Rev. Proc. 63-7

The purpose of this Revenue Procedure is to set forth rules for determining the taxable year of a foreign corporation for purposes of section 902(d), sections 951 through 972, and sections 1246 through 1948 of the Internal Revenue Code of 1954, as amended or added by the Revenue Act of 1962. The rules to be followed for such purposes are as follows:

Rule 1. The taxable year of the foreign corporation shall be determined under section 441 of the Code, and the regulations thereunder, and by treating a foreign corporation which is not subject to United States income tax as though it were a taxpayer within the meaning of section 7701(a)(14) of the Code.

Rule 2. The taxable year beginning in 1963 of a foreign corporation which has derived income after December 31, 1957, and before January 1, 1963, which is subject to tax under section 882 of the Code shall be the taxable year previously established by such corporation under section 441 of the Code.

Rule 3. A foreign corporation may adopt a taxable year beginning in 1962 as though such foreign corporation were a new taxpayer within the meaning of paragraph (b)(3) of section 1.441-1 of the Income Tax Regulations, but only if the following conditions are satisfied:

(a) The foreign corporation has never been subject to United States income tax; or

(b) The foreign corporation has not derived any income after December 31, 1957, and before January 1, 1963, which is subject to tax under section 882 of the Code; and

(c) A taxable year ending on or after December 31, 1958, and before January 1, 1963, of such foreign corporation has not been established for the purpose of determining the amount of tax payable by its United States shareholders upon its undistributed foreign personal holding company income; and

(d) The adoption of a taxable year in accordance with this rule does not result in obtaining, for such taxable year or any prior period, any tax benefit, to which the foreign corporation would not otherwise be entitled, under any tax convention to which the United States is a party; and

(e) The foreign corporation adopts an annual accounting period which ends on or before December 31, 1962, and the adoption is effected not later than the 15th day of the third month following the close of such annual accounting period; and

(f) One or more of the United States shareholders (as defined in section 951(b) of the Code) of the foreign corporation give written notice of, and file a statement (certified under penalties of perjury) of an officer of such foreign corporation who is a citizen or resident of the United States, or, if there is no such officer, of any officer of such foreign corporation, attesting to, the timely adoption under this rule of such annual accounting period. The notice and statement so required of a United States shareholder shall be filed within the time prescribed by law (not including extensions) for the filing of his income tax return for the taxable year with or within which such newly adopted annual accounting period of the foreign corporation ends and shall be filed with the district director of internal revenue for the district in which such income tax return is required to be filed.

Rule 4. A taxable year of a foreign corporation which has been established or adopted in accordance with this Revenue Procedure may be changed only with the prior approval of the Commissioner of Internal Revenue in accordance with section 442 of the Code, and the regulations thereunder, and by treating a foreign corporation which is not subject to United States income tax as though it were a taxpayer within the meaning of section 7701(a)(14) of the Code. Application for approval to change such taxable year of a foreign corporation which is not subject to United States income tax shall be made by one or more of its United States shareholders (as defined in section 951(b) of the Code) by filing an application in accordance with the principles of paragraph (b) of section 1.442-1 of the Income Tax Regulations. In general, a change of such a taxable year will be approved if the annual accounting period of the foreign corporation is changed to conform to requirements of foreign law or because bona fide foreign business reasons make such a change necessary or desirable, provided that the other applicable provisions of paragraph (b) of section 1.442-1 are satisfied.

¹ Also released a Technical Information Release 451, dated Feb. 1, 1963.