Par. 9. Sections 1.56A-0 through 1.56A-27 are added to read as follows:
(a) Overview. This section provides rules under section 56A(c)(1) of the Code for computing FSI and AFSI if a CAMT entity's AFS is prepared on the basis of a financial accounting period that differs from the taxable year.
(b) AFSI adjustment for mismatched years —(1) In general. If the AFS of a CAMT entity is prepared on the basis of a financial accounting period that differs from the CAMT entity's taxable year (including a taxable year of less than 12 months), the CAMT entity computes its FSI and AFSI as if the CAMT entity's financial accounting period were the same as its taxable year by conducting an interim closing of the books using the accounting standards the CAMT entity uses to prepare its AFS. For purposes of computing FSI and AFSI for the current taxable year under this paragraph (b)(1), the CAMT entity performs an interim closing of the books as of the end of the current taxable year and uses the interim closing of the books completed as of the end of the immediately preceding taxable year in computing FSI and AFSI for such prior year (if any). If the CAMT entity did not compute FSI and AFSI for the prior taxable year, the CAMT entity also performs an interim closing of the books as of the end of the immediately preceding taxable year.
(2) Examples. The following examples illustrate the application of the rules in paragraph (b)(1) of this section.
(i) Example 1: Calendar-year taxpayer with fiscal annual financial accounting period —(A) Facts. X is a domestic corporation that uses the calendar year as its taxable year. X's AFS is prepared based on a financial accounting period that begins on November 1 and ends on October 31. X computes FSI and AFSI under the section 56A regulations for the taxable year that begins on January 1, 2024, and ends on December 31, 2024, and the taxable year that begins on January 1, 2025, and ends on December 31, 2025.
(B) Analysis: Taxable year ending December 31, 2024. Pursuant to paragraph (b)(1) of this section, X conducts an interim closing of the books as of the close of business on December 31, 2023, and December 31, 2024, respectively, to compute FSI and AFSI for the 2024 taxable year (that is, the calendar year). Accordingly, X uses the financial results and accounting principles from the October 31, 2024, AFS to prepare an interim closing of the books as of December 31, 2023, and determine FSI and AFSI from January 1, 2024, through October 31, 2024. In addition, X uses the financial results and accounting principles for the annual financial accounting period ending October 31, 2025, to prepare an interim closing of the books as of December 31, 2024, and determine FSI and AFSI from November 1, 2024, through December 31, 2024.
(C) Analysis: Taxable year ending December 31, 2025. Pursuant to paragraph (b)(1) of this section, X conducts an interim closing of the books as of the close of business on December 31, 2025, to compute FSI and AFSI for its 2025 taxable year. In addition, X uses the interim closing of the books conducted as of December 31, 2024, in computing FSI and AFSI for its 2025 taxable year. Accordingly, X uses the financial results and accounting principles from the October 31, 2025, AFS and the interim closing of the books prepared as of December 31, 2024, to determine FSI and AFSI from January 1, 2025, through October 31, 2025. In addition, X uses the financial results and accounting principles for the annual financial accounting period ending October 31, 2026, to prepare an interim closing of the books as of December 31, 2025, and determine FSI and AFSI from November 1, 2025, through December 31, 2025.
(ii) Example 2: Fiscal year taxpayer with calendar-year financial accounting period —(A) Facts. X is a domestic corporation that uses the 12-month period ending September 30 as its taxable year. The accounting period for X's AFS begins on January 1 and ends on December 31. X computes FSI and AFSI under the section 56A regulations for the taxable year that begins on October 1, 2023, and ends on September 30, 2024, and the taxable year that begins on October 1, 2024, and ends on September 30, 2025.
(B) Analysis: Taxable year ending September 30, 2024. Pursuant to paragraph (b)(1) of this section, X conducts an interim closing of the books as of the close of business on September 30, 2023, and September 30, 2024, respectively, to compute FSI and AFSI for the taxable year ending September 30, 2024. Accordingly, X uses the financial results and accounting principles from the December 31, 2023, AFS to prepare an interim closing of the books as of September 30, 2023, and determine FSI and AFSI from October 1, 2023, through December 31, 2023. In addition, X uses the financial results and accounting principles for the annual financial accounting period ending December 31, 2024, to prepare an interim closing of the books as of September 30, 2024, and determine FSI and AFSI from January 1, 2024, through September 30, 2024.
(C) Analysis: Taxable year ending September 30, 2025. Pursuant to paragraph (b)(1) of this section, X conducts an interim closing of the books as of the close of business on September 30, 2025, to compute FSI and AFSI for the taxable year ending September 30, 2025. In addition, X uses the interim closing of the books prepared as of September 30, 2024, in computing FSI and AFSI for the taxable year ending September 30, 2025. Accordingly, X uses the financial results and accounting principles for its December 31, 2024, AFS and the interim closing of the books prepared as of September 30, 2024, to determine FSI and AFSI from October 1, 2024, through December 31, 2024. In addition, X uses the financial results and accounting principles for the annual financial accounting period ending December 31, 2025, to prepare an interim closing of the books as of September 30, 2025, and determine FSI and AFSI from January 1, 2025, through September 30, 2025.
(c) Applicability date. This section applies to taxable years ending after September 13, 2024.