth in Section 3 of this revenue procedure to its consolidated return (filed on a timely basis, taking into account any extensions) will be deemed to have requested the Commissioner's advance consent as required under section 1.1502-76(a)(1) of the regulations. Accordingly, in such case, consent is hereby granted to the affiliated group to file a consolidated federal income tax return in which one or more members of the group use a 52-53-week tax year and the tax years of all members of the group end within the same 7-day period.

SEC. 5. COMPLIANCE WITH CONDITIONS

Members of an affiliated group filing a consolidated tax return using a tax year other than that of the common parent without complying with all the conditions of this revenue procedure or whose representations are found to be inaccurate will not be deemed to have obtained the Commissioner's advance consent for the affiliated group to file a consolidated federal income tax return in which one or more members of the group use a 52-53-week tax year and the tax years of all members of the group end within the same 7-day period.

SEC. 6. EFFECT ON OTHER DOCUMENTS

This revenue procedure eliminates the necessity to file a ruling request under section 1.1502-76(a)(1) of the regulations. Rev. Rul. 72-184 and Rev. Rul. 78-322 are modified to the extent that they reflect the previous rule that a ruling request was required to obtain the Commissioner's advance consent, even if the conditions set forth therein were met.

SEC. 7. EFFECTIVE DATE

This revenue procedure is effective for all consolidated returns filed (on a timely basis, taking into account any extensions) after September 18, 1989.

SEC. 8. INQUIRIES

Inquiries regarding this revenue procedure may be addressed to the Commissioner of Internal Revenue, ATTN: CC:CORP:02, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044.

DRAFTING INFORMATION

The principal author of this revenue procedure is Barney Cochran of the Office of Assistant Chief Counsel (Corporate). For further information regarding this revenue procedure, contact Mr. Cochran on (202) 566-3354 (not a toll-free call).