To amend the Internal Revenue Code of 1986 to modify the provisions permitting certain entities to elect a taxable year other than the required year.

Amends the Internal Revenue Code to repeal the limitations on taxable years which may be elected by a partnership, S corporation, or personal service corporation.

Provides that a change of taxable year shall not be treated as a termination of an election to have a taxable year other than the required taxable year unless such change is to a required taxable year.

Provides that if such entities terminate such election, then they are not eligible to make another election before five taxable years have passed, without the consent of the Secretary of the Treasury. Sets forth circumstances for making such an election without the consent of the Secretary.

Provides that any loss for the short period resulting from a change in election: (1) shall not be allowed as a carryback to any preceding taxable year (and shall not be taken into account by any partner of a partnership, or shareholder of an S corporation); and (2) shall be taken into account by the entity (or partner or shareholder) ratably over the first six taxable years beginning after the short period.