The IRS last week published new final regulations relating to the Alternative Simplified Credit or ASC under Section 41(c)(5) which has been around since 2006. This calculation avoids having to go back to the 1980s base years and instead uses a rolling prior 3 year 50% average QRE method for establishing the base period (rather than looking back to gross receipts and QREs in the 1984-1988 years).

In these new final regulations, the only change with respect to the proposed 2008 regulations is how to handle short tax years. The IRS did receive and adopt comments that the short years should be measured by a proration of days, rather than months in the short year. This change will be effective for tax years ending after June 9, 2011, although the final regs provide a limited exception for tax years ending before June 9, 2011, that permits taxpayers to amend their returns to reflect a using a days method. Of note, the IRS did not adopt suggestions/comments that the ASC election should be more flexible to allow that decision to be made post-return filing. Rather, the ASC rules still require this election to be on a timing filed tax return.